Calculate Ownership Interest with an Override

General Mineral Rights Discussion
1

I’m trying to calculate the total ownership interest for the following:

A. Per the Mineral Deed the exact wording is “an undivided 2/24th of 1/8 and a 1/128th overriding royalty interest”.

B. The royalty interest on the lease is 1/8.

To calculate the total ownership interest I gather that I would reduce the 1/8 by the 2/24 ….. BUT ….. would I also reduce the 1/128 overriding royalty interest by the 2/24 (Scenario #1) … or, given the wording in the Mineral Deed, would I just use the 1/128 WITHOUT reducing it (Scenario #2)?

SCENARIO #1:

(1/8 mineral interest) x 2/24 x 1/8 royalty = .001953 royalty interest

1/128 override x 2/24 = .000651 override interest

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Total = .001953 Total Ownership Interest

SCENARIO #2:

(1/8 mineral interest) x 2/24 x 1/8 royalty .001953 royalty interest

1/128 override = .0078125 override interest

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Total = .0097655 Total Ownership Interest

Which is the correct way to calculate the Total Ownership Interest …….

………. SCENARIO #1? SCENARIO #2 ? OR IS NEITHER ONE CORRECT?

2

Not an expert on this but I have read lots of leases and lease assignments.

I think your Scenario #2 calculation for the 1/128 override is correct. Overriding royalty comes out of the working interest, in this case the 87 1/2% or 7/8 left over from the 1/8 royalty.

I think the undivided 2/24 of 1/8 would mean 2/24 of the 1/8 royalty interest or 0.014166667

The total of the two figures would be the ownership percentage.

Do you have the deed where this ownership interest was passed to the owner, or some history? Interesting.

3

I calculate from scratch by dividing my NMA by the spacing. ie, 20A x 3/16 /640A