Net Revenue Interest
The share of production revenue that a working interest owner receives after all royalties and other burdens are deducted.
Detailed Definition
Net Revenue Interest (NRI) is the share of production revenue that a working interest owner actually receives after deducting all royalties, overriding royalties, and other revenue burdens. NRI represents the true economic interest in production revenue.
Calculating NRI: NRI = Working Interest x (1 - Total Revenue Burden)
Example: - Working Interest: 100% (1.0) - Landowner Royalty: 1/8 (0.125) - Overriding Royalty: 1/16 (0.0625) - Total Revenue Burden: 0.1875 - NRI = 1.0 x (1 - 0.1875) = 0.8125 (81.25%)
Components that reduce NRI: - Landowner royalty (reserved in the lease) - Overriding royalty interests (carved from working interest) - Non-participating royalty interests - Production payments - Net profits interests
Significance: - Determines the actual revenue received by the working interest owner - Used in economic evaluations and reserve reports - Affects well economics and investment decisions - Appears on division orders for production distribution
NRI in transactions: When evaluating or acquiring mineral properties: - Always verify the NRI, not just the working interest - A high working interest with heavy royalty burdens may have a low NRI - NRI directly affects cash flow and property valuation - Title examination determines the correct NRI by identifying all revenue burdens
Distinction from working interest: Working interest defines cost responsibility; NRI defines revenue entitlement. A 100% working interest owner bears 100% of costs but receives less than 100% of revenue due to royalty burdens.
Related Terms
Mineral Lease
A contract granting the right to explore for and produce minerals from a specific tract of land in exchange for rental payments and royalties.
Royalty Interest
The landowner's share of production revenue from an oil, gas, or mineral lease, typically expressed as a fraction.
Working Interest
The operating interest in an oil and gas lease that bears the costs of exploration, development, and production.
Overriding Royalty Interest
A royalty interest carved out of the working interest in an oil and gas lease, not tied to land ownership.