Different Types of Royalty Income

The oil and gas industry is known for its significant returns and attractive royalty income. 4 common types are…

1. Royalty Interest. This is a percentage of production revenue paid to the owner of the mineral rights without the costs of the wells.

2. Overriding Royalty Interest (ORRI) is reserved for the geologist, engineer, or other technical experts who worked on the project. Their revenue is similar to the mineral rights owner because they do not bear any costs of the wells.

3. Net Profits Interest or Nonoperating Interest (NonOp) is based on the net profits of the oil and gas production does not bear any part of net losses.

4. Net Royalty Interest (NRI) goes to the Working Interest which is the ownership interest in the well that bears all the costs of the well plus the expenses to plug and abandon the well at the end of the life. They are entitled to a share of what is left from the production revenue.

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https://www.eia.gov/tools/glossary/index.php

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