Ethan Oil Corporation owns 100% of the working interest in an oil and gas lease located in
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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?
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