working interest

Working interest describes a percentage of ownership in a mineral lease granting its owner the right to explore, drill, and produce oil and gas from the leased property.

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Working interest owners bear all of the costs and liabilities associated with leasing, drilling, producing, and operating a well but share in only part of the production revenue from a successful well. The share of production revenue to which a working interest owner is entitled will always be smaller than the share of costs that the working interest owner is required to bear, with the balance of the production revenue accruing to the royalty owners. For example, the owner of a 100 percent working interest in a lease burdened by a landowner's royalty of 20 percent would be required to pay 100 percent of the exploration, development, and operating costs but would be entitled to only 80 percent of the production revenue. The royalty owner would be entitled to the remaining 20 percent of production revenue.