Sunrise Oil owns a 100% working interest in an oil and gas lease. The Royalty on the lease is 12.5%, which is owned by the Whittenburg Family Trust. Sunrise sells 100% of its interest to Beltway Oil & Gas reserving 1/8 interest but will pay none of the operating expenses. In March 2022 Beltway Oil & Gas produces 1,500 barrels (BBLS) of oil and sell 975 BBLs of oil at $88 per BBL. Beltway Oil incurs $37,000 in lease operating expenses.
A. What type of interest has Beltway Oil & Gas acquired?
B. What type of interest has Sunrise Oil retained?
C. What is the gross revenue to the royalty owner?
D. What is the gross revenue to the working interest owner?
E. What portion of the lease operating expenses will Beltway Oil & Gas Pay?