What is a Royalty?

It is important to understand the different rights owners of real property have and how they relate to energy assets.

Surface Rights

Surface land owners possess Surface Rights which are conveyed in title and allow surface structures and farming.

Mineral Rights

Mineral Right owners own the sub-terrain “mineral” rights. Underground Mineral Rights (also known as Mineral Interest) are separate from Surface Rights and allow their owner to authorize drilling. When a drilling company strikes a source of energy and places a well on the source, the Mineral Right becomes a Royalty Interest. The portion owned by the drilling company is called a Working Interest.

Working Interest

Driller operators of the wells typically negotiate a long-term lease with the Mineral Interest owners. The portion owned by the drilling company, or operator, is called a Working Interest (generally 75 - 80% of production). These are often large operators like Conoco Phillips, Chesapeake, and Noble Energy, or small wildcat drillers of various sizes.