Assignment of Overriding Royalty Interest - Short Form
Description
Definition and meaning
An Assignment of Overriding Royalty Interest (Short Form) is a legal document that allows the owner of a royalty interest to transfer or assign their rights to another party. This form is commonly used in the oil and gas industry to detail the specifics of the royalty interest being transferred, ensuring all parties understand their rights and obligations. The term 'overriding royalty interest' refers to an interest in production that is paid out of the gross production from a lease, without deducting any expenses. This form is crucial for parties engaged in the leasing or selling of mineral rights, as it provides the necessary legal framework for such transactions.
How to complete a form
Completing the Assignment of Overriding Royalty Interest (Short Form) accurately is vital for its effectiveness. To properly fill out the form, follow these steps:
- Begin by clearly entering the date on which the assignment is effective.
- Fill in the names and addresses of both the assignor and assignee.
- Specify the undivided percentage of the overriding royalty interest being assigned.
- Indicate the relevant details from any prior assignment, including volume and page numbers.
- Ensure to provide a description of the oil and gas lease and the lands involved, which should be included as Exhibit 'A'.
After filling in the required information, both parties should sign the document in the presence of a notary or witness, as required by state laws.
Who should use this form
This form is primarily intended for individuals or entities involved in the oil and gas industry, including:
- Property owners looking to lease or sell their mineral royalties.
- Investors acquiring royalty interests for financial gain.
- Legal representatives managing asset transfers for clients.
- Producers who might benefit from securing additional royalty interests.
Understanding who should use this form helps ensure that the legal rights and interests of all parties are properly documented and transferred.
Key components of the form
The Assignment of Overriding Royalty Interest (Short Form) includes several vital components:
- Effective Date: The date the assignment becomes effective.
- Assignor and Assignee Details: Names and addresses of the parties involved.
- Royalty Interest Percentage: The portion of the royalty interest being transferred.
- Prior Assignment Information: Details from previous agreements to clarify rights.
- Description of Lease and Lands: Specifics regarding the property subject to the assignment, attached as Exhibit 'A'.
Each component plays a crucial role in making the assignment legally binding and clear.
How to fill out Assignment Of Overriding Royalty Interest - Short Form?
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FAQ
An overriding royalty interest is the right to receive revenue from the production of oil and gas from a well. The overriding royalty is carved out of the lessee's (operator's) working interest and entitles its owner to a fraction of production.
Royalty Interest an ownership in production that bears no cost in production. Royalty interest owners receive their share of production revenue before the working interest owners. Working Interest an ownership in a well that bears 100% of the cost of production.
Overriding Royalty Interest (ORRI) a percentage share of production, or the value derived from production, which is free of all costs of drilling and producing, and is created by the lessee or working interest owner and paid by the lessee or working interest owner.
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.
Net revenue is the amount that is shared among the property owners. To determine net revenue interest, multiply the royalty interest by the owner's shared interest. For example, if you have a 5/16 royalty, your net royalty interest would be 25% multiplied by 5/16, which equals 7.8125% calculated to four decimal places.
An overriding royalty interest generally entitles the owner of the interest to a specified share of the oil and gas produced under the terms of the lease. In Texas and in many other oil-producing states, overriding royalty interests are generally treated as interests in real estate.
