What is Working Interest?
When an oil and gas company, the Lessee, comes along and takes an oil and gas lease from a mineral owner it creates a new type of interest, the Lessee’s interest, or “working interest” as it is referred to.
When the lease expires and/or the production ceases, the Lessee or operator plugs the well and the working interest extinguishes.
The Lessee, or Working Interest owner in an oil and gas lease, bears all of the cost of drilling for and producing the minerals but receives only a portion of the production which is the difference between the royalty rate, or percentage, received by the mineral owner and 100%.
It is called “working interest,” because it does all the work of exploration and development.
The working interest can also be owned by multiple parties. The original Lessee may grant shares, or percentages, of his working interest to other parties who share the cost of drilling and production.
Or, in the event siblings or relatives leased their mineral interests to different oil and gas companies, those oil and gas companies, or working interest owners, may get together and agree to jointly develop the tract.
This is a very simple explanation and we explain it more thoroughly in our blog, Surface Rights vs. Mineral Interests vs. Royalty Interests vs. Working Interests.
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