Net Revenue Interest (NRI) Explained: How Much of Production You Actually Receive

Why NRI Matters More Than Working Interest

When investors ask 'what percentage do I own?', they usually mean their working interest. But the number that determines your check is Net Revenue Interest (NRI). The difference between these two numbers is the royalty burden, and it can significantly change your economics.

The Formula

NRI = Working Interest × (1 - Total Royalty Burden). If you hold a 10% working interest on a lease with a 20% royalty burden (landowner royalty + any overriding royalties), your NRI is 10% × 0.80 = 8%. You receive 8% of gross production revenue. You pay 10% of operating costs. That mismatch between revenue share and cost share is the royalty burden at work.

Typical Royalty Burdens

Landowner royalties in Oklahoma typically range from 12.5% (1/8th) to 25% (1/4th). The most common is 3/16ths (18.75%). Some leases carry overriding royalty interests (ORRIs), additional royalty percentages carved out for landmen, geologists, or other parties who helped assemble the lease. Total royalty burdens of 20-25% are common.

Higher royalty burdens mean lower NRI for working interest holders. A lease with a 25% royalty burden gives you 75% of the revenue a zero-royalty lease would. This is why experienced investors ask about royalty burden before anything else.

Verifying NRI in Offering Documents

Your offering documents should specify both your working interest and your NRI. If only working interest is listed, ask for the royalty burden calculation. The NRI should be verified against the Division Order, the legal document filed with the purchaser that establishes each party's decimal interest in production.

BassEXP provides NRI calculations in every offering document and matches them against filed Division Orders. We also provide our NRI calculator tool so you can model different scenarios before investing.

NRI and Cash Flow Projections

When evaluating projected returns, always use NRI, not working interest, for revenue calculations. A 10% working interest sounds like 10% of revenue, but if NRI is 7.5%, that's what you actually receive. Costs are still based on working interest. This is why lower royalty burden leases are more valuable to working interest holders.