Kansas Assignment of Overriding Royalty Interests of a Percentage of Assignor's Net Revenue Interest, After Deductions of Certain Costs — Effectively A Net Profits, also known as Kansas AO ORI, is a legal agreement used in the oil and gas industry. This transaction involves the transfer of a percentage of the assignor's net revenue interest to another party, known as the assignee, after deducting certain costs. The assignee, in turn, receives a portion of the net profits generated from the oil and gas production. Kansas AO ORI provides an opportunity for individuals or companies to monetize their interest in oil and gas production by assigning a portion of their revenue interest to someone else. This arrangement is commonly used when the assignor wants to obtain immediate cash flow or reduce their financial risk associated with oil and gas production. The terms and conditions of a Kansas AO ORI can vary depending on the specific agreement. The percentage of the assignor's net revenue interest to be assigned is negotiated between the assignor and the assignee. Often, this percentage represents a fraction of the total revenue generated after deducting costs related to production, operation, and maintenance of the oil and gas well. By entering into a Kansas AO ORI, the assignor transfers ownership of the assigned percentage of net revenue interest to the assignee. The assignee then becomes entitled to receive a corresponding portion of the net profits generated from the assigned interest. This arrangement allows the assignor to share the risk and potential rewards of oil and gas production with the assignee. It's important to note that Kansas AO ORI agreements typically have certain deductions of costs, which vary from agreement to agreement. These deductions can include operating costs, marketing costs, taxes, and any other expenses incurred in relation to the production and sale of oil and gas. The assignor's net revenue interest is determined after subtracting these costs, ensuring that the assignee only receives a percentage of the net profits. In summary, Kansas 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 used in the oil and gas industry to transfer a portion of the assignor's net revenue interest to another party. This arrangement allows the assignor to share the risks and benefits of oil and gas production while providing an opportunity to obtain immediate cash flow or reduce financial risk.
Kansas 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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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.
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.
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.
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.
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.