I have noticed that two different companies use different formulas to calculate my royalty interest. This is in Ward County. I have a 1/6 interest in both wells, 25% lease royalty, each well has different NPRIs. But the first company multiplies the NPRIs times the lease royalty in parentheses, the second company doesn’t. Since this affects my royalty interest, I would like to know which one is correct or if the terms of my lease would have caused the difference in calculations.
Sec 214
Royalty Interest in Unit Tracts 6A and 6B: (1/6 x [1/4 - (61.298666%*1/4)]) = 0.0161253
Tract Participation in Hornsilver Unit: 81.56/648.92 = 0.12568382
Royalty Interest: 0.0161253 x 0.12568382 = 0.0020267526
Sec 213
Royalty Interest in Unit Tract 2: 1/6 x (1/4 -(.0785375)) = 0.02857708
Tract Participation: 40.63/573.98 = 0.07078644
Royalty Interest: 0.02857708 x 0.07078644 = 0.00202287
Sec 213 if calculated like Sec 214
Royalty Interest in Unit Tract 2: 1/6 x (1/4 -(.0785375*1/4)) = 0.038394271
Tract Participation: 40.63/573.98 = 0.070786439
Royalty Interest: .038394271 x .070786439 = .002717794
Both could be correct. There may be differences in the wording of the NPRI deeds for each tract. Some NPRIs are fixed as a set number, such as 1/64 = 0.015625 and is deducted from your royalty. Others are ‘floating’ based on the royalty rate of the lease—such as 1/8 of the royalty rate. In that case, if your royalty is 1/8, then the NPRI is 1/8 x 1/8 = 1/64, and if your royalty is 1/4, then the NPRI is 1/8 x 1/4 = 1/32. All of these may be affected by the chain of deeds through the original grantor of the NPRI. Generally, the NPRI will be factored by your fractional interest in the minerals. However, within the deed chain, someone could have sold partial minerals and either retained all of the NPRI burden or have made the grant subject to the buyer taking on all of the NPRI burden. You need to trace the deed history of each tract and, in particular, see the wording of the original grants of NPRI to figure this out. Finally, there have been court cases about the interpretation of NPRI language and resulting burdens.
Could be pooled vs allocation issue. Pooled wells come out to a similar number to allocated feet of well bore but they are calculated with different sizes which can lead to slightly different numbers.