oil & gass

Q24 & Q25

24. Ethan Oil Corporation owns 100% of the working interest in an oil and gas lease located in a remote area of Wyoming. The royalty on the lease is 1/8. Ethan Oil does not have the funds to develop the lease and decides to assign the working interest to Tritium Oil Company, reserving an interest that will pay 1/5 of 7/8 of gross revenues but where the Ethan Oil will pay none of the operating costs. REQUIRED: What kind of interest has Tritium acquired? What kind of interest has Ethan Oil retained? 25. Tyler Energy owns a 100% working interest in a tract of land in Texas. Lacking the funds to develop the property, Tyler Energy assigns Gravity Oil 30,000 barrels of oil to be paid out of 1/7 of its share of production in exchange for $600,000 in cash. REQUIRED: What type of interest has Gravity Oil acquired