Net-Profits Interest Law and Legal Definition
In the context of Oil and Gas law, net-profits interest refer to a share of net proceeds from production free of the costs of production. Net-profits interest is paid solely from the share of the working interest owner. Sometimes, it is granted instead of a royalty interest. Same as in a royalty, the interest is expressed as a fraction or a percentage of production. But, net-profits interest is payable only if there is a net profit, and the costs used to calculate the net profit depend on what is negotiated.