So I had a company call and ask to buy my override from my lease, can someone explain this? Are they basically wanting part of my monthly payment? Haven’t ever heard this term used yet. TIA
There is no way to know what someone means from a phone conversation. You should always request a written detailed email or letter, including any contract language, to understand what is being proposed.
Yeah sure, just wondering what overrode interest means.
An override, aka overriding royalty interest (ORRI), is a percentage of ownership in an oil and gas lease that is a burden on the working interest owners (the other party or parties who own the lease). When the lease expires, the override ceases to exist (usually; I sometimes see an override continuing on to the next lease under very specific circumstances). Overrides can exist in an oil and gas lease in general, be limited to specific depths, or specific wellbores. They are very often proportionately reduced by the mineral interest covered by the lease, and/or if the working interest owner who granted the ORRI does not own 100% of the lease. It can be sold in part or in full. If you google overriding royalty interest you can find more detailed articles explaining what they are, but this is pretty much the gist of it.
Also, TennisDaze is correct, if you think you want to sell, you should absolutely request everything in writing. You can also do a title search on your own in order to determine what you actually own if you’re feeling ambitious, or you can hire a landman. Since this is the first time you’ve heard of this interest, my guess is it’s probably not that much, so be careful before investing your own money in a title search. Paying a landman to determine your ownership could end up costing you more than your interest is even worth.
Hope that helps. Let me know if you have any other questions.
Oops. Forgot to mention that ORRI owners are not responsible for production costs. They get paid on production without having to invest money in operations.