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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (186288)	11/5/2014 7:32:58 PM
From: isopatch	7 Recommendations Recommended By Ben Smith Bernie Diamond Biotech Jim JimisJim old tx oiler and 2 more members Respond to of 206104

Thanks Ed. Just two quick points. 1. A Royalty interest is very different from a mineral interest. A royalty interest derives it's value from the current & anticipated income stream generated by currently producing wells. In some cases, the royalty is even further limited to wells producing from a single pay zone. A mineral interest is an undivided share in the entire subsurface geology underlying a parcel of acreage. So you not only receive royalty income from all current producing wells, but also from any wells which are drilled, into hitherto undeveloped deeper or shallower pay zones, in the future. That's why mineral acreage is much more valuable than royalties. Frankly? I don't bother with royalties, or royalty trusts, anymore. 2. Undrilled mineral interests aren't less expensive, despite no throwing off any income, to date. In fact, they're often much more expensive to buy. The reason for this is another major economic benefit of mineral ownership compared to owning royalty interests. Only the mineral acreage owners can lease undrilled property to an oil and gas E&P for exploitation. In exchange for agreeing to lease the mineral owners receive an up front lump payment known in the industry as "the bonus". Some of these bonus payments are enormous. When your read news releases about E&Ps paying $3,000, $7,000, or more, per acre? It's the mineral owners or the current lease holding company who receive that windfall. Royalty owners do not. The one unleased mineral interest I mentioned, (prior post), is a very good one with proven reserves, in multiple pay zones, confirmed by wells completed on nearby offsetting acreage on all sides. In no hurry to get this baby drilled. It's simple. As completion and stimulation technology continues to advance, this acreage will produce considerably more in the future than was possible even 3 or 4 yrs. ago. Tic toc...) Iso