Carried Interest (Oil and Gas) (US) | Practical Law

Carried Interest (Oil and Gas) (US) | Practical Law

Carried Interest (Oil and Gas) (US)

Carried Interest (Oil and Gas) (US)

Practical Law Glossary Item w-040-1942 (Approx. 2 pages)

Glossary

Carried Interest (Oil and Gas) (US)

In the oil and gas context, a carried interest is a fractional oil and gas interest that is not required to pay for drilling or operational expenses for a limited time (carry period). These expenses are paid by the other working interest owners (called co-tenants) of the property. Depending on the terms of the carried interest, the carry may apply only to the owner's share of costs incurred in drilling or continue through subsequent costs incurred in well completion.
Until a well has paid out, carried interest owners do not normally receive income from the well but thereafter receive an agreed percentage share of its subsequent production.
For information on other oil and gas interests, see Practice Note, Oil & Gas Leases: Overview: Interests Created and for a discussion of Texas oil and gas law, see Practice Note, Oil & Gas Law: Overview (TX). For an oveview of the oil and gas industry in the US, see Practice Note, US Oil & Gas Industry: Overview.