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What is a non participating royalty interest?

My broker advised that I look into this option.

asked by Gracelette (16)

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Tags:  investing

answers

You own a a share of production, that is paid to an owner but does not have the right to explore / develop a lease, or even get bonus / rental payments. It is free of the production cost and is reduced from the royalty interest. Hope this is easy!

8 votes

I've seen it being used in the Energy Industry - mainly Oil and Gas. It basically means that the royalty owner who is non-participatory gets nothing from the profits of the production from the unit.

  • I must add that if the royalty owner elects to ratify the lease then he or she can get something out of it. A little weird and technical - almost sounds shady!
    posted by notanexpert (199)
6 votes

A non participating royalty interest is commonly found in oilfield leases or mineral interests. This interest will entitle you to receive your share of the gross proceeds of production if a oil/gas well is drilled on lands containing your mineral interest. You are not, however, entitled to any bonus monies paid for leasing with executive rights.

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posted by swtsu1 (57)
4 votes

You invest money into a corporation that explores and mines natural resources (mostly oil/gas). You participate in profits from production, but do not participate in business costs or bonuses.

3 votes

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