If you are comparing an offer on either type of interest, our mineral-rights valuation guide lays out the documents and variables a serious valuation should use. Owners already receiving checks should also verify the payable fraction with the royalty decimal calculator.
In the mineral business, we categorize assets into two main buckets: :PDP and :NPRO.
Producing (PDP)
Proved Developed Producing. These are minerals that are currently generating a royalty check. There is a well on the land, it’s pumping oil, and the operator is paying you.
Producing minerals are:
- Easiest to value — We can see actual cash flow
- Easiest to sell — Less speculation involved
- Subject to :decline — Wells produce less over time
Non-Producing (NPRO)
Non-Producing Royalty Interest. These are minerals with no active wells. You aren’t getting a check.
Are they worthless? Not necessarily!
If you are in a hot area like the :Permian Basin or the :Eagle Ford, your non-producing minerals could be worth more per acre than producing ones in a tired field. Why? Because we’re betting on future wells—and new wells produce at peak rates.
The Risk: If no one ever drills, they generate zero return. Buying NPRO is a speculative bet for us, but it provides immediate cash for you.
The Best of Both Worlds: :PUD
Some minerals are currently producing AND have permits for new wells. These are the most valuable—established cash flow plus upside potential.
How We Value Each Type
| Type | Valuation Method |
|---|---|
| PDP | Multiple of current cash flow (typically 3-5x annual royalty) |
| NPRO | Acreage value based on location and drilling activity |
| PUD | Hybrid: cash flow + discounted future value of permitted wells |
The Documents That Separate the Two
“Producing” should be verified, not inferred from a lease or a well symbol on a map. A producing file normally includes a division order, recent statements and public production records tying a well or unit to the legal description. Confirm the owner name, decimal, product, sales month and operator. Suspended or minimum-pay interests may be producing even when no recent check arrived.
“Non-producing” is not one risk category. An unleased tract with no nearby activity is different from leased acreage in a permitted unit, and both differ from a depth not held by an existing well. Review the lease term, extensions, pooling authority, depth clauses, Pugh clause and assignments. One shallow legacy well may hold only part of the acreage—or, depending on the instruments, much more than expected.
For producing assets, value begins with attributable cash flow. Normalize enough statement history to identify decline, price changes, downtime and one-time adjustments. Check whether taxes and post-production costs are deducted before using a multiple. A multiple applied to an unusually high first check can materially overstate value.
For non-producing assets, value is probability-weighted. Relevant evidence includes title certainty, exact location, lease terms, spacing orders, permits, offset results, operator behavior and plausible timing. A nearby well does not automatically develop the owner’s tract, and a permit does not promise completion.
Keep the ownership unit consistent. Gross acres describe the tract. Net mineral acres apply the ownership fraction. Net royalty acres adjust for the lease royalty. Offers framed in different units can look comparable when they are not. Ask every buyer to state the net interest and royalty assumption used.
Producing and non-producing interests can coexist under one legal description at different depths. Inventory each tract and formation before signing a deed. A broad conveyance can transfer undeveloped upside never included in the buyer’s cash-flow discussion. Independent deed review matters particularly for partial sales, depth limits and reservations.
Reclassify the inventory when facts change. First production, a lease expiration, a pooling order, a new division order or a plugged well can move an interest between categories without changing the owner’s name. Keep the date and supporting document beside each classification so heirs and advisers can reproduce the conclusion rather than relying on an old spreadsheet label.
:pdp
Proved Developed Producing. Industry shorthand for minerals that are actively generating revenue right now. The “proved” means reserves have been confirmed by production data.
:npro
Non-Producing Royalty Interest. Minerals that aren’t currently generating income. Value depends entirely on the likelihood of future drilling.
:decline
The natural reduction in oil production from a well over time. A typical shale well might produce 70% less in year two than year one.
:permian
The Permian Basin in West Texas and New Mexico—the most prolific oil-producing region in the United States and the primary focus of American energy investment.
:eagle-ford
A major shale formation in South Texas, known for high-quality oil and consistent drilling activity from operators like EOG and Devon.
:pud
Proved Undeveloped. Reserves that are known to exist (based on nearby wells) but haven’t been drilled yet. These locations are on the operator’s development schedule.