Problem 10. An investor buys a lease for a 12.5% landowner royalty. An engineer is retained to work the lease for a 5.5% overriding royalty interest. The first investor sells...but keeps a 12% overriding royalty interest with a 25% back-in working interest...net revenue ownership interest for the engineer after payout is closest to: (A) 7.5%; (B) 3.75%; (C) 4.75%; (D) 5.5%
This one is easy; the
engineer’s share is an "overriding royalty interest" and thus not effected by anything after his initial 5.5%, hence,
5.5%. See 10 ECN 2 for the definition of ORRI and a more complex example that includes this part.
On the 2016 Exam #54, is the answer key wrong? The key says the answer is C) 420,000 res bbls, but the only answer I am getting is D) 2,100,000 res bbls. My work matches the calculation for Vp on 12WLT3. Am I missing something? Thanks!
ReplyDeleteHi Sara, try checking your units. The Vp in the guidebook is in ft^3. Divide by 5.615 to get your answer in reservoir barrels.
DeleteThank you! I knew I was missing something, completely missed the units on that equation.
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