Advanced Calculations: Overriding Royalties
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Advanced Calculations: Overriding Royalties NADOA Institute – September 8, 2021 Eli Murray, CDOA, CPLTA, CPL
Transcript of Advanced Calculations: Overriding Royalties
Title Layout• Working Interest * Mineral Interest * Tract
Participation Factor = GWI
• Net Revenue Interest * Working Interest * Mineral Interest * Tract Participation Factor = NWI
• 1 – burdens = Net Revenue Interest
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Scenario • Stinky Pete creates an AMI covering 4
Sections and executes multiple overlapping Letter Agreements.
• Woody – 25% WI with an ORRI reservation based on royalty rate.
• For 12.5%-18.75% royalty, reserves ORRI of 3% • For 18.75% to 22.5% royalty, reserves ORRI of 2% • For royalty above 22.5%, no ORRI reservation
• Jessie – 56% WI with an ORRI reservation of 22.5% less burdens.
• Bullseye – 19% WI with an ORRI reservation of 25% less burdens.
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Scenario • Lease Info in favor of Stinky Pete:
• Lease A – Dorothy, royalty rate 12.5%, 100% MI, covers 320 Gross Acres in the S/2 of Section 4
• Lease B – Tin Man, royalty rate 1/6, 50% MI, covers 320 Gross Acres in N/2 of Section 4
• Lease C – Scarecrow, royalty rate 1/5, 50% MI, covers 160 Gross Acres in NE/4 of Section 4
• Lease D – Cowardly Lion, royalty rate 25%, 50% MI, covers 160 Gross Acres in NW/4 of Section 4
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Calculation – Tract 1 (S/2) • Lease A – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 100% MI * 320 GA / 640 UA = 0.0037500 • 0.56 WI * 0.1 ORRI * 100% MI * 320 GA / 640 UA = 0.0280000
• ORRI calculation is .225 - .125 • 0.19 WI * 0.125 ORRI * 100% MI * 320 GA / 640 UA = 0.0118750
• ORRI calculation is .25 - .125 • Combined ORRI = 0.0436250
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Calculation – Tract 2 (NE/4) • Lease B – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 50% MI * 160 GA / 640 UA = 0.0009375 • 0.56 WI * 0.0583333 ORRI * 50% MI * 160 GA / 640 UA = 0.0040833
• ORRI calculation is .225 - .16666667 • 0.19 WI * 0.0833333 ORRI * 50% MI * 160 GA / 640 UA = 0.0019792
• ORRI calculation is .25 - .16666667 • Combined ORRI = 0.0070000
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Calculation – Tract 2 (NE/4) • Lease C – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.0006250 • 0.56 WI * 0.025 ORRI * 50% MI * 160 GA / 640 UA = 0.0017500
• ORRI calculation is .225 - .20 • 0.19 WI * 0.05 ORRI * 50% MI * 160 GA / 640 UA = 0.0011875
• ORRI calculation is .25 - .20 • Combined ORRI = 0.0035625
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Calculation – Tract 3 (NW/4) • Lease B – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 50% MI * 160 GA / 640 UA = 0.0009375 • 0.56 WI * 0.0583333 ORRI * 50% MI * 160 GA / 640 UA = 0.0040833
• ORRI calculation is .225 - .16666667 • 0.19 WI * 0.0833333 ORRI * 50% MI * 160 GA / 640 UA = 0.0019792
• ORRI calculation is .25 - .16666667 • Combined ORRI = 0.0070000
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Calculation – Tract 3 (NW/4) • Lease D – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.00 ORRI * 50% MI * 160 GA / 640 UA = 0.0000000
• 0.00. Per Letter Agreement, no override if the royalty is over 22.5%. • 0.56 WI * 0.00 ORRI * 50% MI * 160 GA / 640 UA = 0.0000000
• 0.00. ORRI calculation is .225 - .25 = -.025, but can’t have a negative. • 0.19 WI * 0.00 ORRI *50% MI * 160 GA / 640 UA = 0.0000000
• ORRI calculation is .25 - .25 • Combined ORRI = 0.0000000
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Calculation – Tract 1 (S/2) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
A Dorothy RI 0.000000 1.000000 0.1250000 1 S/2 320 640 0.000000 0.062500
A Stinky Pete ORRI 0.250000 1.000000 0.0300000 1 S/2 320 640 0.000000 0.003750
A Stinky Pete ORRI 0.560000 1.000000 0.1000000 1 S/2 320 640 0.000000 0.028000
A Stinky Pete ORRI 0.190000 1.000000 0.1250000 1 S/2 320 640 0.0000000 0.011875
A Woody WI 0.250000 1.000000 0.1550000 1 S/2 320 640 0.125000 0.105625
A Jessie WI 0.560000 1.000000 0.2250000 1 S/2 320 640 0.280000 0.217000
A Bullseye WI 0.190000 1.000000 0.2500000 1 S/2 320 640 0.095000 0.0712500
TOTAL TPF 0.500000 0.500000 0.500000
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Calculation – Tract 2 (NE/4) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
B Tin Man RI 0.000000 0.500000 0.166667 2 NE/4 160 640 0.0000000 0.0208333
C Scarecrow RI 0.000000 0.500000 0.200000 2 NE/4 160 640 0.0000000 0.0250000
B Stinky Pete ORRI 0.250000 0.500000 0.030000 2 NE/4 160 640 0.0000000 0.0009375
B Stinky Pete ORRI 0.560000 0.500000 0.058333 2 NE/4 160 640 0.0000000 0.0040833
B Stinky Pete ORRI 0.190000 0.500000 0.083333 2 NE/4 160 640 0.0000000 0.0019792
C Stinky Pete ORRI 0.250000 0.500000 0.020000 2 NE/4 160 640 0.0000000 0.0006250
C Stinky Pete ORRI 0.560000 0.500000 0.025000 2 NE/4 160 640 0.0000000 0.0017500
C Stinky Pete ORRI 0.190000 0.500000 0.050000 2 NE/4 160 640 0.0000000 0.0011875
B Woody WI 0.250000 0.500000 0.196667 2 NE/4 160 640 0.0312500 0.0251042
B Jessie WI 0.560000 0.500000 0.225000 2 NE/4 160 640 0.0700000 0.0542500
B Bullseye WI 0.190000 0.500000 0.250000 2 NE/4 160 640 0.0237500 0.0178125
C Woody WI 0.250000 0.500000 0.220000 2 NE/4 160 640 0.0312500 0.0243750
C Jessie WI 0.560000 0.500000 0.225000 2 NE/4 160 640 0.0700000 0.0542500
C Bullseye WI 0.190000 0.500000 0.250000 2 NE/4 160 640 0.0237500 0.0178125
TOTAL TPF 0.250000 0.2500000 0.2500000
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Calculation – Tract 3 (NW/4) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
B Tin Man RI 0.000000 0.500000 0.166667 3 NW/4 160 640 0.0000000 0.0208333
D Cowardly Lion RI 0.000000 0.500000 0.250000 3 NW/4 160 640 0.0000000 0.0312500
B Stinky Pete ORRI 0.250000 0.500000 0.030000 3 NW/4 160 640 0.0000000 0.0009375
B Stinky Pete ORRI 0.560000 0.500000 0.058333 3 NW/4 160 640 0.0000000 0.0040833
B Stinky Pete ORRI 0.190000 0.500000 0.083333 3 NW/4 160 640 0.0000000 0.0019792
D Stinky Pete ORRI 0.250000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
D Stinky Pete ORRI 0.560000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
D Stinky Pete ORRI 0.190000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
B Woody WI 0.250000 0.500000 0.196667 3 NW/4 160 640 0.0312500 0.0251042
B Jessie WI 0.560000 0.500000 0.225000 3 NW/4 160 640 0.0700000 0.0542500
B Bullseye WI 0.190000 0.500000 0.250000 3 NW/4 160 640 0.0237500 0.0178125
D Woody WI 0.250000 0.500000 0.250000 3 NW/4 160 640 0.0312500 0.0234375
D Jessie WI 0.560000 0.500000 0.250000 3 NW/4 160 640 0.0700000 0.0525000
D Bullseye WI 0.190000 0.500000 0.250000 3 NW/4 160 640 0.0237500 0.0178125
TOTAL TPF 0.250000 0.2500000 0.2500000
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Calculation – Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
SUBTOTAL ORRI 0.0000000 0.0611875
Woody WI 0.2500000 0.2036459
Jessie WI 0.5600000 0.4322500
Bullseye WI 0.1900000 0.1425000
SUBTOTAL WI 1.0000000 0.7783959
AVG NRI 81.45833%
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Burden Groups – Tract 1 (S/2)
Lease Owner Name Interest
A Stinky Pete ORRI 0.250000 0.003750 2
A Stinky Pete ORRI 0.560000 0.028000 3
A Stinky Pete ORRI 0.190000 0.011875 4
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Burden Groups – Tract 2 (NE/4)
Lease Owner Name Interest
B Tin Man RI 1.000000 0.0208333 1
C Scarecrow RI 1.000000 0.0250000 1
B Stinky Pete ORRI 0.250000 0.0009375 2
B Stinky Pete ORRI 0.560000 0.0040833 3
B Stinky Pete ORRI 0.190000 0.0019792 4
C Stinky Pete ORRI 0.250000 0.0006250 2
C Stinky Pete ORRI 0.560000 0.0017500 3
C Stinky Pete ORRI 0.190000 0.0011875 4
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Burden Groups – Tract 3 (NW/4)
Lease Owner Name Interest
B Tin Man RI 1.000000 0.0208333 1
D Cowardly Lion RI 1.000000 0.0281250 1
B Stinky Pete ORRI 0.250000 0.0009375 2
B Stinky Pete ORRI 0.560000 0.0040833 3
B Stinky Pete ORRI 0.190000 0.0019792 4
D Stinky Pete ORRI 0.250000 0.0000000 2
D Stinky Pete ORRI 0.560000 0.0000000 3
D Stinky Pete ORRI 0.190000 0.0000000 4
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Burden Groups Lease Owner Interest
Type Unitized NRI Woody Jessie Bullseye
A Dorothy RI 0.0625000 0.0156250 0.0350000 0.0118750 B Tin Man RI 0.0416666 0.0104166 0.0233333 0.0079167 C Scarecrow RI 0.0250000 0.0062500 0.0140000 0.0047500 D Cowardly Lion RI 0.0312500 0.0078125 0.0175000 0.0059375
TOTAL RI 0.1604166 0.0401041 0.0898333 0.0304792 A-D Stinky Pete ORRI 0.0611875 0.0062500 0.0379167 0.0170208
TOTAL ORRI 0.0611875 0.0062500 0.0379167 0.0170208 A-D Woody NRI 0.2036459 0.2036459 A-D Jessie NRI 0.4322500 0.4322500 A-D Bullseye NRI 0.1425000 0.1425000
TOTAL NRI 0.7783959 0.2036459 0.4322500 0.1425000 A-D Woody GWI 0.2500000 0.2500000 A-D Jessie GWI 0.5600000 0.5600000 A-D Bullseye GWI 0.1900000 0.1900000
TOTAL GWI 1.0000000 0.2500000 0.5600000 0.1900000
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LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.25 1 0.0037500 2 B Stinky Pete ORRI 0.25 2 0.0009375 2 C Stinky Pete ORRI 0.25 2 0.0006250 2 B Stinky Pete ORRI 0.25 3 0.0009375 2 D Stinky Pete ORRI 0.25 3 0.0000000 2
BURDEN GROUP TOTAL 0.0062500 2 A Stinky Pete ORRI 0.56 1 0.0280000 3 B Stinky Pete ORRI 0.56 2 0.0040833 3 C Stinky Pete ORRI 0.56 2 0.0017500 3 B Stinky Pete ORRI 0.56 3 0.0040833 3 D Stinky Pete ORRI 0.56 3 0.0000000 3
BURDEN GROUP TOTAL 0.0379167 3 A Stinky Pete ORRI 0.19 1 0.0118750 4 B Stinky Pete ORRI 0.19 2 0.0019792 4 C Stinky Pete ORRI 0.19 2 0.0011875 4 B Stinky Pete ORRI 0.19 3 0.0019792 4 D Stinky Pete ORRI 0.19 3 0.0000000 4
BURDEN GROUP TOTAL 0.0170208 4 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0062500 0.0611875 10.21450%
0.0379167 0.0611875 61.96805%
0.0170208 0.0611875 27.81745%
Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Woody – 25%, Jessie – 56%, Bullseye – 19%
Tin Man RI 0.0416666 Woody – 25%, Jessie – 56%, Bullseye – 19%
Scarecrow RI 0.0250000 Woody – 25%, Jessie – 56%, Bullseye – 19%
Cowardly Lion RI 0.0312500 Woody – 25%, Jessie – 56%, Bullseye – 19%
SUBTOTAL RI 0.1604166 0.1604167
Stinky Pete ORRI 0.0611875 Woody – 10.2145%, Jessie – 61.9680%, Bullseye – 27.8174%
SUBTOTAL ORRI 0.0611875 0.0611875
SUBTOTAL WI 0.7783959 0.7783959
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Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Tempting to use a “quick and dirty” calculation. • 0.25 GWI * 77.5% NRI = 0.19375 NWI (est.) • .2036458 NWI (current) - 0.19375 NWI (est.) = 0.0098958 ORRI (est.) • Is this right?
• Spoiler Alert…It isn’t!
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Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Current Burdens on Woody’s WI:
• Lease A – 0.125 ROY + 0.03 ORRI = 0.15500000 • Lease B – 0.1666667 ROY + 0.03 ORRI = 0.19666667 • Lease C – 0.20 ROY + 0.02 ORRI = 0.22000000 • Lease D – 0.25 ROY = 0.25000000
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Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • 22.5% less current burdens on Woody’s WI:
• Lease A – 0.22500000 - 0.15500000 = 0.07000000 • Lease B – 0.22500000 - 0.19666667 = 0.02833333 • Lease C – 0.22500000 - 0.22000000 = 0.00500000 • Lease D – None
• ORRI calculation is .225 - .25 = -.025, but can’t have a negative.
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Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Woody’s ORRI:
• Lease A: 0.25 WI * 0.07 ORRI * 100% MI * 320 GA / 640 UA = 0.00875000 • Lease B: 0.25 WI * 0.02833333 ORRI * 50% MI * 320 GA / 640 UA = 0.00177083 • Lease C: 0.25 WI * 0.005 ORRI * 50% MI * 160 GA / 640 UA = 0.00015625 • Lease D – None
• Combined ORRI = 0.01067708 • Notice this is higher than the 0.0098958 estimated ORRI. Quick and
dirty doesn’t work because the 25% royalty reduces the NRI.
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Calculation – Bullseye WI Lease
SUBTOTAL – PREVIOUS 0.1900000 0.1425000
A Bullseye WI 0.250000 1.000000 0.2250000 1 S/2 320 640 0.1250000 0.0968750
B Bullseye WI 0.250000 0.500000 0.2250000 2 NE/4 160 640 0.0312500 0.0242188
C Bullseye WI 0.250000 0.500000 0.2250000 2 NE/4 160 640 0.0312500 0.0242188
B Bullseye WI 0.250000 0.500000 0.2250000 3 NW/4 160 640 0.0312500 0.0242187
D Bullseye WI 0.250000 0.500000 0.2500000 3 NW/4 160 640 0.0312500 0.0234375
SUBTOTAL - NEW 0.2500000 0.1929688
Calculation – Revised Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
Woody ORRI 0.0000000 0.0106771
SUBTOTAL ORRI 0.0000000 0.0718646
Jessie WI 0.5600000 0.4322500
Bullseye WI 0.4400000 0.3354688
SUBTOTAL WI 1.0000000 0.7677188
AVG NRI 77.18750%
1 Jessie 56.0000% 1 Bullseye 44.0000%
2 Jessie 100.0000% 2 Bullseye 0.0000%
3 Jessie 0.0000% 3 Bullseye 100.0000%
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LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.56 1 0.0280000 2 B Stinky Pete ORRI 0.56 2 0.0040833 2 C Stinky Pete ORRI 0.56 2 0.0017500 2 B Stinky Pete ORRI 0.56 3 0.0040833 2 D Stinky Pete ORRI 0.56 3 0.0000000 2
BURDEN GROUP TOTAL 0.0379167 2 A Stinky Pete ORRI 0.25 1 0.0037500 3 B Stinky Pete ORRI 0.25 2 0.0009375 3 C Stinky Pete ORRI 0.25 2 0.0006250 3 B Stinky Pete ORRI 0.25 3 0.0009375 3 D Stinky Pete ORRI 0.25 3 0.0000000 3 A Stinky Pete ORRI 0.19 1 0.0118750 3 B Stinky Pete ORRI 0.19 2 0.0019792 3 C Stinky Pete ORRI 0.19 2 0.0011875 3 B Stinky Pete ORRI 0.19 3 0.0019792 3 D Stinky Pete ORRI 0.19 3 0.0000000 3
BURDEN GROUP TOTAL 0.0232708 3 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0379167 0.0611875 61.96805%
0.0232708 0.0611875 38.03195%
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Woody ORRI 0.25 1 0.0087500 3 B Woody ORRI 0.25 2 0.0008854 3 C Woody ORRI 0.25 2 0.0001563 3 B Woody ORRI 0.25 3 0.0008854 3 D Woody ORRI 0.25 3 0.0000000 3
TOTAL OVERRIDING ROYALTY 0.0106771
Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Jessie – 56%, Bullseye – 44%
Tin Man RI 0.0416666 Jessie – 56%, Bullseye – 44%
Scarecrow RI 0.0250000 Jessie – 56%, Bullseye – 44%
Cowardly Lion RI 0.0312500 Jessie – 56%, Bullseye – 44%
SUBTOTAL RI 0.1604166 0.1604166
Woody ORRI 0.0106771 Jessie – 0%, Bullseye – 100%
SUBTOTAL ORRI 0.0718646 0.0718646
SUBTOTAL WI 0.7677188 0.7677188
Burden Groups Lease Owner Interest
Type Unitized NRI Jessie Bullseye
A Dorothy RI 0.0625000 0.0350000 0.0275000 B Tin Man RI 0.0416666 0.0233333 0.0183333 C Scarecrow RI 0.0250000 0.0140000 0.0110000 D Cowardly Lion RI 0.0312500 0.0175000 0.0137500
TOTAL RI 0.1604166 0.0898333 0.0705833 A-D Stinky Pete ORRI 0.0611875 0.0379167 0.0232708 A-D Woody ORRI 0.0106771 0.0106771
TOTAL ORRI 0.0718646 0.0379167 0.0339479 A-D Jessie NRI 0.4322500 0.4322500 A-D Bullseye NRI 0.3354688 0.3354688
TOTAL NRI 0.7677188 0.4322500 0.3354688 A-D Jessie GWI 0.5600000 0.0000000 A-D Bullseye GWI 0.4400000 0.0000000
TOTAL GWI 1.0000000 0.5600000 0.4400000
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Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Can we use a “quick and dirty” calculation. • 50% * 0.56 GWI * 2% ORRI = 0.0056 ORRI (est.) • 50% * 0.4322500 NWI (current) – 0.0056 ORRI (est.) = 0.2161250
(est.) Bullseye NWI • Is this right?
• Spoiler Alert…Yes!
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Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Current Burdens on Jessie’s WI:
• Lease A – 0.125 ROY + 0.10 ORRI = 0.22500000 • Lease B – 0.1666667 ROY + 0.0583333 ORRI = 0.22500000 • Lease C – 0.20 ROY + 0.025 ORRI = 0.22500000 • Lease D – 0.25 ROY = 0.25000000
• Do we need this? • No, because the reservation isn’t dependent on the existing
burdens.
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Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Jessie’s ORRI:
• Lease A: 50%*0.56 WI * 0.02 ORRI * 100% MI * 320 GA / 640 UA = 0.00280000 • Lease B: 50%*0.56 WI * 0.02 ORRI * 50% MI * 320 GA / 640 UA = 0.00140000 • Lease C: 50%*0.56 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.00070000 • Lease D: 50%*0.56 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.00070000
• Combined ORRI = 0.00560000 • Notice this matches the estimated ORRI, and it works because the
override isn’t dependent on current burdens.
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Calculation – Bullseye WI Lease
SUBTOTAL – PREVIOUS 0.4400000 0.3354688
A Bullseye WI 0.2800000* 1.000000 0.2450000 1 S/2 320 640 0.1400000 0.1057000
B Bullseye WI 0.2800000 0.500000 0.2450000 2 NE/4 160 640 0.0350000 0.0264250
C Bullseye WI 0.2800000 0.500000 0.2450000 2 NE/4 160 640 0.0350000 0.0264250
B Bullseye WI 0.2800000 0.500000 0.2450000 3 NW/4 160 640 0.0350000 0.0264250
D Bullseye WI 0.2800000 0.500000 0.2700000** 3 NW/4 160 640 0.0350000 0.0255500
SUBTOTAL - NEW 0.2800000 0.2105250
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*1/2 * 56% = 28% or 0.2800000 **0.25 roy + 0.02 ORRI = 0.27 burden or 73% NRI
Calculation – Revised Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
Woody ORRI 0.0000000 0.0106771
Jessie ORRI 0.0000000 0.0056000
SUBTOTAL ORRI 0.0000000 0.0774646
Jessie WI 0.2800000 0.2161250
Bullseye WI 0.7200000 0.5459938
SUBTOTAL WI 1.0000000 0.7621188
AVG NRI 77.18750%
1 Jessie 28.0000% 1 Bullseye 72.0000%
2 Jessie 100.0000% 2 Bullseye 0.0000%
3 Jessie 0.0000% 3 Bullseye 100.0000%
4 Jessie 50.0000% 4 Bullseye 50.0000%
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LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.56 1 0.0280000 2 B Stinky Pete ORRI 0.56 2 0.0040833 2 C Stinky Pete ORRI 0.56 2 0.0017500 2 B Stinky Pete ORRI 0.56 3 0.0040833 2 D Stinky Pete ORRI 0.56 3 0.0000000 2
BURDEN GROUP TOTAL 0.0379167 2 A Stinky Pete ORRI 0.25 1 0.0037500 3 B Stinky Pete ORRI 0.25 2 0.0009375 3 C Stinky Pete ORRI 0.25 2 0.0006250 3 B Stinky Pete ORRI 0.25 3 0.0009375 3 D Stinky Pete ORRI 0.25 3 0.0000000 3 A Stinky Pete ORRI 0.19 1 0.0118750 3 B Stinky Pete ORRI 0.19 2 0.0019792 3 C Stinky Pete ORRI 0.19 2 0.0011875 3 B Stinky Pete ORRI 0.19 3 0.0019792 3 D Stinky Pete ORRI 0.19 3 0.0000000 3
BURDEN GROUP TOTAL 0.0232708 3 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0379167 0.0611875 61.96805% Jessie 50% 30.98403%
Bullseye 50% 30.98402%
Overriding Royalty Burden
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Woody ORRI 0.25 1 0.0087500 3 B Woody ORRI 0.25 2 0.0008854 3 C Woody ORRI 0.25 2 0.0001563 3 B Woody ORRI 0.25 3 0.0008854 3 D Woody ORRI 0.25 3 0.0000000 3 TOTAL OVERRIDING ROYALTY 0.0106771
Overriding Royalty Burden
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Jessie ORRI 0.28 1 0.0028000 3 B Jessie ORRI 0.25 2 0.0007000 3 C Jessie ORRI 0.25 2 0.0007000 3 B Jessie ORRI 0.25 3 0.0007000 3 D Jessie ORRI 0.25 3 0.0007000 3 TOTAL OVERRIDING ROYALTY 0.0056000
Burden Groups Lease Owner Interest
Type Unitized NRI Jessie Bullseye
A Dorothy RI 0.0625000 0.0175000 0.0275000 B Tin Man RI 0.0416666 0.0116666 0.0183333 C Scarecrow RI 0.0250000 0.0070000 0.0110000 D Cowardly Lion RI 0.0312500 0.0087500 0.0137500
TOTAL RI 0.1604166 0.0449166 0.0304792 A-D Stinky Pete ORRI 0.0611875 0.0189584 0.0422291 A-D Woody ORRI 0.0106771 0.0106771 A-D Jessie ORRI 0.0056000 0.0056000
TOTAL ORRI 0.0774646 0.0189584 0.0585062 A-D Jessie NRI 0.2161250 0.2161250 A-D Bullseye NRI 0.5459938 0.5459938
TOTAL NRI 0.7621188 0.2161250 0.5459938 A-D Jessie GWI 0.2800000 0.0000000 A-D Bullseye GWI 0.7200000 0.0000000
TOTAL GWI 1.0000000 0.5600000 0.1900000
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Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Jessie – 28%, Bullseye – 72%
Tin Man RI 0.0416666 Jessie – 28%, Bullseye – 72%
Scarecrow RI 0.0250000 Jessie – 28%, Bullseye – 72%
Cowardly Lion RI 0.0312500 Jessie – 28%, Bullseye – 72%
SUBTOTAL RI 0.1604166 0.1604167
Woody ORRI 0.0106771 Jessie – 0%, Bullseye – 100%
Jessie ORRI 0.0056000 Jessie – 0%, Bullseye – 100%
SUBTOTAL ORRI 0.0774646 0.0774646
SUBTOTAL WI 0.7621188 0.7621188
Questions??
Contact Information: Phone: Email: Eli Murray, CDOA, CPLTA, CPL 214.217.6214 [email protected]
42NADOA 2021 Institute - Eli Murray
Scenario
Party
WI
ORRI
Woody
0.25
3% (12.5 - 18.75%), 2% (18.75% to 22.5%), 0% (above 22.5%)
Jessie
0.56
A
Dorothy
1
0.125
1
S/2
320
320
•Lease A – Dorothy, covers S/2 of Section 4, royalty rate 12.5%
B
0.5
0.1666666667
2
NE/4
160
80
•Lease B – Tin Man, covers N/2 of Section 4, royalty rate 1/6
B
0.5
0.1666666667
3
NW/4
160
80
C
Scarecrow
0.5
0.2
2
NE/4
160
80
•Lease C – Scarecrow, covers NE/4 of Section 4, royalty rate of 1/5
D
0.5
0.25
3
NW/4
160
80
•Lease D – Cowardly Lion, covers NW/4 of Section 4, royalty rate of 22.5%
640
0.8145836
0.771875
0.75
DOIv2
Woody conveys his WI to Bullseye reserving an ORRI of 22.5% less burdens.
Lease
0.771875
0.7624290909
DOIv3
Jessie conveys half of her WI to Bullseye reserving a 2% ORRI, proportionately reduced.
Lease
Burden Groups
• Net Revenue Interest * Working Interest * Mineral Interest * Tract Participation Factor = NWI
• 1 – burdens = Net Revenue Interest
NADOA 2021 Institute - Eli Murray 2
Scenario • Stinky Pete creates an AMI covering 4
Sections and executes multiple overlapping Letter Agreements.
• Woody – 25% WI with an ORRI reservation based on royalty rate.
• For 12.5%-18.75% royalty, reserves ORRI of 3% • For 18.75% to 22.5% royalty, reserves ORRI of 2% • For royalty above 22.5%, no ORRI reservation
• Jessie – 56% WI with an ORRI reservation of 22.5% less burdens.
• Bullseye – 19% WI with an ORRI reservation of 25% less burdens.
NADOA 2021 Institute - Eli Murray 3
Scenario • Lease Info in favor of Stinky Pete:
• Lease A – Dorothy, royalty rate 12.5%, 100% MI, covers 320 Gross Acres in the S/2 of Section 4
• Lease B – Tin Man, royalty rate 1/6, 50% MI, covers 320 Gross Acres in N/2 of Section 4
• Lease C – Scarecrow, royalty rate 1/5, 50% MI, covers 160 Gross Acres in NE/4 of Section 4
• Lease D – Cowardly Lion, royalty rate 25%, 50% MI, covers 160 Gross Acres in NW/4 of Section 4
NADOA 2021 Institute - Eli Murray 4
Calculation – Tract 1 (S/2) • Lease A – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 100% MI * 320 GA / 640 UA = 0.0037500 • 0.56 WI * 0.1 ORRI * 100% MI * 320 GA / 640 UA = 0.0280000
• ORRI calculation is .225 - .125 • 0.19 WI * 0.125 ORRI * 100% MI * 320 GA / 640 UA = 0.0118750
• ORRI calculation is .25 - .125 • Combined ORRI = 0.0436250
NADOA 2021 Institute - Eli Murray 5
Calculation – Tract 2 (NE/4) • Lease B – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 50% MI * 160 GA / 640 UA = 0.0009375 • 0.56 WI * 0.0583333 ORRI * 50% MI * 160 GA / 640 UA = 0.0040833
• ORRI calculation is .225 - .16666667 • 0.19 WI * 0.0833333 ORRI * 50% MI * 160 GA / 640 UA = 0.0019792
• ORRI calculation is .25 - .16666667 • Combined ORRI = 0.0070000
NADOA 2021 Institute - Eli Murray 6
Calculation – Tract 2 (NE/4) • Lease C – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.0006250 • 0.56 WI * 0.025 ORRI * 50% MI * 160 GA / 640 UA = 0.0017500
• ORRI calculation is .225 - .20 • 0.19 WI * 0.05 ORRI * 50% MI * 160 GA / 640 UA = 0.0011875
• ORRI calculation is .25 - .20 • Combined ORRI = 0.0035625
NADOA 2021 Institute - Eli Murray 7
Calculation – Tract 3 (NW/4) • Lease B – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.03 ORRI * 50% MI * 160 GA / 640 UA = 0.0009375 • 0.56 WI * 0.0583333 ORRI * 50% MI * 160 GA / 640 UA = 0.0040833
• ORRI calculation is .225 - .16666667 • 0.19 WI * 0.0833333 ORRI * 50% MI * 160 GA / 640 UA = 0.0019792
• ORRI calculation is .25 - .16666667 • Combined ORRI = 0.0070000
NADOA 2021 Institute - Eli Murray 8
Calculation – Tract 3 (NW/4) • Lease D – All parties participate in the leases, and
assignments are made in accordance with the Letter Agreements:
• Stinky Pete’s ORRI: • 0.25 WI * 0.00 ORRI * 50% MI * 160 GA / 640 UA = 0.0000000
• 0.00. Per Letter Agreement, no override if the royalty is over 22.5%. • 0.56 WI * 0.00 ORRI * 50% MI * 160 GA / 640 UA = 0.0000000
• 0.00. ORRI calculation is .225 - .25 = -.025, but can’t have a negative. • 0.19 WI * 0.00 ORRI *50% MI * 160 GA / 640 UA = 0.0000000
• ORRI calculation is .25 - .25 • Combined ORRI = 0.0000000
NADOA 2021 Institute - Eli Murray 9
Calculation – Tract 1 (S/2) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
A Dorothy RI 0.000000 1.000000 0.1250000 1 S/2 320 640 0.000000 0.062500
A Stinky Pete ORRI 0.250000 1.000000 0.0300000 1 S/2 320 640 0.000000 0.003750
A Stinky Pete ORRI 0.560000 1.000000 0.1000000 1 S/2 320 640 0.000000 0.028000
A Stinky Pete ORRI 0.190000 1.000000 0.1250000 1 S/2 320 640 0.0000000 0.011875
A Woody WI 0.250000 1.000000 0.1550000 1 S/2 320 640 0.125000 0.105625
A Jessie WI 0.560000 1.000000 0.2250000 1 S/2 320 640 0.280000 0.217000
A Bullseye WI 0.190000 1.000000 0.2500000 1 S/2 320 640 0.095000 0.0712500
TOTAL TPF 0.500000 0.500000 0.500000
NADOA 2021 Institute - Eli Murray 10
Calculation – Tract 2 (NE/4) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
B Tin Man RI 0.000000 0.500000 0.166667 2 NE/4 160 640 0.0000000 0.0208333
C Scarecrow RI 0.000000 0.500000 0.200000 2 NE/4 160 640 0.0000000 0.0250000
B Stinky Pete ORRI 0.250000 0.500000 0.030000 2 NE/4 160 640 0.0000000 0.0009375
B Stinky Pete ORRI 0.560000 0.500000 0.058333 2 NE/4 160 640 0.0000000 0.0040833
B Stinky Pete ORRI 0.190000 0.500000 0.083333 2 NE/4 160 640 0.0000000 0.0019792
C Stinky Pete ORRI 0.250000 0.500000 0.020000 2 NE/4 160 640 0.0000000 0.0006250
C Stinky Pete ORRI 0.560000 0.500000 0.025000 2 NE/4 160 640 0.0000000 0.0017500
C Stinky Pete ORRI 0.190000 0.500000 0.050000 2 NE/4 160 640 0.0000000 0.0011875
B Woody WI 0.250000 0.500000 0.196667 2 NE/4 160 640 0.0312500 0.0251042
B Jessie WI 0.560000 0.500000 0.225000 2 NE/4 160 640 0.0700000 0.0542500
B Bullseye WI 0.190000 0.500000 0.250000 2 NE/4 160 640 0.0237500 0.0178125
C Woody WI 0.250000 0.500000 0.220000 2 NE/4 160 640 0.0312500 0.0243750
C Jessie WI 0.560000 0.500000 0.225000 2 NE/4 160 640 0.0700000 0.0542500
C Bullseye WI 0.190000 0.500000 0.250000 2 NE/4 160 640 0.0237500 0.0178125
TOTAL TPF 0.250000 0.2500000 0.2500000
NADOA 2021 Institute - Eli Murray 11
Calculation – Tract 3 (NW/4) Lease
Owner Name
Tract Desc
Tract Acres
Unit Acres
Unitized WI
Unitized NRI
B Tin Man RI 0.000000 0.500000 0.166667 3 NW/4 160 640 0.0000000 0.0208333
D Cowardly Lion RI 0.000000 0.500000 0.250000 3 NW/4 160 640 0.0000000 0.0312500
B Stinky Pete ORRI 0.250000 0.500000 0.030000 3 NW/4 160 640 0.0000000 0.0009375
B Stinky Pete ORRI 0.560000 0.500000 0.058333 3 NW/4 160 640 0.0000000 0.0040833
B Stinky Pete ORRI 0.190000 0.500000 0.083333 3 NW/4 160 640 0.0000000 0.0019792
D Stinky Pete ORRI 0.250000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
D Stinky Pete ORRI 0.560000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
D Stinky Pete ORRI 0.190000 0.500000 0.000000 3 NW/4 160 640 0.0000000 0.0000000
B Woody WI 0.250000 0.500000 0.196667 3 NW/4 160 640 0.0312500 0.0251042
B Jessie WI 0.560000 0.500000 0.225000 3 NW/4 160 640 0.0700000 0.0542500
B Bullseye WI 0.190000 0.500000 0.250000 3 NW/4 160 640 0.0237500 0.0178125
D Woody WI 0.250000 0.500000 0.250000 3 NW/4 160 640 0.0312500 0.0234375
D Jessie WI 0.560000 0.500000 0.250000 3 NW/4 160 640 0.0700000 0.0525000
D Bullseye WI 0.190000 0.500000 0.250000 3 NW/4 160 640 0.0237500 0.0178125
TOTAL TPF 0.250000 0.2500000 0.2500000
NADOA 2021 Institute - Eli Murray 12
Calculation – Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
SUBTOTAL ORRI 0.0000000 0.0611875
Woody WI 0.2500000 0.2036459
Jessie WI 0.5600000 0.4322500
Bullseye WI 0.1900000 0.1425000
SUBTOTAL WI 1.0000000 0.7783959
AVG NRI 81.45833%
NADOA 2021 Institute - Eli Murray 14
Burden Groups – Tract 1 (S/2)
Lease Owner Name Interest
A Stinky Pete ORRI 0.250000 0.003750 2
A Stinky Pete ORRI 0.560000 0.028000 3
A Stinky Pete ORRI 0.190000 0.011875 4
NADOA 2021 Institute - Eli Murray 15
Burden Groups – Tract 2 (NE/4)
Lease Owner Name Interest
B Tin Man RI 1.000000 0.0208333 1
C Scarecrow RI 1.000000 0.0250000 1
B Stinky Pete ORRI 0.250000 0.0009375 2
B Stinky Pete ORRI 0.560000 0.0040833 3
B Stinky Pete ORRI 0.190000 0.0019792 4
C Stinky Pete ORRI 0.250000 0.0006250 2
C Stinky Pete ORRI 0.560000 0.0017500 3
C Stinky Pete ORRI 0.190000 0.0011875 4
NADOA 2021 Institute - Eli Murray 16
Burden Groups – Tract 3 (NW/4)
Lease Owner Name Interest
B Tin Man RI 1.000000 0.0208333 1
D Cowardly Lion RI 1.000000 0.0281250 1
B Stinky Pete ORRI 0.250000 0.0009375 2
B Stinky Pete ORRI 0.560000 0.0040833 3
B Stinky Pete ORRI 0.190000 0.0019792 4
D Stinky Pete ORRI 0.250000 0.0000000 2
D Stinky Pete ORRI 0.560000 0.0000000 3
D Stinky Pete ORRI 0.190000 0.0000000 4
NADOA 2021 Institute - Eli Murray 17
Burden Groups Lease Owner Interest
Type Unitized NRI Woody Jessie Bullseye
A Dorothy RI 0.0625000 0.0156250 0.0350000 0.0118750 B Tin Man RI 0.0416666 0.0104166 0.0233333 0.0079167 C Scarecrow RI 0.0250000 0.0062500 0.0140000 0.0047500 D Cowardly Lion RI 0.0312500 0.0078125 0.0175000 0.0059375
TOTAL RI 0.1604166 0.0401041 0.0898333 0.0304792 A-D Stinky Pete ORRI 0.0611875 0.0062500 0.0379167 0.0170208
TOTAL ORRI 0.0611875 0.0062500 0.0379167 0.0170208 A-D Woody NRI 0.2036459 0.2036459 A-D Jessie NRI 0.4322500 0.4322500 A-D Bullseye NRI 0.1425000 0.1425000
TOTAL NRI 0.7783959 0.2036459 0.4322500 0.1425000 A-D Woody GWI 0.2500000 0.2500000 A-D Jessie GWI 0.5600000 0.5600000 A-D Bullseye GWI 0.1900000 0.1900000
TOTAL GWI 1.0000000 0.2500000 0.5600000 0.1900000
NADOA 2021 Institute - Eli Murray 18
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.25 1 0.0037500 2 B Stinky Pete ORRI 0.25 2 0.0009375 2 C Stinky Pete ORRI 0.25 2 0.0006250 2 B Stinky Pete ORRI 0.25 3 0.0009375 2 D Stinky Pete ORRI 0.25 3 0.0000000 2
BURDEN GROUP TOTAL 0.0062500 2 A Stinky Pete ORRI 0.56 1 0.0280000 3 B Stinky Pete ORRI 0.56 2 0.0040833 3 C Stinky Pete ORRI 0.56 2 0.0017500 3 B Stinky Pete ORRI 0.56 3 0.0040833 3 D Stinky Pete ORRI 0.56 3 0.0000000 3
BURDEN GROUP TOTAL 0.0379167 3 A Stinky Pete ORRI 0.19 1 0.0118750 4 B Stinky Pete ORRI 0.19 2 0.0019792 4 C Stinky Pete ORRI 0.19 2 0.0011875 4 B Stinky Pete ORRI 0.19 3 0.0019792 4 D Stinky Pete ORRI 0.19 3 0.0000000 4
BURDEN GROUP TOTAL 0.0170208 4 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0062500 0.0611875 10.21450%
0.0379167 0.0611875 61.96805%
0.0170208 0.0611875 27.81745%
Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Woody – 25%, Jessie – 56%, Bullseye – 19%
Tin Man RI 0.0416666 Woody – 25%, Jessie – 56%, Bullseye – 19%
Scarecrow RI 0.0250000 Woody – 25%, Jessie – 56%, Bullseye – 19%
Cowardly Lion RI 0.0312500 Woody – 25%, Jessie – 56%, Bullseye – 19%
SUBTOTAL RI 0.1604166 0.1604167
Stinky Pete ORRI 0.0611875 Woody – 10.2145%, Jessie – 61.9680%, Bullseye – 27.8174%
SUBTOTAL ORRI 0.0611875 0.0611875
SUBTOTAL WI 0.7783959 0.7783959
NADOA 2021 Institute - Eli Murray 20
Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Tempting to use a “quick and dirty” calculation. • 0.25 GWI * 77.5% NRI = 0.19375 NWI (est.) • .2036458 NWI (current) - 0.19375 NWI (est.) = 0.0098958 ORRI (est.) • Is this right?
• Spoiler Alert…It isn’t!
NADOA 2021 Institute - Eli Murray 21
Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Current Burdens on Woody’s WI:
• Lease A – 0.125 ROY + 0.03 ORRI = 0.15500000 • Lease B – 0.1666667 ROY + 0.03 ORRI = 0.19666667 • Lease C – 0.20 ROY + 0.02 ORRI = 0.22000000 • Lease D – 0.25 ROY = 0.25000000
NADOA 2021 Institute - Eli Murray 22
Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • 22.5% less current burdens on Woody’s WI:
• Lease A – 0.22500000 - 0.15500000 = 0.07000000 • Lease B – 0.22500000 - 0.19666667 = 0.02833333 • Lease C – 0.22500000 - 0.22000000 = 0.00500000 • Lease D – None
• ORRI calculation is .225 - .25 = -.025, but can’t have a negative.
NADOA 2021 Institute - Eli Murray 23
Additional Conveyances. #1 • Woody conveys his WI to Bullseye reserving an ORRI of
22.5% less burdens. • Woody’s ORRI:
• Lease A: 0.25 WI * 0.07 ORRI * 100% MI * 320 GA / 640 UA = 0.00875000 • Lease B: 0.25 WI * 0.02833333 ORRI * 50% MI * 320 GA / 640 UA = 0.00177083 • Lease C: 0.25 WI * 0.005 ORRI * 50% MI * 160 GA / 640 UA = 0.00015625 • Lease D – None
• Combined ORRI = 0.01067708 • Notice this is higher than the 0.0098958 estimated ORRI. Quick and
dirty doesn’t work because the 25% royalty reduces the NRI.
NADOA 2021 Institute - Eli Murray 24
Calculation – Bullseye WI Lease
SUBTOTAL – PREVIOUS 0.1900000 0.1425000
A Bullseye WI 0.250000 1.000000 0.2250000 1 S/2 320 640 0.1250000 0.0968750
B Bullseye WI 0.250000 0.500000 0.2250000 2 NE/4 160 640 0.0312500 0.0242188
C Bullseye WI 0.250000 0.500000 0.2250000 2 NE/4 160 640 0.0312500 0.0242188
B Bullseye WI 0.250000 0.500000 0.2250000 3 NW/4 160 640 0.0312500 0.0242187
D Bullseye WI 0.250000 0.500000 0.2500000 3 NW/4 160 640 0.0312500 0.0234375
SUBTOTAL - NEW 0.2500000 0.1929688
Calculation – Revised Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
Woody ORRI 0.0000000 0.0106771
SUBTOTAL ORRI 0.0000000 0.0718646
Jessie WI 0.5600000 0.4322500
Bullseye WI 0.4400000 0.3354688
SUBTOTAL WI 1.0000000 0.7677188
AVG NRI 77.18750%
1 Jessie 56.0000% 1 Bullseye 44.0000%
2 Jessie 100.0000% 2 Bullseye 0.0000%
3 Jessie 0.0000% 3 Bullseye 100.0000%
NADOA 2021 Institute - Eli Murray 27
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.56 1 0.0280000 2 B Stinky Pete ORRI 0.56 2 0.0040833 2 C Stinky Pete ORRI 0.56 2 0.0017500 2 B Stinky Pete ORRI 0.56 3 0.0040833 2 D Stinky Pete ORRI 0.56 3 0.0000000 2
BURDEN GROUP TOTAL 0.0379167 2 A Stinky Pete ORRI 0.25 1 0.0037500 3 B Stinky Pete ORRI 0.25 2 0.0009375 3 C Stinky Pete ORRI 0.25 2 0.0006250 3 B Stinky Pete ORRI 0.25 3 0.0009375 3 D Stinky Pete ORRI 0.25 3 0.0000000 3 A Stinky Pete ORRI 0.19 1 0.0118750 3 B Stinky Pete ORRI 0.19 2 0.0019792 3 C Stinky Pete ORRI 0.19 2 0.0011875 3 B Stinky Pete ORRI 0.19 3 0.0019792 3 D Stinky Pete ORRI 0.19 3 0.0000000 3
BURDEN GROUP TOTAL 0.0232708 3 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0379167 0.0611875 61.96805%
0.0232708 0.0611875 38.03195%
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Woody ORRI 0.25 1 0.0087500 3 B Woody ORRI 0.25 2 0.0008854 3 C Woody ORRI 0.25 2 0.0001563 3 B Woody ORRI 0.25 3 0.0008854 3 D Woody ORRI 0.25 3 0.0000000 3
TOTAL OVERRIDING ROYALTY 0.0106771
Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Jessie – 56%, Bullseye – 44%
Tin Man RI 0.0416666 Jessie – 56%, Bullseye – 44%
Scarecrow RI 0.0250000 Jessie – 56%, Bullseye – 44%
Cowardly Lion RI 0.0312500 Jessie – 56%, Bullseye – 44%
SUBTOTAL RI 0.1604166 0.1604166
Woody ORRI 0.0106771 Jessie – 0%, Bullseye – 100%
SUBTOTAL ORRI 0.0718646 0.0718646
SUBTOTAL WI 0.7677188 0.7677188
Burden Groups Lease Owner Interest
Type Unitized NRI Jessie Bullseye
A Dorothy RI 0.0625000 0.0350000 0.0275000 B Tin Man RI 0.0416666 0.0233333 0.0183333 C Scarecrow RI 0.0250000 0.0140000 0.0110000 D Cowardly Lion RI 0.0312500 0.0175000 0.0137500
TOTAL RI 0.1604166 0.0898333 0.0705833 A-D Stinky Pete ORRI 0.0611875 0.0379167 0.0232708 A-D Woody ORRI 0.0106771 0.0106771
TOTAL ORRI 0.0718646 0.0379167 0.0339479 A-D Jessie NRI 0.4322500 0.4322500 A-D Bullseye NRI 0.3354688 0.3354688
TOTAL NRI 0.7677188 0.4322500 0.3354688 A-D Jessie GWI 0.5600000 0.0000000 A-D Bullseye GWI 0.4400000 0.0000000
TOTAL GWI 1.0000000 0.5600000 0.4400000
NADOA 2021 Institute - Eli Murray 31
Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Can we use a “quick and dirty” calculation. • 50% * 0.56 GWI * 2% ORRI = 0.0056 ORRI (est.) • 50% * 0.4322500 NWI (current) – 0.0056 ORRI (est.) = 0.2161250
(est.) Bullseye NWI • Is this right?
• Spoiler Alert…Yes!
NADOA 2021 Institute - Eli Murray 32
Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Current Burdens on Jessie’s WI:
• Lease A – 0.125 ROY + 0.10 ORRI = 0.22500000 • Lease B – 0.1666667 ROY + 0.0583333 ORRI = 0.22500000 • Lease C – 0.20 ROY + 0.025 ORRI = 0.22500000 • Lease D – 0.25 ROY = 0.25000000
• Do we need this? • No, because the reservation isn’t dependent on the existing
burdens.
NADOA 2021 Institute - Eli Murray 33
Additional Conveyances. #2 • Jessie conveys half of her WI to Bullseye reserving a 2%
ORRI, proportionately reduced. • Jessie’s ORRI:
• Lease A: 50%*0.56 WI * 0.02 ORRI * 100% MI * 320 GA / 640 UA = 0.00280000 • Lease B: 50%*0.56 WI * 0.02 ORRI * 50% MI * 320 GA / 640 UA = 0.00140000 • Lease C: 50%*0.56 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.00070000 • Lease D: 50%*0.56 WI * 0.02 ORRI * 50% MI * 160 GA / 640 UA = 0.00070000
• Combined ORRI = 0.00560000 • Notice this matches the estimated ORRI, and it works because the
override isn’t dependent on current burdens.
NADOA 2021 Institute - Eli Murray 34
Calculation – Bullseye WI Lease
SUBTOTAL – PREVIOUS 0.4400000 0.3354688
A Bullseye WI 0.2800000* 1.000000 0.2450000 1 S/2 320 640 0.1400000 0.1057000
B Bullseye WI 0.2800000 0.500000 0.2450000 2 NE/4 160 640 0.0350000 0.0264250
C Bullseye WI 0.2800000 0.500000 0.2450000 2 NE/4 160 640 0.0350000 0.0264250
B Bullseye WI 0.2800000 0.500000 0.2450000 3 NW/4 160 640 0.0350000 0.0264250
D Bullseye WI 0.2800000 0.500000 0.2700000** 3 NW/4 160 640 0.0350000 0.0255500
SUBTOTAL - NEW 0.2800000 0.2105250
NADOA 2021 Institute - Eli Murray 35
*1/2 * 56% = 28% or 0.2800000 **0.25 roy + 0.02 ORRI = 0.27 burden or 73% NRI
Calculation – Revised Unit Totals Owner Interest Type Expense Interest Revenue Interest
Dorothy RI 0.0000000 0.0625000
Scarecrow RI 0.0000000 0.0250000
SUBTOTAL RI 0.0000000 0.1604166
Woody ORRI 0.0000000 0.0106771
Jessie ORRI 0.0000000 0.0056000
SUBTOTAL ORRI 0.0000000 0.0774646
Jessie WI 0.2800000 0.2161250
Bullseye WI 0.7200000 0.5459938
SUBTOTAL WI 1.0000000 0.7621188
AVG NRI 77.18750%
1 Jessie 28.0000% 1 Bullseye 72.0000%
2 Jessie 100.0000% 2 Bullseye 0.0000%
3 Jessie 0.0000% 3 Bullseye 100.0000%
4 Jessie 50.0000% 4 Bullseye 50.0000%
NADOA 2021 Institute - Eli Murray 37
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Stinky Pete ORRI 0.56 1 0.0280000 2 B Stinky Pete ORRI 0.56 2 0.0040833 2 C Stinky Pete ORRI 0.56 2 0.0017500 2 B Stinky Pete ORRI 0.56 3 0.0040833 2 D Stinky Pete ORRI 0.56 3 0.0000000 2
BURDEN GROUP TOTAL 0.0379167 2 A Stinky Pete ORRI 0.25 1 0.0037500 3 B Stinky Pete ORRI 0.25 2 0.0009375 3 C Stinky Pete ORRI 0.25 2 0.0006250 3 B Stinky Pete ORRI 0.25 3 0.0009375 3 D Stinky Pete ORRI 0.25 3 0.0000000 3 A Stinky Pete ORRI 0.19 1 0.0118750 3 B Stinky Pete ORRI 0.19 2 0.0019792 3 C Stinky Pete ORRI 0.19 2 0.0011875 3 B Stinky Pete ORRI 0.19 3 0.0019792 3 D Stinky Pete ORRI 0.19 3 0.0000000 3
BURDEN GROUP TOTAL 0.0232708 3 TOTAL OVERRIDING ROYALTY 0.0611875
BG TOTAL TOTAL ORRI BURDEN %
0.0379167 0.0611875 61.96805% Jessie 50% 30.98403%
Bullseye 50% 30.98402%
Overriding Royalty Burden
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Woody ORRI 0.25 1 0.0087500 3 B Woody ORRI 0.25 2 0.0008854 3 C Woody ORRI 0.25 2 0.0001563 3 B Woody ORRI 0.25 3 0.0008854 3 D Woody ORRI 0.25 3 0.0000000 3 TOTAL OVERRIDING ROYALTY 0.0106771
Overriding Royalty Burden
LEASE OWNER INTEREST TYPE WI TRACT UNITIZED NRI BURDEN GROUP
A Jessie ORRI 0.28 1 0.0028000 3 B Jessie ORRI 0.25 2 0.0007000 3 C Jessie ORRI 0.25 2 0.0007000 3 B Jessie ORRI 0.25 3 0.0007000 3 D Jessie ORRI 0.25 3 0.0007000 3 TOTAL OVERRIDING ROYALTY 0.0056000
Burden Groups Lease Owner Interest
Type Unitized NRI Jessie Bullseye
A Dorothy RI 0.0625000 0.0175000 0.0275000 B Tin Man RI 0.0416666 0.0116666 0.0183333 C Scarecrow RI 0.0250000 0.0070000 0.0110000 D Cowardly Lion RI 0.0312500 0.0087500 0.0137500
TOTAL RI 0.1604166 0.0449166 0.0304792 A-D Stinky Pete ORRI 0.0611875 0.0189584 0.0422291 A-D Woody ORRI 0.0106771 0.0106771 A-D Jessie ORRI 0.0056000 0.0056000
TOTAL ORRI 0.0774646 0.0189584 0.0585062 A-D Jessie NRI 0.2161250 0.2161250 A-D Bullseye NRI 0.5459938 0.5459938
TOTAL NRI 0.7621188 0.2161250 0.5459938 A-D Jessie GWI 0.2800000 0.0000000 A-D Bullseye GWI 0.7200000 0.0000000
TOTAL GWI 1.0000000 0.5600000 0.1900000
NADOA 2021 Institute - Eli Murray 40
Unit Burdens Owner Interest Type Revenue Interest Burden Group
Dorothy RI 0.0625000 Jessie – 28%, Bullseye – 72%
Tin Man RI 0.0416666 Jessie – 28%, Bullseye – 72%
Scarecrow RI 0.0250000 Jessie – 28%, Bullseye – 72%
Cowardly Lion RI 0.0312500 Jessie – 28%, Bullseye – 72%
SUBTOTAL RI 0.1604166 0.1604167
Woody ORRI 0.0106771 Jessie – 0%, Bullseye – 100%
Jessie ORRI 0.0056000 Jessie – 0%, Bullseye – 100%
SUBTOTAL ORRI 0.0774646 0.0774646
SUBTOTAL WI 0.7621188 0.7621188
Questions??
Contact Information: Phone: Email: Eli Murray, CDOA, CPLTA, CPL 214.217.6214 [email protected]
42NADOA 2021 Institute - Eli Murray
Scenario
Party
WI
ORRI
Woody
0.25
3% (12.5 - 18.75%), 2% (18.75% to 22.5%), 0% (above 22.5%)
Jessie
0.56
A
Dorothy
1
0.125
1
S/2
320
320
•Lease A – Dorothy, covers S/2 of Section 4, royalty rate 12.5%
B
0.5
0.1666666667
2
NE/4
160
80
•Lease B – Tin Man, covers N/2 of Section 4, royalty rate 1/6
B
0.5
0.1666666667
3
NW/4
160
80
C
Scarecrow
0.5
0.2
2
NE/4
160
80
•Lease C – Scarecrow, covers NE/4 of Section 4, royalty rate of 1/5
D
0.5
0.25
3
NW/4
160
80
•Lease D – Cowardly Lion, covers NW/4 of Section 4, royalty rate of 22.5%
640
0.8145836
0.771875
0.75
DOIv2
Woody conveys his WI to Bullseye reserving an ORRI of 22.5% less burdens.
Lease
0.771875
0.7624290909
DOIv3
Jessie conveys half of her WI to Bullseye reserving a 2% ORRI, proportionately reduced.
Lease
Burden Groups
