Mineral Rights & Oil Royalties
A mineral right is ownership of the oil and gas under a piece of land; a royalty is the share of a well's revenue paid to the owner, free of drilling and operating costs. This guide explains the terms, shows how a royalty check is worked out (using the latest WTI close of $97.97), and lists the public companies that own royalties. It is general information, not legal, tax or investment advice.
The Terms That Matter
| Term | What it means |
|---|---|
| Mineral rights | Ownership of the oil, gas and other minerals beneath land. Can be severed from the surface and sold, inherited or leased separately. |
| Royalty interest | A share of production revenue paid by the operator, with no share of drilling or operating costs. |
| Working interest | The operating interest in a lease. The holder pays costs and receives revenue after royalties. |
| Overriding royalty (ORRI) | A royalty carved out of the working interest, often held by landmen, geologists or earlier owners, and ending when the lease does. |
| Net mineral acres (NMA) | The acreage an owner actually owns in a tract, after allowing for shared ownership. |
| Decimal interest | The owner's share of a unit's revenue: net mineral acres divided by unit acres, times the royalty rate. |
| Division order | The operator's document stating the owner's decimal and where payments go. Check it against your title before signing. |
| Pooling / unitization | Combining tracts so one long horizontal well can drill under several owners, who share production by their acreage. |
| Post-production costs | Gathering, compression, processing and transport costs that a lease may allow the operator to deduct from the royalty. |
Lease royalties were traditionally one-eighth (12.5%); leases in active basins now commonly specify roughly 20% to 25%. The rate is whatever the lease says.
A Worked Royalty Check
Illustration · WTI close Oct 19, 2026| Step | Value |
|---|---|
| Net mineral acres owned | 10 |
| Acres in the drilling unit | 640 |
| Royalty rate in the lease | 25% |
| Decimal interest = 10 ÷ 640 × 0.25 | 0.003906 |
| Oil sold from the unit in the month | 10,000 bbl |
| Price (latest WTI close) | $97.97/bbl |
| Gross revenue | $979,700 |
| Gross royalty check = revenue × decimal | $3,827 |
Before post-production deductions, severance and income taxes, and ignoring any quality or location price differential. The numbers are an illustration, not a prediction of any real well. Run your own figures in the oil royalty calculator.
Taxes, in Brief
What commonly applies
- Royalty income is generally taxed as ordinary income.
- Qualifying owners can usually claim percentage depletion, which lets them deduct a set share (15% for eligible oil and gas royalty owners) of gross income from the property, subject to limits.
- Most producing states charge a severance tax, normally deducted before the royalty is paid.
Before you act
- Tax and title rules vary by state and by situation; ask a tax adviser and a landman or attorney before selling, leasing or signing a division order.
- Compare any offer with the lease, the unit's production history and recent comparable sales.
Public Royalty and Mineral Companies
Delayed quotes · USD| Symbol | Company | Last | Day change | About |
|---|---|---|---|---|
| VNOM | Viper Energy | $45.04 | +0.04% | Mineral and royalty owner affiliated with Diamondback Energy, with most of its acreage in the Permian Basin. |
| BSM | Black Stone Minerals | $14.88 | -1.00% | Mineral and royalty owner with interests across many US states and basins, structured as a publicly traded partnership. |
| KRP | Kimbell Royalty Partners | $16.32 | +0.21% | Mineral and royalty owner that buys interests across US basins, structured as a publicly traded partnership. |
Quotes from Yahoo Finance, delayed and informational only; not investment advice. Descriptions are general summaries; read each company's filings for its actual acreage and ownership. Other energy stocks: energy stocks today.
Where Drilling Is Happening
Baker Hughes · week of Oct 9| Basin | Active rigs | vs prior week |
|---|---|---|
| Permian | 274 | +4 |
| Haynesville | 57 | +1 |
| Eagle Ford | 49 | unchanged |
| Williston | 35 | unchanged |
| Marcellus | 23 | unchanged |
| Utica | 10 | unchanged |
| DJ-Niobrara | 10 | unchanged |
Royalty income depends on whether wells get drilled under your minerals, and rig counts are the leading indicator. Each basin page lists its main operators. All basins side by side: US oil and gas basins.
Mineral Rights & Royalties FAQ
What is the difference between mineral rights and royalty interests?
Mineral rights are ownership of the oil, gas and other minerals under the land, which can be sold or leased separately from the surface. A royalty interest is the right to a share of production revenue from a well, paid by the operator without the owner bearing drilling or operating costs. Owners who lease their minerals usually receive a royalty; owners who keep a working interest pay a share of the costs.
What is a typical oil and gas lease royalty?
Historically one-eighth (12.5%). Leases in active basins today commonly specify higher rates, often in the range of 20% to 25%, and the rate is set in the lease, not by law, except where a state or federal rule sets a minimum. Always read the specific lease.
How is a royalty check calculated?
The owner's decimal interest is the net mineral acres divided by the acres in the drilling unit, multiplied by the royalty rate. The check is that decimal times the revenue from the well, less any post-production costs the lease allows the operator to deduct. As an illustration, 10 net mineral acres in a 640-acre unit at a 25% royalty is a decimal of 0.003906; if the well sold 10,000 barrels in a month at the latest WTI close of $97.97, the gross check would be about $3,827 before taxes and deductions.
What are post-production deductions?
Costs the operator may subtract between the wellhead and the point of sale, such as gathering, compression, processing and transportation. Whether and how much can be deducted depends on the lease language and on state law, which is one of the main reasons two owners with the same royalty rate can receive different checks.
How do commodity prices affect royalty income?
Royalties are a share of revenue, so they rise and fall with oil and gas prices and with production volume. Because wells decline after the first year or two, income from a producing well generally falls over time unless new wells are drilled on the same minerals. See the live prices on the dashboard and the weekly market pulse.
Are royalty companies a way to own minerals without owning land?
Yes: a few publicly traded companies own mineral and royalty interests across many wells and pass on much of the income. Their share prices follow commodity prices and drilling activity on their acreage. This page lists them with delayed quotes for information only and gives no investment advice.