Title: Understanding South Carolina's Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced Introduction: In South Carolina, the Assignment of Overriding Royalty Interest (ORRIS) is a significant aspect of oil and gas lease agreements. This arrangement allows certain parties to gain a share of the revenue generated from oil production. Specifically, the Assignment of Overriding Royalty Interest to Become Effective At Payout is an agreement that triggers the assignment of ORRIS when a specific production threshold is reached, with the payout being determined based on the volume of oil produced. Let's explore this mechanism and its variations in more detail. 1. South Carolina Assignment of Overriding Royalty Interest to Become Effective At Payout: The Assignment of Overriding Royalty Interest to Become Effective At Payout is a provision in oil and gas lease agreements that outlines the conditions necessary for the assignment of ORRIS. In South Carolina, this provision activates when the oil production reaches a certain predetermined payout threshold. 2. Payout Based on the Volume of Oil Produced: The payout under the Assignment of Overriding Royalty Interest to Become Effective At Payout is determined based on the volume of oil produced. As the production increases, so does the reward for the assignee. The specific formula for calculating the payout might differ between agreements, but a common approach is to assign a fixed percentage of the total revenue generated or the gross value of the oil produced. 3. Types of South Carolina Assignment of Overriding Royalty Interest to Become Effective At Payout: a. Fixed Percentage ORRIS: In this type of Assignment of Overriding Royalty Interest, a fixed percentage of the total revenue generated from the oil production is assigned to the assignee once the production threshold is met. For example, if the fixed percentage is set at 1%, and the total revenue generated is $1 million, the assignee receives a payout of $10,000. b. Gross Value ORRIS: This variation calculates the payout based on a fixed percentage of the gross value of the oil produced. The gross value includes the sale price of the oil, minus any transportation or processing costs. For instance, if the gross value percentage is set at 2% and the gross value of oil produced is $800,000, the assignee receives a payout of $16,000. c. Hybrid ORRIS: Some agreements combine the elements of both fixed percentage and gross value ORRIS. This approach allows the assignee to receive a modest fixed percentage of the total revenue, along with an additional percentage of the gross value. This structure ensures that the assignee benefits from the overall financial performance of the project. Conclusion: The South Carolina Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced, is an essential component of oil and gas lease agreements. By using different variations, such as fixed percentage, gross value, or hybrid ORRIS structures, parties involved can tailor the agreement to suit their needs and ensure fair compensation for the assignee based on the volume of oil produced. The various forms of this arrangement facilitate productive partnerships in the oil and gas industry and contribute to the efficient utilization of South Carolina's oil resources.
South Carolina Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced
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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.
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.
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 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, ...
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.