CPL CPL Division Orders & Revenue Distribution 2

Question 1

How is the Net Revenue Interest (NRI) for a working interest owner calculated?

Accepted Answer

NRI = Working Interest × (1 − Total Royalty Burden)

Answer

A working interest owner's NRI equals their working interest multiplied by one minus the total royalty burden, reflecting what they net after all royalty obligations are paid.

Question 2

What is an overriding royalty interest (ORRI) and how does it differ from a landowner's royalty?

Accepted Answer

An ORRI is carved from the working interest and expires when the lease terminates; a landowner's royalty is reserved in the lease and runs with the land

Answer

An ORRI is an interest carved out of the working interest that bears no costs and expires with the lease, whereas a landowner's royalty is reserved in the mineral lease and runs with the land.

Question 3

When a working interest is assigned, the assignee typically receives:

Accepted Answer

A proportionate share of both revenues (NRI) and costs (WI) as defined in the assignment

Answer

An assignment of working interest conveys the assignee's proportionate share of both revenues (expressed as NRI) and costs (expressed as WI percentage) per the assignment terms.

Question 4

What is 'revenue suspense' as used in division order administration?

Accepted Answer

Funds withheld by the purchaser due to unresolved title, missing payees, or unsigned division orders

Answer

Revenue suspense refers to funds the purchaser withholds and holds in reserve because ownership is unclear, title is disputed, or an owner has not signed a division order.

Question 5

What is a 'title requirement' in the context of division order preparation?

Accepted Answer

A condition identified in the title opinion that must be satisfied before an owner can be paid

Answer

A title requirement is a curative condition specified in the division order title opinion that an owner must satisfy—such as recording a deed or probating an estate—before their interest can be paid.

(CPL) Certified Professional Landman Practice Test

(CPL) Certified Professional Landman Practice Test

CPL CPL Division Orders & Revenue Distribution 2