Types of Ownership

Royalty & Overriding Interest

A royalty interest is the interest retained by the mineral and/or surface owner in an oil and gas lease. It typically ranges from 12.5 – 17% of the total revenue from oil and gas production that can be attributed to the lease, and there are usually multiple owners involved. The royalty interest is not subject to operational expenses (e.g., drilling and production), however it is subject to oil and gas extraction taxes and post- production costs (e.g., transportation and processing). An overriding interest is similar to a royalty interest, and is proportioned from the overall working interest; it exists for as long as the lease for the mineral rights is valid. 

Return to Oil & Gas Background

Working Interest: Operated

Oil and Gas companies lease the mineral rights from the mineral owners to drill and produce the resources. They typically have the majority interest (>50%), known as the operated working interest, and make most of their income from their share in the well. They bear the daily operational duties and their share of expenses for the wells. 

Working Interest: Non-Operated

The owner of the operated working interest may also have other partners who own a part of the working interest, but do not directly influence the operation of the well. This is called the non-operated working interest – it is typically less than 50% of overall lease, and can be comprised of multiple partners. The non- operated working interest partners are responsible for their share of operational expenses even though they are not involved in daily well operations.