The percentage of production revenue that a working interest owner actually receives after all royalty and overriding royalty burdens are deducted.
Net Revenue Interest is the portion of a well’s gross revenue that an investor (typically a working interest owner) is entitled to receive. It is calculated by subtracting all royalty fractions from the working interest. For example, if an investor has a 10% working interest in a well and the total royalty burden (to landowners and any overriding royalties) is 20%, the investor’s NRI is 8% (i.e., 10% × (1 – 0.20)). NRI is a crucial figure because it represents the true share of production proceeds the investor will earn. It accounts for the fact that a portion of the production is allocated to others off the top, so the working interest share is diluted by these obligations.
Understanding NRI is essential for investors to accurately project their income from a well. A common mistake is to assume one’s working interest equals revenue share, but NRI clarifies the actual cash flow percentage. Investors use NRI to calculate expected revenue and ensure the venture remains attractive after accounting for royalties.
