Texas Crude Energy, LLC (No. 170266). Proportionate reduction clause in the lease, C would only receive 6!And have an overriding royalty interest in working interests.
On the above terms, the value of Crude Energy would increase with the sale of the drilling rights. Thus, the purchaser, Crude Energy, would have a right to a certain return on its initial investment. The royalty would not depend on the oil price, but on the market price of Crude Energy. So, the value to the state, and to you, of Crude Energy is in the ability to collect payments through the sale of drilling rights. The royalty paid to Crude Energy would amount to the value of the oil produced, divided by the price paid for the drilling rights at the time each lease expires. So if Crude Energy (IOU) sells oil at 60 and the price paid for the drilling rights is 18 for two years, then Crude Energy would pay royalties equal to 12.50 for every gallon of Oil it produces from the sale of drilling rights.
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