Title: Understanding Washington Assignment of Overriding Royalty Interest Convertible to A Working Interest At Assignee's Option Introduction: In the energy industry, one common agreement is the Washington Assignment of Overriding Royalty Interest (ORRIS) Convertible to A Working Interest at Assignee's Option. This legal contract outlines the transfer of an overriding royalty interest and provides the assignee with the option to convert it into a working interest. This article will provide a detailed description of this type of assignment, highlighting key components and variations. 1. Washington Assignment of ORRIS Convertible to a Working Interest at Assignee's Option Defined: At its core, the Washington Assignment of Overriding Royalty Interest Convertible to a Working Interest at Assignee's Option refers to an agreement where a royalty interest holder assigns their rights to receive a percentage of profits from an oil, gas, or mineral lease. The assignee is provided with an additional option to convert this royalty interest into a working interest, entitling them to directly participate in the operational aspects of the lease project. 2. Key Elements of the Agreement: a. Assignment of Overriding Royalty Interest: The agreement transfers the ORRIS rights from the original holder (assignor) to a third party (assignee). The assignor usually receives a lump sum or periodic payments in exchange. b. Optional Conversion to Working Interest: The assignee has the option to convert the assigned ORRIS into a working interest. This allows them to take on operational responsibilities and expenses in addition to benefits from production. c. Terms and Conditions: The agreement encompasses specific terms like duration, percentage interest assigned, payment details, rights, and obligations of the assignor and assignee. 3. Benefits for the Assignor: a. Immediate Monetary Gain: By assigning the ORRIS, the assignor receives an immediate financial benefit, either through a lump sum payment or periodic royalties. b. Reduced Risk and Administrative Efforts: Assigning the ORRIS eliminates the responsibilities associated with lease operations, reducing risks and administrative tasks. 4. Advantages for the Assignee: a. Enhanced Investment Potential: Assignees benefit from potential future profits and capital appreciation through the option to convert the assigned ORRIS into a working interest. b. Active Participation: Conversion to a working interest allows the assignee to actively engage in lease operations, participate in decision-making, and potentially influence project outcomes. 5. Types of Washington Assignment of ORRIS Convertible to a Working Interest at Assignee's Option: Though the key principles remain the same, variations in this assignment agreement can occur based on negotiation and specific circumstances. Some common types include: a. Fixed Conversion Rate Assignment: The ORRIS's conversion rate to a working interest is predefined in the agreement. b. Differential Conversion Rate Assignment: The conversion rate fluctuates based on certain production thresholds, market conditions, or performance indicators. Conclusion: The Washington Assignment of Overriding Royalty Interest Convertible to a Working Interest at Assignee's Option provides a mechanism for the transfer of royalty interests with an added option to actively participate in lease projects. The agreement enables assignors to gain immediate financial benefits, while assignees have the opportunity to enhance investment potential and actively engage in operations. Variations in this agreement can exist, such as fixed or differential conversion rate assignments, to account for specific conditions and negotiations.
Washington Assignment of Overriding Royalty Interest Convertible to A Working Interest At Assignee's Option
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FAQ
Working Interest (WI) Value ? Since the overriding royalty interest (ORRI) is a portion of the working interest, the WI value is the major determinant of the value of overriding mineral rights. The WI owner incurs all of the costs associated with exploration and development activity.
There are three main types of royalty interests: 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.
What Determines the Value of an Overriding Royalty Interest? Mineral interest location. One in a shale basin with high production is worth more. Producing oil and gas wells. Wells currently producing are valued more. ... Production reserves and levels. ... Prices.
If at any time Assignee desires to transfer or dispose of all or any portion of the Overriding Royalty Interest, Assignee must first give to Assignor written notice thereof stating: (a) the amount of the Overriding Royalty Interest offered by Assignee; (b) the form of consideration (which shall be either cash or a ...
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 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, ...
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.