I searched the site for an answer but no luck. I inherited a working interest in Garfield Co., OK for 80 gross acres and a working interest percentage of 0.01916 (net WI 0.01677)
A new well went in there but I declined to participate and the mineral interest was switched to an override percentage of 0.00014974.
My question is how do I determine if this is the correct override percentage?
Thanks for any help.
Dear Mr. Choate,
In order to determine your interest, (1) the gross amount of overriding royalty granted in exchange for working interest must be known.
Also, (2) the gross size of the unit must be known and (3) if all of your 80 acre lease is contained within the confines of the unit. Something that must be know is (4) your working interest ownership. That is the only thing that it seems that we know for apparent sure.
If you compute the gross Net Revenue Interest of your lease -- using the decimals with which you provided, the gross NRI would be 0.01667/0.01916, or 87.00%.
The gross amount of overriding royalty should be so stated in the commissioner's order.
Once you provide that information, I will walk you through the math process and then it will be determined if the decimal interest stated is correct.
The formula would be as follows::
((WI x 80)/unit size) x gross ORRI size.
To plug in example numbers, if you are contributing 80 gross acres in an 640 acre unit and have an overriding royalty of 5% and your WI decimal interest is 0.01916, then your net ORRI would be ((.01916 x 80)/640)x.05 = 0.00011975. It would be simple algebra to reverse engineer the desired net ORRI to determine the gross ORRI in the exchange. But, let's not do that, let's use real numbers furnished to determine the veracity of the computed interest furnished.
Best,
Buddy Cotten