When valuing mineral interests, it is important to consider the nuances of the each type of mineral interest. Given that risk and asset values are indirectly related, it is important to keep in mind the various risk factors which pertain to the mineral interest. We’ll begin by examining the various risks surrounding both types of interests.
Overriding royalty interests are often used as an incentive for those who are affiliated with the drilling process but do not own the minerals or E&P company (a broker or geologist for, example). Owners of ORRI, like royalty interest owners, bear no cost of production but own a portion of the revenues generated by the drilling process.
In previous posts we have discussed the existence of royalty trusts & partnerships and their market pricing implications to royalty owners. Many of those trusts have a set number of wells generating royalty income at declining rates for multiple years to come. Viper Energy Partners LP (VNOM) is not a trust, but a partnership, solely focused on the Permian Basin with royalty interests in producing wells as well as proven undeveloped (PUD), probable and possible wells. In this post, we consider VNOM, the current market, and implications for royalty owners.
When comparing a royalty interest to an ORRI, it is critical to understand the subtle nuances of the rights and restrictions between the two. Owners of royalty interests utilizing Permian Basin Royalty Trust as a valuation gauge should adjust for such differences as well as other differences between publicly traded and non-marketable securities.
Many operators and oil and gas service companies didn’t survive the last 20 months, and most of the news headlines focused on their story. For royalty owners, who might depend upon royalty checks for steady income, it was equally scary as their payments shrunk due to low oil prices which were magnified by lower production rates. However, the last 12 months have provided some relief. In post, we reflect on the effects of the market and valuation implications for royalty owners.
Royalty trusts, like the rest of the oil and gas industry, have been hit hard. In this post, we examine their performance over the last couple of years and consider the impact of bankruptcy.
When the price of oil started its descent during 2014, the majority of media attention was, and still is, focused on exploration, production, and oil field services companies. While bankruptcy courts are busy deciphering reorganization plans and perhaps liquidations of companies, one group of oil and gas participants are getting little attention: royalty owners. While the last two years have been a rough ride, opportunities do exists for forward thinking royalty owners and investors.
- Asset Sales
- Bakken Shale
- Domestic Production
- Downstream Analysis
- Eagle Ford Shale
- Marcellus and Utica Shale
- Mergers and Acquisitions
- Permian Basin
- Royalty Trusts
- Special Topics
- Valuation Issues