Category

Mineral and Royalty Rights

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February 22, 2021 Eagle Ford Shale Special Topics

Held by Production

Oftentimes differences are a matter of perspective. Put another way – one person’s loss can be another person’s gain.  One of the thematic differences between producers and mineral owners is their perspective on “Held By Production.”  It elicits very different reactions depending on what side of the term one is on, and has a leverageable impact on value.   With rig counts dropping to around half of last year’s count, how much acreage will be available for re-leasing this year?  In this post, we decided to spend some time exploring this concept and its impact on the energy industry.

February 5, 2021 Valuation Issues

Mineral And Royalty Valuations Remain Low Amid Recent Oil Price Gains

The recent rise of oil prices is a welcome sign to mineral and royalty holders across the board. Low valuations may not last for much longer though. In the meantime, let us expound a bit on the forces keeping mineral and royalty valuations in their existing state.

May 28, 2020 Valuation Issues

Royalties And Minerals: A New Market Is Emerging

The fact that valuations in the mineral and royalty space have decreased is not news at this point, but what is interesting is that this environment has changed a lot of things along the way.

February 6, 2020

Aggregators Continue to Attract Equity Capital

In this post, we focus on mineral aggregators. We also offer insights on the investment landscape at large and particularly as it relates to the minerals subspace by providing an update on the most recent IPO, Brigham Minerals (MNRL).

November 25, 2019

Royalty MLP Is Delivering Yield Against Backdrop Of Energy Sector Struggles

While equity prices have dropped by approximately 30% for producers, six publicly-traded royalty aggregators relatively outperformed the SPDR Index. These Royalty MLP’s have tracked closer to crude oil prices, anchored by sizeable dividend payments, thus buoying sliding equity prices. If dividend yields are added back, some of them have been outperforming crude prices.

November 6, 2019

Public Royalty Trusts: More Than Meets the Eye

Yield Traps, Depressed Commodity Prices, and Stage of Decline May Decrease Utility of Public Yields

In previous posts, we have discussed the relationship between public royalty interests and their market pricing implications to royalty owners.  We have differentiated between mineral aggregators and public royalty trusts and introduced some other considerations for how to pick the appropriate comparable. In this post, we will discuss the prevailing high dividend yields of public royalty trusts. We will also offer some reasons for why these trusts may be declining not just in production but also their comparability, from a valuation perspective, to some privately held mineral interests.

August 9, 2019

Public Royalty Interests: Picking the Right Comparable

In previous posts, we have discussed the relationship between public royalty interests and their market pricing implications to royalty owners.  Here, we will define our group of royalty interests which can be used to gain valuation insights.  Specifically, we will look at mineral aggregators, natural gas focused trusts, and crude oil focused trusts and the statutory differences between them. We also consider how dividend yields and other public data can be used to imply value for private mineral interests while being judicious in our application of such metrics.

May 17, 2019

Royalty and Mineral Value Proposition Highlights Otherwise Underperforming Energy Sector

The burgeoning mineral market is leading the way for an energy sector that has lagged in returns for several years now. For this week’s post, we highlight the ascension of the estimated $400 to $600 billion onshore mineral market in the U.S, a topic discussed last month at the DUG Permian Basin Conference in Fort Worth.

April 8, 2019

Considerations for Endowments Divesting Fossil Fuels

The purpose of an endowment is to provide a permanent source of funding that maintains the operations of colleges, universities, churches, etc.  To best serve its fiduciaries, an endowment should achieve the highest return possible.  Congruently, when divesting, the endowment must ensure it achieved a fair price for its investments. This post does not weigh in on the discussion of whether endowments should or should not liquidate fossil fuels.  Rather, we hope to educate and advise those who have decided to divest their fossil fuel assets and are unsure of how to proceed.

April 3, 2019

From Enduro to Permianville

A Closer Look at Permianville Royalty Trust

In previous posts, we have discussed the relationship between public royalty trusts and their market pricing implications to royalty owners. Many publicly traded trusts are restricted from acquiring other interests, so they have relatively fixed resources, and the value of these trusts comes from generally declining distributions. In many cases, the royalty comes from a related operator, though this is neither required nor characteristic of all trusts. There are also other MLPs such as Kimbell Royalty Partners, Viper Energy Partners, Dorchester Minerals, and Black Stone Minerals that are aggregators consistently gobbling up new acreage. In this post, we explore the subject characteristics of Permianville Royalty Trust, formerly known as Enduro Royalty Trust.

January 28, 2019 Special Topics

Risk and Return

Working Interests and Royalty Interests

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.

January 22, 2019

Mineral Interest Owners: How to Know What You Own

As we’ve discussed, there are plenty of factors to consider when determining the value of mineral interests. While some mineral owners may be very well attuned to decline curves and local pricing dynamics, others may only casually monitor the price of oil and gas to get a general sense of the trend in the industry.  This post is geared towards those mineral interest owners who have less knowledge on the subject and should serve as a guide for those looking to learn more about what they own.

December 10, 2018

Before Selling Your Oil and Gas Royalty Interest, Read This

There are many reasons that you may want to sell your oil and gas royalty interest, but a lack of knowledge regarding the worth of your royalty interest could be very costly. Whether an inflow of cash would help you make ends meet or finance a large purchase; you no longer want to deal with the administrative paperwork or accounting cost of reconciling monthly revenue payments; or you would prefer to diversify your portfolio or move your investments to a less volatile industry, understanding how royalty interests are valued will ensure that you maximize the value.

November 2, 2018

Royalty MLPs Are Devouring Mineral Assets To Fund Growing Investor Appetites

The emerging field of royalty-focused MLPs and mineral aggregation has the potential to provide growth through acquisitions, as well as distribution payments that public investors desire. Kimbell’s acquisition of Haymaker is a good example of this.

October 3, 2018

How to Value an Oil and Gas Mineral Royalty Interest

This blog post summarizes our whitepaper that provides an informative overview regarding the valuation of mineral royalty interests within the oil and gas industry.  While there are a myriad of factors (mostly out of a royalty holder’s control) impacting the economics of a royalty interest, this blog post focuses on valuation methodology.

August 14, 2018

Public Royalty Trusts (Part II)

Can Revenue Interests Still Benefit from Capital Appreciation?

In a recent post, we explored the ins and outs of MV Oil Trust.  We analyzed the underlying net profit interests it holds, the underlying properties of the trust, and the rights of unitholders including their rights during termination of the trust.  This week, we will look into how these play into the composition of the MV Oil Trust’s stock price, and the balance struck between investor’s current return in the form of dividends and potential for returns from capital appreciation.

July 30, 2018

Public Royalty Trusts (Part I)

Can Revenue Interests Benefit from Capital Appreciation?

In previous posts, we have discussed the relationship between public royalty trusts and their market pricing implications to royalty owners.  Many publicly traded trusts have a fixed number of wells, so the value comes from declining distributions.  Some of the trusts have wells that have not been drilled, which represent upside potential for investors. In this post, we will explore the subject characteristics of MV Oil Trust.  This will serve as a primer for a subsequent post in which we will look further into the composition of its stock price in order to better understand investors’ ability to achieve returns through distributions and capital appreciation.

July 18, 2018 Mergers, Acquisitions, & Divestitures

Details and Analysis of Kimbell Royalty Partners’ Acquisition of Haymaker Minerals & Royalties, LLC

In this week’s post, we provide a detailed analysis of the Kimbell Royalty Partners’ acquisition of Haymaker Minerals & Royalties, LLC. We assess some of the benefits of public mineral and royalty companies as compared to their private counterparts.

May 14, 2018

Royalty Interests and the Importance of the Operator

In previous posts, we have discussed the market pricing implications of publicly traded royalty trusts to royalty and mineral owners. We have explained the importance of understanding the specifics underlying those trusts before using them as a pricing benchmark. In this post, we will delve further into market prices of royalty and mineral interests and the important role of operators. We will look into the three publicly traded royalty trusts operated by SandRidge Energy: SandRidge Mississippian Trust I, SandRidge Mississippian Trust II, and SandRidge Permian Trust.

May 7, 2018

Considerations for Endowments Divesting Fossil Fuels

The purpose of an endowment is to provide a permanent source of funding that maintains the operations of colleges, universities, churches, etc.  To best serve its fiduciaries, an endowment should achieve the highest return possible.  Congruently, when divesting, the endowment must ensure it achieved a fair price for its investments. This post does not weigh in on the discussion of whether endowments should or should not liquidate fossil fuels.  Rather, I hope to educate and advise those who have decided to divest their fossil fuel assets and are unsure of how to proceed.

April 30, 2018

Royalty Trusts: I’m a Revenue Partner… No, Wait… That Looks Like Equity

In previous posts, we have discussed the existence of publicly traded royalty trusts & partnerships and their market pricing implications to royalty owners. Before using publicly traded royalty trusts as a pricing reference for your royalty interest, it is important to understand the economic rights and restrictions within those royalty trusts. In this post, we discuss the current market, the outperformance of the Whiting USA Trust II (WHZT), and importance of understanding the details about your royalty interest.

April 2, 2018

Before Selling Your Oil and Gas Royalty Interest Read This

There are many reasons that you may want to sell your oil and gas royalty interest, but a lack of knowledge regarding the worth of your royalty interest could be very costly. Whether an inflow of cash would help you make ends meet or finance a large purchase; you no longer want to deal with the administrative paperwork or accounting cost of reconciling monthly revenue payments; or you would prefer to diversify your portfolio or move your investments to a less volatile industry, understanding how royalty interests are valued will ensure that you maximize the value.

November 27, 2017

How to Value an Oil & Gas Mineral Royalty Interest

This blog post summarizes our whitepaper that provides an informative overview regarding the valuation of mineral royalty interests within the oil and gas industry.  While there are a myriad of factors (mostly out of a royalty holder’s control) impacting the economics of a royalty interest, this blog post focuses on valuation methodology.

November 21, 2017 Special Topics

Underpayments, Overpayments, Lost Opportunities and Bankruptcies: Trends and Happenings in Energy Litigation

Royalty underpayment cases are anticipated to remain steady in the current pricing environment.  There is an understandable tension between mineral owners’ concern over shrinking payments and operators’ concern over profitability and favorable drilling economics.