February 23, 2024

Highandright

Entertain Reaching Stars

Exploring the Concept of “Working Interests”

2 min read

If you are either leasing your property to a mineral company, have a working interest in mineral rights, or are just expanding your options for property that you do currently possess, then you must do some research into mineral rights, oil and gas leasing, and working interests prior to moving forward or signing your name to any dotted line.

The U.S. Energy Information Administration (EIA) defines working interests in the following way: “An interest in a mineral property that entitles the owner of that interest to all shares of the mineral production from the property, usually subject to a royalty. In other words, it allows the owner of the land to explore, develop, and operate on that property. The EIA notes that since the owner bears all the costs of exploration, development, and operation of the property, they are entitled to a share of the mineral production from the property or to a share of the proceeds there from. (US Energy Information Administration, 2010)

There are two types of it.The “gross” that EIA defines as “the reporting company’s working interest plus the proportionate share of any basic royalty interest or overriding royalty interest related to such; and the second type is “net”, which is the percentage of production that each party actually receives.

There are a number of companies who sell working interests. There are many oil and mineral exploration companies and brokers who specialize in selling mineral rights as well as oil and gas royalties. The brokering of working interests can take anywhere from several days to several weeks in order to complete a deal between parties. This process is usually dependent on the amount of information the seller already has pertaining to the track of land he/she is trying to sell. Additionally, production history, reservoir formation, commodity price risk, future production and development, interest type and tax rates are several factors that are considered when deciding on royalties from a piece of land.

Working interests are sold similarly to mineral rights. If you have questions regarding how to sell it you have the option of contacting your state office of the USGS or doing a quick search of the Internet to find brokers who can walk you through the process.

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