DEFINITION of 'Royalty Interest'

In the oil and gas industry this refers to ownership of a portion of the resource or revenue that is produced. A company or person that owns a royalty interest does not bear any of the costs of the operations needed to produce the resource, yet the person or company still owns a portion of resource of revenue produced.

BREAKING DOWN 'Royalty Interest'

In contrast to a royalty interest, a working interest refers to an investment in an oil and gas operation where the investor does bear some of the costs for exploration, drilling and production. An investor that has a royalty interest only bears the cost of the initial investment and isn't liable for ongoing operating costs.

RELATED TERMS
  1. Royalty

    A payment to an owner for the use of property, especially patents, ...
  2. Royalty Units

    An ownership unit in a royalty trust. A royalty unit gives the ...
  3. Working Interests

    Refers to a form of investment in oil and gas drilling operations ...
  4. Royalty Income Trust

    A type of special-purpose financing created to hold investments ...
  5. Operating Netback

    A measure of oil and gas sales net of royalties, production and ...
  6. Severance Tax

    A tax imposed on the removal of nonrenewable resources such as ...
Related Articles
  1. Investing

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  2. Investing

    5 Reasons Why Private Equity Investors Like Oil and Gas Companies

    Oil and gas companies may look like a risky industry on the outside, but private equity investors have found reasons to regularly invest in these firms.
  3. Retirement

    How Oil and Gas Can Fuel Your Retirement Account

    Investors who choose oil and gas assets inside a tax-deferred retirement account can reap substantial rewards. Here's how to invest.
  4. Investing

    Natural Resource Investing

    ETFs and futures are just some of the various investment options available to natural resource investors.
  5. Investing

    Mine For Profits With Natural Resource Sector Funds

    These funds allow everyday investors to get in on the action in this promising sector.
  6. Investing

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  7. Investing

    How Do You Earn a Royalty?

    In business, a royalty is payment for the right to use another person’s property, usually intellectual property such as a copyright, patent or franchise.
  8. Investing

    Tech Startups Eye the Oil Industry

    Although the oil and gas industries have plummeted, high tech companies and investors see promise.
  9. Investing

    Natural Resources ETF: IGE or GNR?

    Explore a comparison between IGE and GNR, and learn about the differences between the two ETFs, and their top holdings and sector allocations.
  10. Investing

    5 Biggest Risks Faced By Oil And Gas Companies

    Before investing in gas and oil stocks, consider such factors as political and geological risks.
RELATED FAQS
  1. What is the difference between a royalty trust and a master limited partnership?

    Find high-yield opportunities in natural resources through royalty income trusts or master limited partnerships, and learn ... Read Answer >>
  2. What are average operating expenses for the oil and gas sector?

    Learn about the average operating expenses and average operating expenses margin for the oil and gas sector and how they ... Read Answer >>
  3. What percentage of the global economy is comprised of the oil & gas drilling sector?

    Read about a rising industry that already composes as much as one-twentieth of total global economic output: the oil & gas ... Read Answer >>
  4. What are risks associated with investing in the oil & gas drilling sector?

    Learn what unique risks are present for investment in the energy industry specifically affecting companies working in oil ... Read Answer >>
  5. What are the main reasons an investor should consider an allocation to the oil and ...

    Learn three of the main reasons for investors to consider making some asset allocation to investments in the popular oil ... Read Answer >>
  6. What are the main benchmarks that track the oil & gas drilling sector?

    Read about several different types of benchmarks that investors can use to track the overall performance of the oil and gas ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center