A Conversion of Reserved Overriding Royalty Interest to Working Interest form. The assignee shall be entitled to recover, out of the total proceeds derived from the sale of oil and gas produced from each well drilled and completed as a well capable of producing oil or gas in paying quantities on the Land, the total cost of drilling, completing, and equipping such well together with the cost of operating such well until the time of such recovery.
Illinois Conversion of Reserved Overriding Royalty Interest to Working Interest
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FAQ
Overriding Royalty Interest (ORRI) ORRIs are created out of the working interest in a property and do not affect mineral owners. An overriding royalty interest (ORRI) is often kept or assigned to a geologist, landman, brokerage, or any entity that was able to reserve an interest in the properties.
The value of a royalty interest is derived from expected future revenues generated by leasing and/or production, which are largely determined by oil and gas market prices and the current drilling environment.
Fixed NPRI ? royalty of an exact, calculable quantity, eg ? 1/16th of oil & gas produced. Floating NPRI ? any description including ?of ? royalty? which would be multiplying the interest by the royalty, eg ? 1/16th of the royalty of oil & gas produced.
How to calculate the overriding royalty interest? ORRI = NRI * 5 percent. $750,000 * 0.005 = $3,750.
An overriding royalty is ?carved out of? the working interest. If ABC Oil Company acquires an oil and gas lease covering Blackacre that reserves a 25% royalty, ABC has a 75% net revenue interest. ABC can convey a share of that net revenue interest as a royalty.
You may convey overriding royalty interest on either an Assignment of Record Title Interest (Form 3000-3), a Transfer of Operating Rights (Form 3000-3a), or on a private assignment. We only require filing of one signed copy per assignment plus a nonrefundable filing fee found at 43 CFR 3000.12.
Several factors determine the value of an overriding royalty interest in a working lease. They include: Location ? A mineral interest in high producing shale basins will be more valuable. Producing Wells ? Producing wells are valued higher than non-producing wells.
To calculate the number of net royalty acres I'm selling, I use this formula: [acres in tract] X [% of minerals owned] X 8 X [royalty interest reserved in lease] X [fraction of royalty interest being sold]. 640 acres X 25% X 8 X 1/4 X 1/2 = 160 net royalty acres.