Know About Royalty Interest & Oil and Gas Overrides

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Oil And Gas Postings
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• Oil and Gas Overrides
• Royalty interest is that which is provided when
  one enters into an oil and gas lease. This occurs
  when the owner of a property has already sold the
  property but wants to retain the interest. In
  this case royalty interests are worked out and
  are sold to raise capital. These oil and gas
  overrides are added at the time of an intervening
  assignment preparation. This type of override
  interest is meant mainly for landsmen,
  geologists, brokers or any other entities that
  have reserved interest on their properties.

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The Limits of Overrides

• When you sign a contract for an override it means
  you are entitled to participate in the fractional
  and undivided interest obtained from the sale of
  the oil and gas proceeds. This interest is not
  calculated on the minerals obtained but on the
  money got from the sale of these minerals. This
  interest is payable as long as the lease exists.
  As soon as the lease expires, the overrides too
  stop. They cannot continue as perpetuity or royal
  interests any more.

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Dwindling of Royalties Over Time

• In this case if you have selected a lucrative oil
  and gas drilling program then you may not fall
  into this dwindling of royalties trap. Though the
  mining wells last for decades, there are also
  times when the overrides and royalties can drop
  considerably when the demand gets lesser. On an
  average scale each well could last for a period
  of 30 to 35 years. Gradually the royalties begin
  dwindle but the land owner still has the land
  that can be leased to another prospective
  drilling company on a new lease.

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Writing out a Good Lease

• In most cases the land owner prepares this lease
  contract. Hence, the benefit of specifying the
  exact amount that should be paid to the owner by
  the contractor lies with the land owner. The
  owner should use the exact language that protects
  the right to his livestock, buildings, crops,
  roads and any other assets during the lease
  period. Land owners also can specify certain
  portions that should not be disturbed at the time
  of drilling thus creating space for his
  livelihood during the drilling years.

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• Conclusion
• In both cases, the leaser and lease should get
  professional advice on how to prepare and sign
  and mutual contract where both parties benefit
  from it. This is mandatory, especially for the
  land owner whose land is being used for the
  drilling purpose. If there are any hidden facts
  at the time of signing the contract, this can
  cause a lot of damage to either of the parties.
  Hence, expert advice is mandatory.

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Contact Us

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• City - Houston, Texas 77002
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