Orri

Oil and Gas Leasing Help
1

We have the opportunity to lease at 1/4 RI. What would be the benefit of negotiating for a 1/8 RI and a 1/8 ORRI ? Will the ORRI be in effect on subsequent wells ?

2

I'm sure others will comment on this as well, but I see no benefit to renegotiating for a 1/8th RI and a 1/8th ORRI. The only benefit would be if your minerals are burdened by a Non-Executive Mineral Interest or a floating ("of the royalty") NPRI. In that case, a 1/8th RI + 1/8th ORRI would benefit you greatly until the NEMI and NPRI owner found out, then you would be sued for breach of fiduciary duty and self-dealing.

To answer your second question, the ORRI's effect would be completely based on whatever the language is in your agreement.

3

Texas Tea gave you a good answer

4

Thank you for your thoughts, but...........

I do not know what NEMI or NPRI are. What I do know is that in the 70's and 80's, a 1/16 ORRI generated the same $ as a 1/8 RI. This was/is because the 1/16 ORRI is on 8/8ths of the well production and the RI formula was/is based on approximately net . If this is still practiced, a 1/8th RI + 2/16th ORRI should generate an additional 1/16th of RI $ over a simple 1/4 RI. Since I own 100% of the Mineral Interests (MI) on these acres, my only Fiduciary Duty is to myself. What's happened in the last 40 years ? Are todays RI's actually based on 8/8ths of the well now ? Somehow I'm hesitant to embrace this concept.

Jan

5


P.S. These minerals will be governed by Oklahoma Law.

Jan Lake said:

Thank you for your thoughts, but...........

I do not know what NEMI or NPRI are. What I do know is that in the 70's and 80's, a 1/16 ORRI generated the same $ as a 1/8 RI. This was/is because the 1/16 ORRI is on 8/8ths of the well production and the RI formula was/is based on approximately net . If this is still practiced, a 1/8th RI + 2/16th ORRI should generate an additional 1/16th of RI $ over a simple 1/4 RI. Since I own 100% of the Mineral Interests (MI) on these acres, my only Fiduciary Duty is to myself. What's happened in the last 40 years ? Are todays RI's actually based on 8/8ths of the well now ? Somehow I'm hesitant to embrace this concept.

Jan