This provision provides for the assignor to except from this assignment and reserve an overriding royalty interest of all oil, gas, casinghead gas, and other minerals that may be produced from the lands under the terms of the Leases that are the subject of this assignment.
Puerto Rico Reservation of Overriding Royalty Interest
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US-OG-511
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FAQ
Working Interest Example ?1 Q: If you own a lease of 100% of the minerals under 160 acres in a 640 acre drilling unit, how much working interest do you own in a well drilled in the unit? A: 25%, because the 160 acres that you control represents 25% of the land in the drilling unit.
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.
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. ORRIs can be interpreted literally or may have proportionate reduction language.
Typically, NPRIs are created by an express grant or reservation in a deed and are entirely different from a ?leasehold? royalty. The holder of a NPRI has no power to negotiate or execute an oil and gas lease and has no power to enter upon the land to extract the hydrocarbons.
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.
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.
How to calculate the overriding royalty interest? ORRI = NRI * 5 percent. $750,000 * 0.005 = $3,750.
How to calculate the overriding royalty interest? The revenue remaining after the RI is paid out of the WI is called the net revenue interest (NRI). If you are the lessor of an ORRI, you will receive your proportional share of the working interest lease based on the net revenue interest (NRI).