Who Gets What?

A Half-Day Intensive Seminar - Royalty Pool Answer

March 5, 2010
   
CYCLE ONE (Weeks 1-4)  
Week 1:  WNOP  ($100,000) -  no amortization
Week 2:  WNOP  ($50,000) -  no amortization
Week 3:  WNOP  $0 -  no amortization
Week 4:  WNOP  $50,000 - amortization of all (i.e., $50,000) WNOP

No Cycle Net Operating Profits (CNOP) in Cycle One, so no share of CNOP to Pool
MWG = $1,500 per point when amortization is in effect
Bookwriter has 2 points, yielding $3,000 MWG, or $12,000 cumulative MWG for Cycle
Bookwriter’s Pool share (0) is LESS than Bookwriter's cumulative MWG

So:  Bookwriter gets $12,000 cumulative MWG for Cycle One
   
CYCLE TWO (Weeks 5-8)  
Week 5:  WNOP  $100,000 -  $100,000 amortization
Week 6:  WNOP  $150,000 -  $100,000 amortization
Week 7:  WNOP  $200,000 -  $100,000 amortization
Week 8:  WNOP  $250,000 -  $100,000 amortization

Aggregate Net Operating Profit: $700,000, minus $400,000 amortization = $300,000 CNOP
35% CNOP to Pool (production is unrecouped) = $105,000 to Pool
2/18ths of Pool to Bookwriter = $11,666.67
$11,666.67 Pool share to Bookwriter is LESS than $12,000 cumulative MWG

So:  Bookwriter gets $12,000 cumulative MWG for Cycle Two
[Note: If no amortization, then Bookwriter would have gotten $27,222.22]
   
CYCLE TWO (Weeks 9-12)  
Week   9:  WNOP  $300,000 -  $100,000 amortization
Week 10:  WNOP  $350,000 -  $100,000 amortization
Week 11:  WNOP  $400,000 -  $100,000 amortization
Week 12:  WNOP  $450,000 -  $100,000 amortization

Aggregate Net Operating Profits: $1,500,000, minus $400,000 amortization = $1,100,000 CNOP
35% CNOP to Pool (production is unrecouped) = $385,000 to Pool
2/18ths of Pool to Bookwriter = $42,777.78
No CAPS in effect because Bookwriter share of GWBOR is greater than Pool share

So: Bookwriter gets $42,777.78 for Cycle Three
[Note: If no amortization, then Bookwriter would have gotten $58,333.33]

   

TOTAL ROYALTIES TO BOOKWRITER FOR FIRST 3 CYCLES = $66,777.78