09/02/2026
Most people hear "oil and gas investment" and picture one thing. There are actually four different ways to hold the asset, and they behave very differently.
Mineral rights mean owning the resource under the ground. A royalty interest is a share of revenue with none of the costs. A working interest is a direct stake in the well, which means sharing the costs and carrying the liability. Funds and partnerships pool exposure across many wells under a sponsor.
The tax provisions get most of the attention. Intangible drilling costs, depreciation on tangible equipment, and the depletion allowance were written into the code to encourage domestic drilling, and they are a real feature of direct ownership.
The risks deserve equal weight. Wells come in dry. Prices are set globally and move fast. These are long horizon assets with no exchange to sell them on tomorrow. And returns depend heavily on who is operating the well.
Which is why the work is understanding the asset, not the tax treatment.
Swipe through for the breakdown.