Oil & Gas Royalties, Explained

Oil and gas royalties are payments made to mineral rights owners in exchange for the right to extract and sell oil and gas from their property. These royalties are typically calculated as a percentage of the value of the extracted resources.

Gross royalties are based on the total value of the extracted oil and gas without deducting any production or transportation costs. On the other hand, net royalties are calculated after deducting these costs, providing a percentage of the net revenue to the mineral rights owner.

Essentially, gross royalties are based on the total production, whereas net royalties are based on the profit after deducting production and transportation expenses. Overall, oil and gas royalties serve as a way for mineral rights owners to benefit from the extraction of resources from their land.