A royalty check is a monthly accounting of your share of what the wells on your mineral rights sold. The amount at the bottom of the royalty check is the least useful part. The stub above it, also called a royalty statement, shows the volume, price, taxes, deductions and decimal behind the payment, and that is where you catch mistakes and learn what your mineral rights are worth. If you're paid by direct deposit, the same detail arrives as a royalty statement instead of a paper stub.
Who sends the royalty check and why it pays for old months
The payor is often the well's operator, and sometimes the company that first buys the oil or gas produced from your mineral rights. Either way, a royalty check always pays for production from earlier months. Texas law sets the deadlines: the first payment is due within 120 days after the end of the month of first sale, and after that on the schedule in your lease or within 60 days for oil and 90 days for gas after the month of sale (Texas Natural Resources Code §91.402). So a royalty check for oil sold in March can arrive near the end of May, and for gas sold in March near the end of June.
When a Texas payor misses those deadlines, and isn't holding the money for one of the reasons the law allows, it owes interest at two percentage points above the rate the Federal Reserve Bank of New York charges on loans to banks, unless a written agreement sets a different rate (§91.403).
The parts of a royalty check stub
Royalty check layouts vary by company, but the columns are similar. Texas requires stubs to show most of the items below (§91.502), and a royalty statement from another state usually uses the same terms, all defined in our oil and gas glossary.
- Property or well name and number, with the county and state. Each well or lease gets its own lines.
- Production month, also called sales month. This is when the oil or gas was sold, not when the royalty check was issued.
- Product. Oil, gas, condensate and natural gas liquids (sometimes listed as plant products) are paid on separate lines.
- Volume. Barrels for oil and thousand cubic feet (Mcf) or MMBtu for gas. This is the total sold from the well or unit, not your share.
- Price per barrel or per Mcf.
- Gross value: volume times price for the whole well.
- Owner interest, or decimal. The share of the well your mineral rights entitle you to, such as 0.00292969.
- Owner gross: your share of the value before taxes and deductions.
- Taxes: state severance and other production taxes on your share.
- Deductions: gathering, transportation, compression, processing or marketing costs, if the lease on your mineral rights allows them.
- Owner net: what the royalty check paid you for that line.
Many royalty check stubs also show an interest type code, such as RI for royalty interest, OR for overriding royalty or WI for working interest. If the code doesn't match what you own, ask why.
How your decimal interest is calculated
For a mineral rights owner in a pooled unit, the basic formula is: net mineral acres divided by the acres in the unit, times your lease royalty rate. Net mineral acres are the gross acres in your tract times the share of the mineral rights you own. If you own half the mineral rights under 20 acres, you have 10 net mineral acres.
Worked example
This is an example, not a typical interest. Say you own 10 net mineral acres in a 640-acre unit, and your lease pays a 3/16 royalty (0.1875). 10 divided by 640 is 0.015625. Multiply by 0.1875 and you get 0.0029296875, which a royalty check stub would show rounded, for example as 0.00292969.
If the well sells 12,000 barrels in a month at $65 a barrel, the gross value is $780,000. Your share before taxes and deductions is $780,000 times 0.00292969, or about $2,285.16. Taxes and deductions then come off that figure to give the net on your royalty check.
You can also run the math backward. Divide your decimal by your share of the unit (net mineral acres divided by unit acres) and you get the royalty rate the payor is using. In the example, 0.00292969 divided by 0.015625 is 0.1875, or 3/16. If the result doesn't match your lease, ask the payor which acreage and rate it used. Horizontal wells that cross several tracts or units can use more complex allocation formulas, so ask for the payor's worksheet if your numbers don't line up. Our oil and gas royalty calculator does both directions for you.
What royalty rate do you have?
Your royalty rate is the fraction in the royalty clause of the oil and gas lease on your mineral rights. Common fractions and their decimals are 1/8 (0.125), 3/16 (0.1875), 1/5 (0.20) and 1/4 (0.25). The difference matters: on the same well, a 1/4 royalty pays twice what a 1/8 royalty pays, and that rate drives every royalty check you receive from the well.
If you never leased your mineral rights but your tract was pooled into a unit, your share is set by the pooling order or state law instead. The operator or the state regulator's order for your unit will show which terms apply.
What a division order is in oil and gas
A division order is a payment instruction, not a new lease, and it does not transfer your mineral rights. Before the first royalty check, the payor sends one listing your decimal interest and asks you to confirm it. In Texas, the law says a division order does not amend any lease or operating agreement between you and the operator (§91.402(c)(2)).
Texas also limits what a payor can require you to sign. The allowed terms include the effective date, the property and products, your interest with a certification of title and an indemnity, authority to suspend payment during a title dispute, your name, address and tax ID, and how and when production is valued and paid. If you refuse to sign one that adds terms beyond these, the payor can't withhold payment for that reason alone. If you refuse one that contains only the allowed terms, it can hold your money without interest until you sign (§91.402(e)).
Before you sign any division order, check:
- Your name, address and tax ID are correct.
- The property description matches the tract where your mineral rights sit and the right unit.
- The decimal matches your own math, or the payor has explained the difference.
- Every product you're owed is listed.
- Nothing changes how royalties are calculated, approves new deductions, or ratifies a lease or pooling agreement.
Rules differ outside Texas. If a division order seems to change the deal on your mineral rights, have an oil and gas attorney read it before you sign.
Transfer orders after a sale or inheritance
When mineral rights change hands, the payor needs proof before it pays the new owner. Texas law defines a transfer order as an agreement signed by the old payee and the new payee that directs the payor to pay the new owner (§91.401). After a sale, the mineral rights buyer usually sends one with the recorded deed. For inherited mineral rights, the deceased owner can't sign, so the payor will ask for recorded documents such as a probated will or an affidavit of heirship. Our guide to how a mineral rights sale closes covers the paperwork in a sale.
Suspended payments and minimum check amounts
A payor can hold, or suspend, your royalty check when something blocks payment: an unsigned division order, a bad address, or a question about title to the mineral rights. In Texas, payors may withhold without interest when there is a title dispute, reasonable doubt about your title, or an unmet requirement in a title opinion (§91.402(b)). Call the owner relations department and ask whether any of your interest is in suspense and exactly what it needs to release it.
Small mineral rights interests may not get a royalty check every month. In Texas, a payor may pay once a year if it owes you $100 or less across all wells. It may hold balances under $10 until production or its duty to pay ends, but it must pay annually if you ask in writing (§91.402(f)). Other states and companies set their own minimums, which the payor's owner relations team can tell you. Money that is never claimed can end up in state unclaimed property, which our guide on finding out if you own mineral rights explains how to search.
How to spot errors on your royalty check
- Your decimal changes from one month to the next with no sale, new well or unit change to explain it.
- A well disappears from the royalty check stub, or a month is skipped with no catch-up payment later.
- The price is far below what the same product earned on your other wells for the same month.
- Deductions appear even though your lease says royalties are paid free of costs.
- Gas is paid but natural gas liquids aren't, on a well whose gas goes through a processing plant.
- Volumes on the stub don't track the production the operator reports to the state regulator, after allowing for timing.
When a royalty check looks wrong, write to the payor's owner relations department. Name the well, the production month, the line, and your own calculation. Keep copies of every letter and royalty statement with your mineral rights records.
Use your royalty check data to value your mineral rights
Buyers price producing mineral rights from the same numbers on your royalty check stub: net monthly income, how fast volumes are falling, and whether new wells are coming. Gather six to twelve months of stubs and add up the net figures. Independent mineral rights buyers who work your county use those same figures to price an offer. Our mineral rights value calculator turns that income into a rough value range. If you're thinking about converting some of your mineral rights income to cash, see how buyers handle a request to sell your royalty interest.