How to Read Your Royalty Statement: A Mineral Owner's Guide
Every month, mineral owners across the country receive royalty statements from their operators. Most glance at the bottom line, deposit the check, and move on. But buried in those line items are details that directly affect how much you're being paid—and whether that amount is correct.
Understanding your royalty statement isn't just good practice. It's how you protect your income.
What a Royalty Statement Actually Shows
A typical royalty statement (sometimes called a check stub or revenue detail) includes several key pieces of information for each property and well:
Property and Well Identification
- Property or lease name and sometimes a property number
- Well name and API number — the unique identifier assigned by the state
- Production month — the month the oil or gas was actually produced (not when you're being paid)
Volume and Pricing
- Gross production — total barrels of oil (BO) or thousand cubic feet of gas (MCF) produced from the well
- Your share of production — gross production multiplied by your decimal interest
- Price per unit — what the operator received per barrel or MCF at the point of sale
- Gross value — your share of production multiplied by the price
Deductions
This is where it gets complicated. Depending on your lease terms and state law, you may see:
- Severance tax — a state tax on the extraction of natural resources (varies by state: Texas charges 4.6% on oil and 7.5% on gas; Oklahoma charges 2-7% depending on well age)
- Gathering and transportation — fees to move oil or gas from the wellhead to a pipeline or processing plant
- Compression — costs to pressurize gas for pipeline transport
- Processing/treating — fees to remove impurities or separate natural gas liquids (NGLs)
- Marketing fees — charged by some operators for arranging the sale
The Bottom Line
- Net revenue — what you actually receive after all deductions
Key Things to Watch For
1. Your Decimal Interest Should Match Your Division Order
Your decimal interest is the precise fraction of revenue you're entitled to. It's calculated from your mineral ownership and lease royalty rate. If you own 10 net mineral acres in a 640-acre unit with a 1/4 royalty, your decimal interest is:
(10 / 640) x 0.25 = 0.00390625
This number should appear on your division order and match what's on every royalty statement. If it doesn't, something is wrong.
2. Deductions Depend on Your Lease Language
Not all deductions are legal. Many leases contain a "no deductions" or "cost-free royalty" clause that prohibits the operator from passing post-production costs to the royalty owner. If your lease says royalties are calculated "at the wellhead," some deductions may be appropriate. If it says "free of cost" or "at the point of sale," they likely aren't.
Review your lease. If you see gathering, transportation, or processing charges and your lease prohibits them, that's money you should be getting back.
3. Production Month vs. Payment Date
There's typically a 60-90 day lag between when oil or gas is produced and when you receive payment. Your January production might not show up until March or April. This is normal—but if you notice gaps of 6+ months, your royalties may be in suspense.
4. Compare Prices Against Market Benchmarks
The price on your statement should be reasonably close to the WTI (West Texas Intermediate) benchmark for oil or the Henry Hub benchmark for natural gas on the production date. Significant discounts (called "basis differentials") can be legitimate based on location and quality, but consistent underpricing is worth questioning.
What to Do If Something Looks Wrong
- Start with your division order — confirm your decimal interest is correct
- Read your lease — know what deductions are and aren't allowed
- Compare statements across months — look for sudden changes in price, volume, or deductions
- Contact the operator's owner relations department — they're required to explain your statement
- Know your state's deadlines — in Texas, royalties must be paid within 120 days of first production, then within 60 days of each subsequent production month. Late payments accrue 18% annual interest.
How MineralDesk Helps
MineralDesk automatically imports and standardizes your royalty statements across all your operators. Instead of deciphering different formats from different companies, you see a consistent view of every well, every deduction, and every payment—with tools to flag discrepancies and track trends over time.
Stop guessing. Start verifying. Get started at MineralDesk.com