Overriding interest

[SSS]

I am trying to sort out multiple stuff my husband got us in years ago that we do not have a good understand of.

Question 1. What is an overriding interest? I’m under the impression this is a royalty paid out before working interest and is not responsible for expenses.

Question 2: is there a liability concern with an overriding interest?

Question 3: We have an overriding interest with Fieldwood Energy, who is filing for bankruptcy. Inquiring back in August, I was told the overriding interest closed in 2016 but the past two years I have received checks for $.10. If it’s closed why am I getting these?

I’m so sorry for all the questions. I’m confused and overwhelmed with it.

Thank you

[tim_dowd]

1. An overriding royalty interest, also referred to as an override is a cost-free royalty paid from the leasehold or working interest. It is similar to the way a royalty interest under a lease is paid. No expenses, other than some taxes, or processing fees, etc. But no costs of operating the well. As it comes from a lease, once a lease expires, the overriding royalty interest expires or terminates as well.
2. No liability concern, unless it is a real unusual situation.
3. It is possible that many of the wells have terminated, but the orri still burdens some existing well. One would have to do more research as to the orri and wells, etc, to determine this.

[Roy]

Agree with TimDowd. After operators pay the conventional, primary royalties to mineral owners pursuant to leases, they sometimes agree to pay a secondary, ancillary royalty (Overriding Royalty Interest) to compensate some party that sold an interest to the operator or performed some vital role such as geologist, developer, finders fee, or landman etc. Thus, operator pays standard 1/8 or 1/4 royalties to mineral owners, then pays another 1% or more ORRI to that special party.

You can Google-search for a formal definition.