Oklahoma Assignment of Overriding Royalty Interest Limited As to Depth (OAORI-LAD) is a legal instrument commonly used in the oil and gas industry to transfer the ownership rights of overriding royalty interests within specified depth limitations. It specifically applies to mineral owners in Oklahoma seeking to maintain their rights to receive royalty payments from oil and gas production within a specific depth range. When a mineral owner enters into an OAORI-LAD agreement, they are essentially assigning their overriding royalty interest to another party, typically an oil and gas operator or a leaseholder. This arrangement enables the assignee to receive a portion of the revenue generated from the production of oil and gas from the specified depths, while the original owner retains the rights to any production above or below the designated depths. There are two primary types of Oklahoma Assignment of Overriding Royalty Interest Limited As to Depth: 1. Vertical Limited Assignment: This type of OAORI-LAD restricts the overriding royalty interest assignment to a specific vertical depth interval. For example, a mineral owner may choose to assign their overriding royalty interest for depths ranging from 1,000 feet to 2,000 feet. This means that they will not receive any royalty payments for oil and gas production above or below this designated depth range. 2. Horizontal Limited Assignment: In contrast to a vertical limited assignment, a horizontal limited assignment pertains to a specific horizontal interval within a defined area. It is commonly used in areas with extensive shale formations, such as the prolific Navarro Basin or the SCOOP/STACK plays in Oklahoma. This type of OAORI-LAD ensures that the overriding royalty interest is only assigned for a specific target zone, allowing the mineral owner to retain their rights to potential production in other formations. Oklahoma Assignment of Overriding Royalty Interest Limited As to Depth agreements are essential for both mineral owners and oil and gas operators as they provide clarity and specificity regarding rights and responsibilities in regard to royalty interests within defined depth limitations. By clearly defining the assigned depth intervals, these agreements help to simplify the ownership structure and maximize the efficiency of revenue distribution in the extraction of oil and gas resources in Oklahoma.
Oklahoma Assignment of Overriding Royalty Interest Limited As to Depth
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FAQ
An overriding royalty interest (ORRI) is an interest carved out of a working interest. It is: A percentage of gross production that is not charged with any expenses of exploring, developing, producing, and operating a well.
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.
How to calculate the overriding royalty interest? ORRI = NRI * 5 percent. $750,000 * 0.005 = $3,750.
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.
An overriding royalty interest (ORRI) is an undivided interest in a mineral lease giving the holder the right to a proportional share (receive revenue) of the sale of oil and gas produced. The ORRI is carved out of the working interest or lease.
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.
Calculating Overriding Royalty Interest An ORRI is a straight percentage. For example, a 2% override would appear on the royalty statement as 0.02 interest in the proceeds from the sale of the leased hydrocarbons. The exact details of an override are dependent on the language.
