Definition - What does Operating Interest mean?
Operating Interest, also known as working interest, is a list rights granted to a grantee by grantor of an oil & gas lease for exploration and production of hydrocarbons present under that particular lease. The operating or working interest owners bear all the expenses in the exploration, production and development of wells, and other operating costs. Most of the times, the operating interest or working interest owners are the oil and gas Exploration and Production organizations.
Petropedia explains Operating Interest
When an oil and gas lease is handed over to working interest owners, they are entitled to pay all the expenditures made from exploration activities till the abandonment of oil or gas wells. As per the law, they are also entitled to share the production revenues in the form of Royalties to the royalty interest owners on that piece of lease based on the percentage of their royalty interests.
A working interest owner has the right to use the property surface in order to explore and obtain the minerals and hydrocarbons to the fullest. Once they determine that the production is declining and there is no more hydrocarbons left or Enhanced Oil Recovery Techniques do not have any beneficial results, field abandonment is done and the working interest rights gets over and the mineral rights are reverted back to the grantor. Similarly, if the mineral lease expires, the ownership of minerals is returned back to the grantors.