Old-Fence-in-Big-Bend-Ranch-1-Black-and-
Resources & FAQs

Mineral Rights

Sometimes referred to as"mineral estate", "minerals", or "royalties", mineral rights grant ownership to the natural resources found below the surface of your property. Mineral rights provide you, the owner, the right to explore, drill, and produce oil and natural gas on your property, or lease your property to an oil company and receive royalty payments from wells drilled on your property. 

Overriding Royalty Interest (ORRI)

Overriding royalty interests do not represent ownership of minerals under the ground, but rather an interest in the production created by the lessee (oil company/operator). ORRIs do not affect mineral owners and are generally assigned to a geologist, land manager, or brokerage firm. Overriding royalty interests are limited to the life of the lease and expire when the lease expires and/or production stops. 

Non-Participating Royalty Interest (NPRI)

A non-participating royalty interest owner has an interest in the oil and gas production created by the mineral estate, but does not retain the right to execute a lease, delay rentals, or receive a bonus. The NPRI owner has fewer rights than does the traditional mineral owner, who typically participates in one or all of the aforementioned activities.

Net Mineral Acre (NMA)

A net mineral acre (NMA) is a unit of measure used to price your mineral interest. One net mineral acre is generally defined as having 100% mineral interest in one acre of land. That said, your specific net mineral acreage is calculated by multiplying your undivided mineral interest in the tract by the number of acres in the tract. For example, if the gross acreage in your given tract is 160 acres (perhaps, the Southwest Quarter of a 640 acre section) and your decimal interest is 1/20, then you have 8 NMA (160 x 1/20 = 8). 

Net Royalty Acre (NRA)

A net royalty acre (NRA) is also a unit of measure used to value mineral estate. The difference being that the NRA takes into account the lease royalty rate, which allows a more fair comparison from one property to the next. The calculation basically finds how many NMA you would own assuming you were leased at a royalty rate of 1/8 (12.5%). For example, if you hear that your neighbor received and offer for $6000/NMA, if would be difficult to compare that offer to an offer you may have received because you do not know their royalty rate. You can find your NRA by simply dividing your decimal interest by 0.125 and multiplying it by your gross acreage. 

Oil & Gas Lease

Essentially, this is a contractual agreement between the mineral owner (lessor) and the producer (lessee) that grants the producer (also called the operator) rights to develop oil and gas wells on the property. Some of the most important details of the oil lease are: the royalty rate, primary term, and bonus. The royalty rate dictates the portion of total revenues that the mineral owner will receive. For example, if your minerals are leased at a 25% royalty, you will get paid 25% of the total revenue produced by the wells on your property. Keep in mind that your royalty rate is also proportionally reduced by your percent ownership in the mineral estate. The primary term is basically the length of your lease, generally 2-3 years. If the lessor does not drill a producing well during the primary term of the lease, the lease expires and they no longer have a hold on the land. Finally, the bonus refers to the signing bonus received by the mineral owner upon executing the lease. This is generally calculated on a per NMA basis. For example, if the bonus is $1,000 per acre and you own 50 net mineral acres, you will receive a $50,000 payment at signing. 

Still have questions? Feel free to contact us!

400 Mann Street, Suite 504

Corpus Christi, Texas 78401

land@eastadams.com  |   361.214.3680

© 2023 by East Adams & Co.