Read this first if you arrived from a royalty search. Royalties and working interests are frequently discussed together, and they are fundamentally different instruments. Kingdom Exploration sponsors direct working-interest drilling programs — not producing royalty purchases.
A royalty owner receives a share of revenue and bears no costs. A working-interest owner owns a share of the well itself and bears the costs, the liabilities, and the risk of total loss. If you came here looking for a passive royalty stream, what we offer is not that, and you should know it before you read another paragraph.
This page explains the structural differences between the two — who pays what, who is liable for what, how each is taxed, and how revenue is calculated. It does not quote yields, returns, or income figures. Any published return range for a private drilling program is an assumption, not data; program economics belong in offering documents where they can be read alongside the assumptions and risks behind them.
| Working Interest (what we sponsor) | Royalty / Mineral Interest | |
|---|---|---|
| What you own | A fractional interest in the well and lease operations | A right to a share of revenue from production |
| Operating costs | You pay your share — LOE, workovers, equipment | None — costs are borne by the working interest |
| Capital calls | Possible. You can be invoiced for workovers, recompletions, disposal, and equipment | None |
| Plugging & abandonment | Your share of the liability at end of life | None |
| Environmental / surface liability | Yes — and if held in a form that does not limit liability, it is not capped at your subscription | Generally none |
| Downside | Total loss of capital, plus potential liability beyond it | Revenue stops; purchase price can still be lost |
| Year-1 IDC deduction | Available — IDCs are expensed in the year incurred (§263(c)) | Not available — no drilling costs are incurred |
| Depletion | Percentage or cost depletion, subject to statutory limits | Percentage or cost depletion, subject to statutory limits |
| Passive or active | Non-passive under §469(c)(3) — only if liability is not limited | Portfolio/passive income |
| Duration | Life of the wells / the lease | Mineral interest is perpetual; an ORRI ends when the lease ends |
| Liquidity | None. No exchange, no established market, transfer usually needs consent | A resale market exists but is thin, negotiated, and slow |
This table is the substance of the page. Everything that follows elaborates on one of these rows.
The tax advantage and the liability are the same fact. §469(c)(3)'s non-passive treatment applies only where the interest is held in a form that does not limit liability. You cannot take the deduction on one page and disclaim the exposure on another. Read the risk disclosure →
Unit size and minimum subscription vary by program and are stated in each offering's documents.
Discontinued: Kingdom Exploration previously advertised an overriding-royalty referral program on this page. That program has been discontinued and the associated referral yield table has been removed. No ORRI is currently offered as referral compensation.
Rather than publish an example with numbers plugged in — which inevitably becomes a projection — here is the actual waterfall. Apply your own price and volume assumptions to it:
Note the asymmetry in steps 4 and 7: revenue comes to you net of royalty, but costs are charged on your gross working interest. That is the structural reason a working interest is riskier than the same nominal percentage of a royalty.
An earlier version of this page showed an “annual yield on net cost” figure. It was computed by dividing income by a cost basis that had already been reduced by the assumed first-year tax benefit. That is not how cash-on-cash return is computed, and it inflates the resulting percentage substantially. It has been removed, along with every other return figure formerly published here.
Two rules worth carrying into any offering you evaluate, ours included: (1) cash-on-cash is measured against the capital you actually paid, not a post-tax-benefit figure; and (2) a tax deduction reduces the cost of an investment — it is not a return on the investment, and combining the two into one percentage is the oldest presentation trick in this industry.
Initial rate, decline profile, and reserves. This is unknown until the well is drilled, completed, and produced — and some wells never produce commercially.
Benchmark price and the differential to it. Crude has fallen more than 70% twice in the last twelve years — assume prices move against you as readily as for you.
LOE per unit produced sets the price at which a well stops being worth operating. Ask what that break-even is for the specific wells before you subscribe.
Tax discussion last reviewed July 2026. This is general information, not tax advice — your treatment depends on your circumstances and holding form. Consult your own CPA.
Request the offering documents, the AFE, and the risk disclosures for a current project, and review them with your own advisors before committing capital.
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