Glossary - Working Interest
Working Interest refers to an owner's operating interest in an oil and gas lease that grants them the right to explore, drill, and produce oil and gas from a particular plot of land. The owner of a working interest is responsible for a proportional share of the costs associated with exploration, drilling, and production operations, and in turn, receives a proportional share of the revenue from the sale of the oil and gas produced.
Also known as
- Operating Interest
- Operational Interest
Use cases examples
- Joint Operating Agreement: The party hereby agrees to acquire a 25% working interest in the designated block, obligating them to contribute 25% of all operational costs incurred.
- Lease Agreement: Under the terms of this lease, the lessee is granted a 40% working interest in the oil and gas properties located on the described premises.
Considerations for investors
- Investors should evaluate the geological data and potential for oil and gas production of the asset before acquiring a working interest to ensure a positive return.
- Investors must factor in the operational costs and potential legal or environmental liabilities associated with the exploration and production activities.
Considerations for founders
- Founders considering entering into agreements that include working interests should understand the financial commitment required for exploration and production activities.
- Founders should assess the potential return on investment from obtaining a working interest, considering the risks of dry wells or non-productive assets.
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