RC Michael Company Inc.
1212 Raintree Drive Suite A-5 Fort Collins, Colorado 80526
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Phone: (970) 484-2737
Our 27th year of client service.
R.C. MICHAEL COMPANY, INC.
GEOLOGICAL CONSULTANTS

Gross Overriding Royalty

How Oil and Gas Royalties Work

Oil and Gas Royalties can generate profit for you. Let's assume a conservative price of $80/barrel. After 2008's wild ride, predicting oil pricing is hazardous at best. We'll stick with the current price range for now.

Let's also assume a conservative production of 40 barrels/day. (Often valuable gas is produced along with – or instead of - the oil, but we'll ignore the gas to keep it simple; just remember that associated gas production will increase these revenue figures.) A 4% overriding royalty is assumed.

40 barrels/day x $80 = $3200/day gross. Gross Overriding royalty essentially means “off the top”, but a few minor taxes do get deducted, so we'll assume a net basis of $3,100 to calculate your royalty.

  • $3,100 x 4% overriding royalty = $124.00 royalty per day.
  • $124.00 x 7 days/week = $868.00/week; x 48 = $41,664/year
48 weeks/year production is assumed to allow a month's downtime during the year for repairs, maintenance, etc.

To estimate your returns from higher - or lower - production, simply multiply the above figures by the corresponding factor. For instance, for 80 barrels/day, increase all figures by 2, giving a yearly income of $83,328/year.

Successful Oil and Gas Leases

Approximately two-thirds of our client leases which have been drilled have produced royalties. We expect this trend to continue or improve in the future due to rapidly developing technologies such as 3-D seismic profiling and the long-term bullish outlook for crude and natural gas.

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