Legal Definitions - certificate of interest

A certificate of interest is a formal document used within the oil and gas industry. It serves as official proof that an individual or entity owns a specific fractional share or percentage of the revenue generated from the production and sale of oil, natural gas, or other hydrocarbons from a particular well, lease, or property. Essentially, it certifies a financial stake in the output of an energy project, entitling the holder to a portion of the proceeds.

• Example 1: Individual Investor in a Drilling Project

  Imagine a group of private investors contributes capital to a new exploratory oil drilling project in West Texas. One investor, Ms. Chen, puts in a certain amount of money and, in return, receives a document stating she owns a 0.75% share of all future oil and gas production from that specific well. This document is her certificate of interest, formally establishing her right to a portion of the revenue generated once the well begins producing.

• Example 2: Landowner's Royalty Share

  A rancher, Mr. Davies, owns a large property where an energy company has successfully drilled several natural gas wells. As part of the original lease agreement, Mr. Davies is entitled to a royalty—a percentage of the gross production from the wells on his land. The energy company issues him a certificate of interest, which legally confirms his 1/8th (12.5%) ownership share in the gas extracted and sold from those wells. This document ensures he receives his due portion of the production revenue.

• Example 3: Partnership in a Production Field

  Two smaller energy companies, Alpha Exploration and Beta Resources, form a joint venture to develop a new oil field. Alpha Exploration manages the day-to-day operations and drilling, while Beta Resources provides a significant portion of the initial investment. To formalize Beta Resources' financial stake in the project's output, Alpha Exploration issues a certificate of interest to Beta Resources, confirming its 40% ownership share in the net production from all wells developed within that specific oil field. This document ensures Beta Resources receives its agreed-upon share of the profits from the oil and gas produced.