Two numbers determine how much money you receive from a producing well: your royalty rate and your net revenue interest (NRI). They're related, but they measure different things, and confusing them can lead to misunderstandings about what you're owed.

Royalty Rate

Your royalty rate is the percentage of production revenue owed to you as the mineral owner, as specified in your lease. Common royalty rates are 1/8 (12.5%), 3/16 (18.75%), and 1/5 (20%).

The royalty rate applies to the total production from the lease or well. If your royalty rate is 3/16, you're entitled to 18.75% of the production revenue from the well (before or after deductions, depending on your lease terms).

But your royalty rate alone doesn't tell you how much of the total well revenue you'll receive, because you may not own 100% of the minerals in the unit.

Net Revenue Interest (NRI)

Your net revenue interest is the actual percentage of well revenue you receive after accounting for your acreage share, your royalty rate, and any other burdens on the title (like overriding royalty interests).

The basic calculation for a royalty owner is:

Your Net Mineral Acres / Total Unit Acres x Your Royalty Rate = NRI

Example

You own 10 net mineral acres in a 640-acre unit. Your royalty rate is 3/16.

10 / 640 x 0.1875 = 0.002929

Your NRI is 0.002929, meaning you receive about 0.29% of the well's total revenue. This is the decimal interest that appears on your division order.

Why They're Different

Your royalty rate is a lease term. It's what you negotiated (or what was set by a pooling order). It applies to your share of the minerals.

Your NRI is the final number that accounts for how much of the unit your minerals cover. If you own minerals in a small tract that's part of a large unit, your NRI will be a small fraction even if your royalty rate is generous.

Two owners can have the same royalty rate but very different NRIs if one owns 80 net mineral acres in the unit and the other owns 5.

Where You'll See Each One

When someone asks "what's your royalty rate?" they're asking about the lease term. When they ask "what's your interest?" they usually mean your NRI or decimal interest.

Checking the Math

If you know your NRI and want to verify it:

  1. Start with the total unit acres (from the spacing or pooling order)
  2. Determine your net mineral acres (from your deed, accounting for fractional ownership)
  3. Apply your royalty rate (from your lease)

The result should match the decimal on your division order. If it doesn't, the operator may have different information about your acreage or royalty rate. Ask them to explain the calculation.

When NRI Changes

Your NRI can change if:

Any change should come with a new division order. Compare the new NRI to the previous one and understand the reason for the change.

MinRight stores your decimal interest for each well, so when a new division order arrives, you can compare it to what's on file. For the components that feed into NRI, see our posts on net mineral acres and calculating your decimal interest.