What a working interest carries that a royalty doesn’t
A working interest (WI) is the operating side of a well: the right to drill and produce under a lease, in exchange for bearing a proportionate share of the costs. Unlike a cost-free royalty, a WI owner gets billed — through joint interest billings (JIBs) and authorizations for expenditure (AFEs) — for drilling, operating, and eventually plugging the well. Your net revenue interest is what’s left after royalties and your share of costs.
That cost-and-liability exposure is the whole difference. A working interest can be more lucrative than a royalty when wells are strong, and a drag when they aren’t — and it can come with environmental and plugging obligations that outlast the production.
How we approach working interests
Because a WI carries costs and liabilities, valuing one means netting realistic operating expenses, upcoming AFEs, and end-of-life plugging obligations against the revenue — not just counting barrels. We focus on small and non-operated positions (where you’re along for the ride rather than running the wells), and we’re candid when the liabilities make a position something we can’t buy.
Whatever the answer, we lay both columns out plainly — revenue on one side, costs and obligations on the other — so you understand exactly what you hold before any price is discussed.
Why owners sell working interests
Many WI holders sell to get out from under the costs and liabilities — the JIBs, the AFEs, the plugging exposure — especially when they inherited a non-operated sliver they never wanted to manage. Converting it to a lump sum ends the billing and the obligation in one step.
Educational content, not legal, tax, or investment advice — your facts are specific, so involve your attorney and CPA before deciding anything. We’ll gladly work with them.