Risk penalty

[MAX]

Working interest with out paying, In New Mexico (RISK PENALTY) is 200% of well costs. Just wondering is that total costs of well or 200% of my portion of costs? Thanks

[TODD_M_Baker]

200% of the total well costs.

[Steve_Durrett]

Not wanting to be argumentative here (perhaps there is just a semantics issue), but the risk penalty applied to your non-participating working interest will be applied to your share of the well.

For example, if the well cost $1 million and you owned 5%, then the net proceeds attributable to your 5% in the well would be have to reach $100,000 (200% x 5% x $1,000,000) before you would be entitled to receive anything.

[TODD_M_Baker]

Steve & Max - you can plug in any well cost total and WI percentage and the result is the same. The operator gets to recoup 2 times the total costs of the well, all expenses included, before the non-consent party begins receiving their respective share of revenue.