# What is a working interest in oil and gas?

Canonical source: https://www.wildcatters.co/learn/what-are-working-interests
Publisher: Wildcatters (https://www.wildcatters.co/#organization)
Content type: Learn concept / guide
Source/provenance: Wildcatters editorial explanation with the regulator and primary references listed below.
Modified: 2026-09-11
Snapshot retrieved: 2026-09-12T11:33:04.209Z
Limitations: Historical examples and source reporting dates are not current prices or proof of ownership. Check source records and property documents.

A working interest gives its owner a share in developing and producing a mineral property and responsibility for associated costs. The owner’s revenue share is affected by royalties and other burdens, so it can differ from the working-interest percentage.

# What is a working interest in oil and gas?

A working interest gives its owner a share in developing and producing a mineral property and responsibility for associated costs. The owner’s revenue share is affected by royalties and other burdens, so it can differ from the working-interest percentage.

Updated: 2026-09-11. By Wildcatters Editorial.

## What to know

- Working interest describes development rights and associated costs.
- Net revenue interest identifies a share after applicable burdens.
- The agreement determines obligations; a percentage alone is insufficient.

## Working interest, royalty interest, and NRI

The [EIA working-interest definition](https://www.eia.gov/TOOLS/GLOSSARY/index.php?id=w) connects development and operating rights with responsibility for costs. Use the governing documents to understand how those rights and costs are allocated.

| Term | What it describes | What to check |
| --- | --- | --- |
| Working interest (WI) | An interest in developing and operating the property, with associated costs | Cost share, operating agreement, commitments, and liability provisions |
| Royalty interest | A right to a share of production or proceeds under the relevant instrument | Payment basis, deductions, taxes, duration, and retained rights |
| Net revenue interest (NRI) | The revenue share after applicable royalty and other interest burdens | The denominator, burdens included, and whether the decimal applies to this property |

NRI describes a revenue allocation; it does not by itself describe a separate set of operating rights. Royalty owners generally do not fund drilling and operating costs in the way working-interest owners do, but “no costs of any kind” is not a sound universal rule. The [RRC royalties FAQ](https://www.rrc.texas.gov/about-us/faqs/royalties-faq/) addresses payment information and deductions in its Texas context.

## A hypothetical 10% working-interest example

Assume a participant owns **10% WI**, bears **10% of the specified costs**, and the lease has a **20% royalty burden applied proportionally**. Assume no other interest burdens, special allocations, or carried interests.

| Calculation | Illustrative result |
| --- | --- |
| Revenue share: 10% × (1 − 20%) | 8% NRI |
| $100,000 property sales revenue × 8% | $8,000 allocated revenue |
| $20,000 specified operating costs × 10% | $2,000 allocated costs |
| $8,000 − $2,000 | $6,000 before other applicable items |

These numbers illustrate arithmetic only. They are not a price, forecast, distribution promise, or investment return. Taxes, other deductions, capital spending, and agreement-specific adjustments are excluded. Do not deduct the same royalty burden a second time from the already calculated 8% NRI.

## Operating and non-operating interests

An operator manages operations under the applicable arrangements. A non-operating owner may participate economically without managing daily field work. The operating agreement determines matters such as approvals, billing, information rights, and treatment of proposed operations.

Do not assume every non-operator has the same voting rights or that an authorization for expenditure is a guaranteed final cost. Read the scope of the proposal and how additional spending is handled.

## What to review before relying on the percentage

- **Identity:** Which leases, wells, depths, or property interests does it cover?
- **Costs:** What is the share of drilling, completion, operating, and plugging obligations?
- **Revenue:** Which burdens produce the stated NRI, and can they change?
- **Governance:** Who operates, approves work, reports results, and bills the participants?
- **Risk allocation:** What do the agreements and applicable law say about liability and future commitments?
- **Evidence:** Can the interest schedule be reconciled with actual billing and revenue statements?

[Research the operator and available records in Intelligence 2.0](https://www.wildcatters.co/intelligence-2), then compare the findings with the transaction documents. Regulatory records alone do not establish the interest you would acquire.

## Tax treatment needs a separate review

Intangible drilling costs, equipment, depletion, and dispositions are distinct tax topics. The [IRS oil-and-gas audit guide](https://www.irs.gov/pub/irs-pdf/p5652.pdf) discusses these subjects and their conditions; it is not a promise that a particular investor can claim a deduction.

Avoid evaluating an interest using a blanket write-off percentage or assumed tax rate. This is educational information. An adviser should review the ownership structure, activity, documents, and applicable tax rules for the specific circumstances.

## Put the interest next to the operating records

Find the operator and available well history, then compare them with the interest schedule and agreements.

[Open Intelligence research](https://www.wildcatters.co/intelligence-2)

## Related reading

- [How to sell mineral rights](https://www.wildcatters.co/learn/how-to-sell-mineral-rights)
- [Leasing versus selling](https://www.wildcatters.co/learn/oil-gas-lease-vs-sell)
- [Browse current opportunities](https://www.wildcatters.co/marketplace)

## Sources

- [EIA · Working interest](https://www.eia.gov/TOOLS/GLOSSARY/index.php?id=w)
- [Texas RRC · Royalties FAQ](https://www.rrc.texas.gov/about-us/faqs/royalties-faq/)
- [IRS · Oil-and-gas tax topics](https://www.irs.gov/pub/irs-pdf/p5652.pdf)