Disproportionate Sharing Meaning & Definition

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Definition of Disproportionate Sharing

Disproportionate Sharing is an oil and gas sharing arrangement where the general partner pays a portion of the cost but receives a larger portion of the program’s revenues.

Applying "Disproportionate Sharing" to Securities Exams:

A general partner in a limited partnership has all the management responsibility, and therefore more liability than limited partners. The investors are the limited partners, and their role is that of "silent partner" in that they have no management responsibility. When an oil and gas limited partnership is formed it will define what the "sharing arrangement" is between the general and limited partners. In a disproportionate sharing arrangement or disproportionate working interest, the general partner makes a smaller investment but receives a larger share of the program’s revenue. Other types of sharing arrangements include functional allocation and reversionary working interest.