Royalty
A reserved share of production. No obligation to fund the well. No IDC election attached to that interest.
02 · Working interest
Working interest is the participating share that funds drilling and receives production.
Royalty owners do not pay drilling costs. Working-interest owners do. Capital is advanced for a share of the well.
When the well produces, that share of oil and gas is sold and distributed as cash. The working-interest owner is in the cost chain and the production chain. A royalty owner is not.
That distinction matters for both economics and tax. Intangible drilling costs and equipment deductions attach to the party that bears the drilling outlay. They do not attach to a passive royalty.
Working interest
A participating interest. Pays its share of drilling and completion. Receives its share of production after royalty and other burdens.
1% of a public rate class
At 400 barrels a day held flat for a year, a 1% working interest is 1,460 barrels. That is $87,600 at $60 a barrel, or $116,800 at $80.
The $60 / $80 tableEducational material only. Not an offer to sell a security. Not tax, legal, or investment advice.