Working Interests

A working interest carries drilling and operating costs alongside production revenue — a fundamentally different exposure than any royalty-type interest.

Working interest is the one ownership type in this list that isn't cost-free. Unlike royalty, NPRI, or overriding royalty interests, a working interest owner shares in the actual costs of drilling, completing, and operating the well — proportional to their percentage interest — in exchange for a proportional share of production revenue after those costs. This makes working interest valuation genuinely different work than a royalty file, and title specialists treat it that way from the first conversation.

Title specialists see New Mexico working interests most often held by small non-operators who participated in a well alongside a larger operator, sometimes going back to a vertical well drilled decades ago, or by heirs who inherited a working interest without fully understanding the cost obligation that comes with it. Before valuing anything, title specialists confirm whether you're current on your share of operating costs, since unpaid joint interest billings can attach directly to the value of the interest.

Why costs, alongside revenue, drive working interest value

A working interest's net value depends on production revenue minus your proportional share of lease operating expenses, and, if the well is still active, potential future capital costs for workovers or additional development. Title specialists request the joint interest billing statements, rather than only a division order, because that's where the actual cost history lives — a working interest attached to a well with rising operating costs or a recent large workover bill reads very differently than one with stable, low costs on a mature, simply-operated well.

If you're behind on joint interest billings, that unpaid balance typically needs to be resolved as part of any sale, since the operator generally won't approve a transfer with outstanding costs owed against the interest.

Operating agreement terms that affect a sale

The joint operating agreement governing the well usually includes preferential rights to purchase provisions, meaning other working interest owners in the unit may have a contractual right of first refusal before you can sell to an outside buyer. Title specialists read the operating agreement early in the file to confirm whether this applies, since missing this step can unwind a sale after the fact if another working interest owner asserts their right.

The operating agreement may also specify how transfers are structured and what notice other parties are entitled to, which title specialists build into the closing timeline from the start rather than treating a working interest sale like a straightforward royalty transaction.

Documenting a working interest for sale

For a working interest file, title specialists want the joint operating agreement, recent joint interest billing statements (showing both revenue and cost deductions), the division order or revenue statement, and confirmation of current well status — actively producing, shut in, or plugged. Because working interest carries ongoing cost exposure and sometimes plugging liability obligations depending on the operating agreement, title specialists document all of this before putting a range together, since it's a materially different calculation than a royalty valuation.

If the well is nearing the end of its economic life, plugging and abandonment liability is a real consideration for a working interest owner that doesn't apply to royalty interests at all, and title specialists factor that into the conversation directly rather than leaving it out.

Title specialists also confirm whether your working interest is operated or non-operated, since a non-operated working interest owner has no direct control over drilling or operating decisions but still bears the proportional cost exposure, which is a distinct risk profile worth understanding clearly before deciding whether to hold or sell. Most working interests title specialists see from individual New Mexico owners are non-operated, inherited alongside a small original stake in a well someone else runs.