Net Profits Interest

Filed Under » , , , ,
Dictionary Says

Definition of 'Net Profits Interest'

A percentage that is paid out of the working interest owner's share of net profits. This is a non-operating interest that may be created when the owner of a property - typically an offshore oil and gas property - leases it out to another party for development and production. A net profits interest may be granted instead of a royalty interest, where the holder receives a share of gross revenues rather than net profits.

The holder of a net profits interest is not liable for paying a proportionate share of losses if the property is unprofitable. However, depending on the stipulations of the lease contract, the working interest owner may recover these losses from future payments of net profit.
Investopedia Says

Investopedia explains 'Net Profits Interest'

For example, such an interest may be created when Company A, which owns the rights to explore and develop an oil and gas property, leases  it to Company B, in exchange for a 12% share in net profits from the leased property. In a given year, if Company B makes $10 million in net profits after deducting all allowable and applicable expenses from revenue generated from the property, $1.2 million would be payable to Company A as its share of net profits.

In order to avoid legal complications down the road, the exact definition of net profits and the expenses that are allowed to be deducted from revenue to arrive at it should be clearly specified in the lease contract. Accounting transparency is another prerequisite.
Search results for

'Net Profits Interest'

  • Use ROA To Gauge A Company's Profits

    http://www.investopedia.com/articles/fundamental/04/012804.asp
    ... Compare ROA to the interest rates companies pay on their debts: if a company is ... If
    we treat ROA as a ratio of net profits over total assets, then two telling ...

  • M & T Bank’s Profits Soar

    http://stocks.investopedia.com/stock-analysis/2011/M--T-Banks-Profits-Soar-MTB-JPM-C-BAC-WFC0118.aspx
    ... (NYSE:MTB) reported a surge in profits of 50 ... Rising income from interest, fees and
    charges contributed to the strong ... on a GAPP basis were $1.59 on net income of ...

  • Capital One Profits Surge

    http://stocks.investopedia.com/stock-analysis/2011/Capital-One-Profits-Surge-COF-C-JPM-WFC-BAC0715.aspx
    ... Capital One Profits Surge. ... Improved Results Continue Revenue for the quarter
    was $4 billion, while net interest income was $3.1 billion. ...

  • Dell Growing Profits Rapidly, Sales Barely

    http://stocks.investopedia.com/stock-analysis/2011/Dell-Growing-Profits-Rapidly-Sales-Barely-DELL-AAPL-GOOG-XRX-EK1123.aspx
    ... Interest expense reduced net income growth to 9%, as profits reached $893 million,
    but share buybacks boosted the per-share growth back to 17%, as earnings ...

  • Find Quality Investments With ROIC

    http://www.investopedia.com/articles/fundamental/03/050603.asp
    ... Term Investments - Long-Term Investments - Non-Interest Bearing Current ... numerator,
    which is after-tax operating profits, or NOPAT ... NOPAT is the same as net income ...

  • Different Shades of Banking Profits

    http://stocks.investopedia.com/stock-analysis/2009/Different-Shades-of-Banking-Profits-GS-WFC0416.aspx
    ... Specific mention of record profits in interest rate products and commodities was
    mentioned in Goldman's earnings release. Net revenues in FICC more than ...

  • What's the difference between bottom-line and top-line growth?

    http://www.investopedia.com/ask/answers/149.asp
    ... These expenses include interest charges paid on loans, general and administrative
    costs and ... bottom line can also be referred to as net earnings or net profits. ...

  • Shaw Group Continues To Rebuild

    http://stocks.investopedia.com/stock-analysis/2010/Shaw-Group-Continues-To-Rebuild-SHAW-FLR-KBR-GVA-URS0719.aspx
    ... Clearly the 20% equity stake represents an ownership interest for Shaw. Including
    the Westinghouse Group, Shaw earned $68.4 million in net profits in the ...

  • Goldman Sachs Returns To A Banking Basic

    http://stocks.investopedia.com/stock-analysis/2008/Goldman_Sachs_Returns_To_A_Banking_Basic_GS_JPM_MS.aspx
    ... revenue for the first six month, but its net interest income decreased ... ability to
    generate higher year-over-year profits from interest income related ...

  • A Look At Corporate Profit Margins

    http://www.investopedia.com/articles/fundamental/04/042804.asp
    ... 2. Operating Profit Margin By comparing earnings before interest and taxes (EBIT)
    to sales, operating profit ... Net Profit Margins = Net Profits after Taxes/Sales. ...

Related Articles

Bank Rates
Product Today Last Wk
$10K MMA 0.50% 0.51%
MMA 0.45% 0.46%
6 Month CD 0.46% 0.47%
1 Year CD 0.70% 0.75%
5 Year CD 1.46% 1.46%
1 Year Jumbo CD 0.66% 0.67%
Rate data provided by Bankrate
Product Today Last Wk
$30K HELOC 4.59% 4.60%
$30K Home Equity Loan 5.74% 5.77%
$50K Home Equity Loan 5.45% 5.50%
$50K HELOC 4.24% 4.24%
$100K Home Equity Loan 5.41% 5.46%
$100K HELOC 4.13% 4.13%
Rate data provided by Bankrate
Product Today Last Wk
30 Year Fixed 3.80% 3.80%
15 Year Fixed 3.09% 3.11%
1 Year ARM 3.54% 3.53%
30 Year Fixed Jumbo 4.38% 4.38%
5/1 ARM 2.65% 2.69%
3/1 ARM 2.69% 2.69%
Rate data provided by Bankrate
Product Today Last Wk
60 Month Used Car Loan 4.51% 4.51%
48 Month Used Car Loan 4.35% 4.35%
48 Month New Car Loan 3.24% 3.24%
36 Month Used Car Loan 4.34% 4.36%
36 Month New Car Loan 3.11% 3.13%
60 Month New Car Loan 3.35% 3.34%
Rate data provided by Bankrate
Partner Links