When a royalty check arrives, most people look at the net amount and move on. But the stub that comes with it tells a much fuller story. Understanding each line helps you verify that you're being paid correctly and gives you the detail you need for tax reporting. No two operators format their stubs identically, but the core information is the same across the industry.

Here's a typical check stub broken down.

The Header

The top of the stub identifies you and the payment:

Property and Well Information

Each line item on the stub corresponds to a specific well or lease. You'll typically see:

Production Volume

Gross Revenue

This is the total revenue from your share of production before any deductions. The basic formula is:

Volume x Price x Your Decimal Interest = Gross Revenue

For gas with a BTU adjustment: Volume x BTU Factor x Price x Decimal Interest = Gross Revenue.

Deductions

This is where the detail matters most. Operators deduct post-production costs before paying you. Common deduction line items include:

These deductions can be significant. In one documented example, post-production deductions consumed 88% of the gross natural gas royalty, with gathering alone accounting for over 60%. Some operators report no deductions but pay on a lower price, effectively hiding the costs in the pricing.

Whether these deductions are allowable depends on your lease language. "At the wellhead" leases generally permit deductions; "gross proceeds" or "free of cost" leases may prohibit them. If you see deductions you don't think should be there, review your lease.

Taxes

Adjustments

Net Revenue

After all deductions, taxes, and adjustments:

Gross Revenue - Deductions - Taxes +/- Adjustments = Net Revenue

This is what you actually receive. If the net amount looks wrong, work backward through the formula to find which component changed.

How to Verify Your Stub

Don't assume the numbers are right just because they came from the operator. Errors are more common than most owners realize, from incorrect decimal interests to unauthorized deductions. Here's how to check:

  1. Compare your decimal interest on the stub to the decimal on your most recent division order. If they don't match, ask why.
  2. Compare volumes to what the state oil and gas commission reports for the same well. Use sales/disposition volumes, not production volumes.
  3. Compare prices to published benchmarks for the same month and basin. Your realized price won't match WTI or Henry Hub exactly, but large gaps deserve a question.
  4. Track deductions month to month. If a deduction category jumps significantly, ask the operator what changed.
  5. Verify taxes against your state's published severance tax rates.

What to Do With Your Stubs

Keep every stub for at least seven years for tax purposes. Log each payment with the full breakdown so you can track trends, catch errors early, and have everything ready at tax time. When you call the operator's owner relations department, having specific numbers in front of you ("My gathering deduction on Well X went from $45 to $120 between March and April") gets answers much faster than "Why did my check go down?"

MinRight's royalty payment form mirrors the structure of a check stub: gross revenue, deductions by category, taxes, adjustments, and net amount. Logging each payment builds a history that makes it easy to spot anomalies, question deductions, and understand prior period adjustments when they show up.