A brief introduction to oil and gas mineral interests.
A brief introduction to oil and gas mineral interests.
Mineral interests (“mineral rights” or “minerals”) are a unique class of real property that represent the legal right to explore for, produce, and generate income from subsurface resources such as oil, gas, and other minerals. Mineral interest owners lease their rights to oil and gas companies (“operators”) in exchange for royalty payments calculated as a percentage of the gross value of the resources produced on their property. Importantly, mineral owners bear no capital costs or operating expenses associated with drilling and production on their acreage, nor are they responsible for any environmental liabilities or asset retirement obligations. The mineral interests we target are severed from surface ownership, meaning they constitute an entirely distinct and transferable class of real property - one that can be bought, sold, inherited, or fractionally divided independently from the surface real estate on a given parcel.
At Next Peak Energy, we define mineral interests as subsurface real estate. Similar to acquiring existing farmland leased to a farmer, or acquiring an existing warehouse leased to a blue-chip tenant, we acquire perpetual mineral rights leased to high-quality operators and collect predictable, cost-free “rent” payments in the form of oil and gas royalties. We then package the assets we acquire into diversified portfolios and sell fractional stakes in them to qualified investors.
Defining mineral interests and how we view them:
Key benefits of investing in mineral interests:
Perpetual, deeded rights to a fixed percentage of gross production value generated on a given parcel
Eligible as a “like-kind” investment property for capital gain tax deferral via 1031 Exchange
15% annual depletion allowance creates a transferrable tax shield on current investor income
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High-margin, passive cash flow perfectly correlated with production volume and commodity pricing
Zero exposure to upfront asset development capital expenditures, like drilling and completing wells
Zero exposure to oilfield services costs, operating expenses, environmental liabilities, or asset retirement obligations
Mineral interests represent the highest margin and most sustainable form of upstream energy investing.
Mineral Interest Owner Net Cash Margin per Barrel Produced
Operator (“Working Interest”) Net Cash Margin per Barrel Produced
Defining mineral interests and how we view them:
Mineral interests (“mineral rights” or “minerals”) are a unique class of real property that represent the legal right to explore for, produce, and generate income from subsurface resources such as oil, gas, and other minerals. Mineral interest owners lease their rights to oil and gas companies (“operators”) in exchange for royalty payments calculated as a percentage of the gross value of the resources produced on their property. Importantly, mineral owners bear no capital costs or operating expenses associated with drilling and production on their acreage, nor are they responsible for any environmental liabilities or asset retirement obligations. The mineral interests we target are severed from surface ownership, meaning they constitute an entirely distinct and transferable class of real property - one that can be bought, sold, inherited, or fractionally divided independently from the surface real estate on a given parcel.
At Next Peak Energy, we define mineral interests as subsurface real estate. Similar to acquiring existing farmland leased to a farmer, or acquiring an existing warehouse leased to a blue-chip tenant, we acquire perpetual mineral rights leased to high-quality operators and collect predictable, cost-free “rent” payments in the form of oil and gas royalties. We then package the assets we acquire into diversified portfolios and sell fractional stakes in them to qualified investors.
Key benefits of investing in mineral interests:
Perpetual, deeded rights to a fixed percentage of gross production value generated on a given parcel
Eligible as a “like-kind” investment property for capital gain tax deferral via 1031 Exchange
15% annual depletion allowance creates a transferrable tax shield on current investor income
High-margin, passive cash flow perfectly correlated with production volume and commodity pricing
Zero exposure to upfront asset development capital expenditures, like drilling and completing wells
Zero exposure to oilfield services costs, operating expenses, environmental liabilities, or asset retirement obligations
Mineral interests represent the highest margin and most sustainable form of upstream energy investing.
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Mineral Interest Margin per Barrel
Working Interest Margin per Barrel