If you’re receiving royalty checks or expect to in the future, one of the most important things you can do is learn how those payments are calculated. Many mineral owners just cash their checks without ever checking if the amount is accurate—but that can be a big mistake.

At Fraction Royalty, we believe every mineral owner should feel confident about their royalties. Whether you’re earning just a few dollars a month or thousands, it’s your money, and you deserve to understand how it’s calculated.

In this guide, we’ll break down the oil royalty formula, explain common deductions, and show you how to track oil revenue like a pro.

Before you can calculate your royalty payment, you need to know your decimal interest. This is the most important number in your statement, and it’s used to determine your share of the revenue from a well.

What Is Decimal Interest?

Your decimal interest is a fraction that represents your share of production from the well. It’s usually a small number like 0.002158 or 0.125000. This number comes from:

• Your net mineral acres

• The size of the drilling unit or lease

• Your royalty rate

How to Calculate It

Here’s a simple formula:

(Net Mineral Acres ÷ Spacing Unit Acres) × Royalty Rate = Decimal Interest

For example:
If you own 10 net mineral acres in a 640-acre unit, and your lease has a 20% royalty, your decimal interest would be:

(10 ÷ 640) × 0.20 = 0.003125

That’s your share of production from that well. This number is used in every oil and gas royalty check you receive.

Missing information to Calculate Decimal Interest?

Generally speaking, your decimal interest is already calculated for you.  It can be found on your royalty statements or check stubs that come from the operator.  It can be referred to as your net decimal interest, decimal interest, owners interest, or royalty interest.

Commonly we use the decimal interest to back into how many acres you own.

Need help?  Contact us for a free consultation.

Once you know your decimal interest, you can start calculating your expected royalty payments using production data and oil prices.

Basic Royalty Formula

Volume × Price × Decimal Interest = Royalty Payment

Let’s say:

• The well produces 1,000 barrels in a month

• Oil sells at $80 per barrel

• Your decimal interest is 0.003125

Your gross royalty would be:

1,000 × $80 × 0.003125 = $250

Where to Find Volume and Price

• Volume is often listed on your check stub

• Price per barrel can be found on sites like EIA.gov or the RRC website.

• If you don’t get a statement, you can use public data or ask the operator for a breakdown

One of the most confusing parts of royalty checks is deductions. These are costs that some operators subtract from your royalty to cover transportation, marketing, or processing.

Common Deductions

• Gathering: Moving the oil/gas to a collection point

• Compression: Pressurizing gas for transport

• Transportation: Trucking or piping to a refinery

• Marketing: Selling the product

Not all leases allow these deductions. If your lease says “no deductions,” your royalty should be based on the gross value. But if your lease is silent or allows deductions, they could take out a significant portion.

How Much Do They Take?

It varies. Some operators take just a few dollars, while others deduct 20% or more. That $250 payment you calculated earlier might end up being $200 or even less depending on deductions.

It’s smart to double-check your royalty statements—especially if the amounts change dramatically month to month.

What to Look For

• Is the production volume reasonable?

• Does the price per barrel match market prices?

• Are deductions consistent and clearly listed?

If anything looks suspicious, you have the right to ask for more details. Contact the operator or oil company and request a breakdown of your payment.

Pro Tip

Keep a running record of your royalty checks. Compare them to market prices and production data. This makes it much easier to catch errors or missing payments.

There are several great tools out there to help you track oil revenue and calculate royalty checks more accurately.

Tools Worth Exploring

• MineralAnswers.com: Track wells and production by county

• DrillingEdge.com: Public well data, permits, and production stats

• EIA Oil Prices: Daily spot prices for crude oil and natural gas

• Spreadsheets or budgeting apps: Keep your own records for easy comparison

If you’re getting overwhelmed, that’s okay.

At Fraction Royalty, we help mineral owners understand their royalty statements—and if you want to sell, we’ll give you a fast, fair offer based on real production data.

Not sure what your mineral rights are worth? Wondering if selling makes more sense than waiting on royalty checks? We can help.

With Fraction Royalty, you get:

• A real offer within 24 hours

• No closing costs

• Fast closings in 7 days or less

• Guidance on tracking, verifying, and even selling your royalties

Whether you decide to keep your rights or sell them, we want to help you understand your options.

Ready to Receive an Offer for Mineral Rights?

If you’re ready to sell oil and gas royalties, or just want to know what your mineral rights are worth, we’re here to help. We’ll make the process fast, fair, and easy.

Fill out our quick contact form and get your personalized offer in 24 hours.

👉 Click here to request your free mineral rights evaluation