A Florida Assignment of Overriding Royalty Interests of a Percentage of Assignor's Net Revenue Interest, After Deductions of Certain Costs — Effectively A Net Profits is a legal agreement that allows an assignor to transfer a portion of their net revenue interest to another party, after deducting certain costs. In Florida, there are several types of assignments of overriding royalty interests that fall under this category. Some of them include: 1. Traditional Assignment: This is the standard form of the assignment where the assignor transfers a specific percentage of their net revenue interest to the assignee. The assignor receives their share of the revenue after making deductions for any costs associated with production or operation. 2. Working Interest Assignment: In this type of assignment, the assignor transfers a portion of their net revenue interest that corresponds to their working interest. This means that the assignor is responsible for a percentage of the costs associated with production or operation, and the assignment reflects their share of the net profits. 3. Horizontal or Vertical Assignment: These assignments are specifically used in the oil and gas industry. A horizontal assignment allows the assignor to transfer a percentage of their net revenue interest across a specific geological formation or zone. A vertical assignment, on the other hand, allows the assignor to transfer a percentage of their net revenue interest within a specific depth or section of a well. 4. Assignment of Overriding Royalty Interest (ORRIS): This type of assignment allows the assignor to transfer a percentage of their net revenue interest after deducting costs. It is often used when the assignor wants to retain their working interest but still receive a portion of the net profits. It's important to note that these assignments are legally binding agreements and should be carefully drafted to ensure the rights and obligations of both parties are properly outlined. Additionally, the percentage of the assignment, deductions, and other terms should be clearly defined to avoid any misunderstandings or disputes in the future.
Florida Assignment of Overriding Royalty Interests of a Percentage of Assignor's Net Revenue Interest, After Deductions of Certain Costs - Effectively A Net Profits
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Overriding royalty interest: Unlike mineral and royalty interests, an overriding royalty interest runs with a lease and not with the land. Therefore, they only remain in effect for as long as a lease is in effect and they expire when a lease expires.
If at any time Assignee desires to transfer or dispose of all or any portion of the Overriding Royalty Interest, Assignee must first give to Assignor written notice thereof stating: (a) the amount of the Overriding Royalty Interest offered by Assignee; (b) the form of consideration (which shall be either cash or a ...
The value of an overriding royalty interest is simple to calculate since it is a percent of the working interest lease. The ORRI value is based on production on the acreage leased by the working interest.
Royalty interest in the oil and gas industry refers to ownership of a portion of a resource or the revenue it produces. A company or person that owns a royalty interest does not bear any operational costs needed to produce the resource, yet they still own a portion of the resource or revenue it produces.
Overriding Royalty Interest: A given interest severed out of the record title interest or lessee's share of the oil, and not charged with any of the cost or expense of developing or operation. The interest provides no control over the operations of the lease, only revenue from lease production.
Essentially, NPRI is the royalty severed from minerals just as minerals are severed from the surface interest. Unlike mineral owners, non-participating royalties do not have executive rights in lease negotiations, leasing incentives, or rental payments. They just receive the actual production proceeds.
However, unlike royalty and working interests, an overriding royalty interest cannot be fractionalized unlike royalty and working interests. The ORRI is a non-possessory, undivided right to a share of the oil and gas production, but it excludes the production costs of the mineral lease.
How to calculate the overriding royalty interest? ORRI = NRI * 5 percent. $750,000 * 0.005 = $3,750.