What are overlay royalties?
Never heard the term. Do you mean Overriding Royalties?
That could be, what are overriding royalties?
Royalties are derived from mineral ownership and are spelled out in a Lease Agreement. The royalty is the amount, usually a set percentage, that the Operator (or Working Interest Owners) will pay the mineral owners from production.
An Overriding Royalty is derived from a contractual arrangement and is a burden on the Working Interest and not the Mineral Interest.
Thank you Steve. I think I understand now.
For those of us who inherited an ORRI (OverRiding Royalty Interest), it could be due to an older agreement with the Operator and a geologist or landman who put a deal together back “in the old days”. They were paid in the override instead of a salary or cash. Other reasons also, but those are common ones.