Title: Puerto Rico Assignment of Overriding Royalty Interest (No Proportionate Reduction) Explained Introduction: In Puerto Rico, the Assignment of Overriding Royalty Interest (No Proportionate Reduction) is a legal agreement that grants the assignee the right to receive a portion of the revenue generated from oil, gas, or mineral extraction on a property, without any proportionate reduction based on the total production. This article will provide a detailed description of what this agreement entails, its purpose, and possible variations. 1. Overview of the Assignment of Overriding Royalty Interest in Puerto Rico: The Assignment of Overriding Royalty Interest is a contractual arrangement in which the owner of a property conveys a portion of their royalty interest to another party. This transfer allows the assignee to receive the assigned percentage of revenue from a specific substance extracted, such as oil, gas, or minerals. 2. No Proportionate Reduction Clause: The presence of the "No Proportionate Reduction" clause ensures that the assignee's interest in the revenue generated remains constant, regardless of the total production. This means that even if the property's overall production increases or decreases over time, the assignee's portion remains unaffected, leading to a stable income stream for the assignee. 3. Purpose and Benefits of a Puerto Rico Assignment of Overriding Royalty Interest with No Proportionate Reduction: — Stable Income: The assignee benefits from a reliable revenue stream since their share remains fixed regardless of production fluctuations. — Hedging Against Risk: By assigning a fixed portion of a property's royalty interest, the assignee mitigates the risk associated with the oil, gas, or mineral market volatility. — Attracting Investors: Property owners often use this agreement as a means to attract investors interested in a guaranteed return amidst uncertain market conditions. 4. Variations of Puerto Rico Assignment of Overriding Royalty Interest (No Proportionate Reduction): a) Flat Rate Override: In this type, the assignee receives a fixed percentage of the total revenue generated by the property, regardless of the production level. b) Sliding Scale Override: Here, the assignee receives a percentage of the revenue, which may vary based on a predetermined production threshold. It allows for a lower override percentage if the production amount is below the certain threshold and a higher override percentage for production exceeding the threshold. Conclusion: The Puerto Rico Assignment of Overriding Royalty Interest (No Proportionate Reduction) is a legally binding agreement allowing the assignee to receive a constant share of the revenue generated from oil, gas, or mineral extraction. With its stability and risk-hedging benefits, this type of assignment attracts investors and provides a reliable income stream for the assignee, even in times of production volatility. Different variations, such as the flat rate and sliding scale overrides, offer flexibility in tailoring the agreement to specific circumstances.
Puerto Rico Assignment of Overriding Royalty Interest (No Proportionate Reduction)
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Overriding Royalty Interest Conveyance means an assignment, in form and substance acceptable to Lender, pursuant to which Borrower grants in favor of Lender an overriding royalty interest equal to six and one-fourth percent (6.25%) of Hydrocarbons produced, saved and sold or used off the premises of the relevant Lease, ...
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.
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.
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.
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.
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.
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.