Royalty Interest

AAA

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. Gross Interest

    The annual rate of interest to be paid on an investment, security ...
  2. Legal Rate Of Interest

    The highest rate of interest that can be legally charged on any ...
  3. Hubbert Peak Theory

    Similar to the predictions of the Hubbert Curve, the Hubbert ...
  4. Working Interests

    Refers to a form of investment in oil and gas drilling operations ...
  5. Sweet Crude

    A type of oil that meets certain content requirements, including ...
  6. Barrels Of Oil Equivalent Per Day ...

    A term that is used often in conjunction with the production ...
Related Articles
  1. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

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

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Active Trading

    Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.
  4. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  5. Mutual Funds & ETFs

    ETF Analysis: United States Gasoline Fund

    Learn about the United States Gasoline Fund, the characteristics of the exchange-traded fund, and the suitability and recommendations of it.
  6. Mutual Funds & ETFs

    ETF Analysis: United States 12 Month Oil

    Find out more information about the United States 12 Month Oil ETF, and explore detailed analysis of the characteristics, suitability and recommendations of it.
  7. Economics

    Who Wins With Low Energy Prices? 

    Low oil prices are here to stay for some time. Which economies will benefit or lose from the low oil price regime?
  8. Options & Futures

    Analyzing The 5 Most Liquid Commodity Futures

    Crude oil leads the pack as the most liquid commodity futures market, followed by corn and natural gas.
  9. Mutual Funds & ETFs

    ETF Analysis: Ultra Oil & Gas

    Find out more about the ProShares Ultra Oil & Gas exchange-traded fund, the characteristics of the ETF and the suitability and recommendations for the fund.
  10. Investing News

    How The Devaluation of the Yuan Hurts the Russian Economy

    With oil and gas comprising the majority of Russia’s exports and China serving as its largest trading partner, a devalued yuan signals the weakening Chinese economy will demand less energy while ...
RELATED FAQS
  1. What are some of the most popular mutual funds for investing in the metals and mining ...

    Mutual funds are one of the many investment options available for growth investors looking for a portfolio that includes ... Read Full Answer >>
  2. How much oil must be produced to maintain inventory levels in the United States?

    Domestic energy investors should track the reserve inventory of crude oil for the United States, which is released in a weekly ... Read Full Answer >>
  3. To what extent is the oil and gas sector dominated by a few major companies?

    Oil and gas are two expansive and highly diverse product lines, with active competition domestically and internationally. ... Read Full Answer >>
  4. What factors are the primary drivers of share prices in the oil and gas sector?

    The primary drivers of share prices in the oil and gas sector are energy prices and economic growth. Stock prices in the ... Read Full Answer >>
  5. What impact does the growth in horizontal drilling have in the oil and gas sector?

    It is tough to separate the growth in horizontal drilling from the growth in hydraulic fracturing, or fracking; the two techniques ... Read Full Answer >>
  6. What are the main substitutes for oil and gas energy?

    The main substitutes for oil and gas energy include nuclear power, solar power, ethanol and wind power. Fossil fuels dwarf ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Depreciation

    1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both ...
  2. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  3. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  4. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  5. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  6. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!