A cousin of ours ended up holding a small working interest through an old partnership his dad signed onto decades back, and it took him a while to understand why his checks looked so different from ours.
A working interest is fundamentally different from the royalty and mineral interests most North Dakota families hold, it's an operating interest, meaning the owner shares in both the revenue from production and the actual costs of drilling and operating the well. Working interest owners in the Bakken are typically operators themselves, or non-operating partners who took a small stake through a joint operating agreement, an old family drilling partnership, or an assignment from an operator raising capital for a well.
If you're receiving joint interest billing statements alongside, or instead of, a straightforward royalty check, that's the clearest sign you hold a working interest rather than a royalty or mineral interest, and it changes both your obligations and your options considerably.
Why a working interest is different from royalty income
A royalty owner never pays a dime toward drilling or operating a well, their share is free of those costs by definition. A working interest owner, by contrast, is billed their proportionate share of drilling costs, workovers, and ongoing lease operating expenses, on top of receiving their proportionate share of revenue. That means a working interest can actually cost you money in a given month if operating expenses outpace production revenue, particularly on an older well needing repair or in a low price environment.
This cost exposure is exactly why working interests carry more risk than royalty interests, and why owners who inherited a small non-operated working interest through an old family partnership sometimes find themselves surprised by a bill rather than a check.
Non-operated positions and how they typically arose
Most individual North Dakota working interest owners hold non-operated positions, meaning they don't run day-to-day operations, an operator like the ones active across the Bakken and Three Forks handles that, but they still share proportionately in costs and revenue under a joint operating agreement. These positions frequently trace back to older family drilling partnerships from earlier decades of North Dakota oil activity, or to an operator assigning a small working interest to a landowner as part of an original lease negotiation.
If you're not sure whether your interest is a working interest or a royalty interest, check whether you've ever received a joint interest billing statement, separate from a royalty statement, since that billing is the clearest marker of working interest ownership.
Selling a working interest
Working interests are sellable, and doing so relieves you of ongoing cost exposure along with the revenue share, which is often the whole point for an owner who inherited a small non-operated position and would rather not track joint interest billing statements or field calls about workover decisions. Buyers value a working interest against net revenue after typical operating costs, remaining reserves on the well, and any deferred liabilities like plugging obligations that may transfer with the interest.
Because plugging and abandonment liability can attach to a working interest, this is one area where it's worth having a straightforward conversation early about exactly what's transferring and what isn't, so there are no surprises on either side.
Reading a joint interest billing statement
A joint interest billing, or JIB, statement lists your proportionate share of specific costs for a given period, drilling, completion, workovers, or routine operating expenses, alongside your proportionate share of revenue for the same period, netted against each other. Unlike a royalty statement, which is almost purely revenue, a JIB can show a net amount owed to you or a net amount you owe, depending on how the month's activity and expenses shook out.
If a JIB statement looks unfamiliar or the math doesn't add up against what you expected, the operator's accounting department can usually walk through the specific charges, and it's worth asking rather than assuming an unusual bill is simply how things work.
North Dakota Owner Questions
Why did you get a bill instead of a check this month?
That's typical for a working interest when operating or drilling costs for the period exceeded your share of production revenue, since working interest owners share proportionately in both costs and revenue, unlike royalty owners.
Is a working interest riskier than owning minerals or a royalty?
Generally yes, because you're exposed to operating costs and potential liability, including plugging obligations, in addition to the same commodity price and production risk every interest type carries.
Can you sell a working interest that currently owes more than it earns?
It can be more difficult, since a buyer has to weigh the cost exposure and any liabilities against future revenue, but it's not impossible, and a straightforward conversation about the well's specific numbers is the place to start.
Does selling a working interest end your exposure to future plugging costs?
Generally the buyer assumes that liability going forward as part of taking on the interest, though the specific terms of the assignment should spell this out clearly before you sign anything.
