May 28, 2018 | Author: C. Bradley Chapman | Category: N/A
Great short article depicting the value of commodities - namely royalties - as an inflationary hedge....
s up up p e m en en t
INTRODUCTION
Oi1and~s
nvestor 1 61 61 6 S . V o ss ss , S u
vest vestor orto toda da av umer umerou ou choi choice ce en it co es to inve invest stin in in oi an as ro tion tion or in th ri of th om odit oditie ie th lv ey ca bu equi equiti ties es utua utua fund funds, s, ener energy gy-o -ori rien ente te exch exchan ange ge trad traded ed fu ds (ETF (ETFs) s) aste aste limite limite part partne ners rshi hips ps (M Ps an publ public ic debt debt inst instru ru ents ents
1 00 00 0
H o u s t o n , T e x a 7 7 05 05 7 -2 -2 6 2 7 13 13 -2 -2 60 60 -6 -6 40 40 0 F a x 7 13 13 -8 -8 40 40 -8 -8 58 58 5 www.oilandgasinvestor.com
But, do roya royalti lties es have have alwa always ys ad good good sens sens as part part of port portfo folio lio diver diversi sific ficat ation ion od th to ke or ense ense than than ever ever fo e.
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Editor-In-Chief L E SL SL I
H A IN IN E S
713-260·6428,
[email protected]
Managi Managing ng Edito Edito
ta
U SA SA N K LA LA N
303-377-8378,
[email protected]
Conl Conlri ribu buti ting ng GAR
Edit Editor or
posi positi tive ve
C LO L O US US E
Corp Corpor orat at
DeSign DeSigner er
F EL EL IC IC I
J O NE NE S
Pro.du Pro.du~io ~io
ro alti alties es ca
Direct Director or
he
el
t'
ltie ltie th
ttra ttract ctiv iv ff
if (w
00 lo
arly arly 40
et la
of it
al
ts in offe offere re
ield ield
im
ts been been
fede federa ra
in esto estors rs an
th fi in in tm ig ific ifican antl tl ig er in om trea trea
th
th
ld
il
very very good good edge edge agai agains ns infl inflat atio ion. n.
taxa taxati tion on on or to ta
c o n ta ta c t c u s to to m e r s e r vi vi c a t 7 1 33- 2 60 60 - 64 64 4 2
[email protected]
actu actual ally ly is Publisher
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Regi Region onal al Sale Sale
fa to th
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tr de plan plan fo tr
in
ould ould se th ir ro alty alty inco inco
L AM AM B
713-260-6430,
tr
oo fo ro alty alty
chec checks ks ri
rg th
ompa ompa ie ll
rs
th pric pric fo ener ener
pr vi dire direct ct lo -ris -ris taxtax- dvan dvanta ta to iece iece prod produc ucti tion on itho ithout ut incu incurr rrin in th cost cost an risk risk of dril drilli li g.
If
ey ri es oi an
Mana Manage ge
C HA HA S
713-260-6466,
[email protected]
ar Ener Energy gy Publi Publish shin ing, g, Ic
or
[email protected]
ov rn
C HA HA RL RL I
om
an inve invest stor or seek seekin in
have have trad tradit itio iona nall ll
F o r a d di di titi o n a c o p ie ie s o f t h i p u b l ic ic a titi o n ,
S HE HE LL LL E
ar
ield ield
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P OO OO L
713-260'6404,
in in 2008 2008
in -r isto istori ri ll lo
Ar Dire Direct ctor or
A L E X A SANDERS
Graphi Graphi
rate rate oy lt in om il rate rate go high higher er es th tock tock rket rket care care
re id
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rt
ltin ltin
G C
LP ro
E. KRIS KRISTI TINE NE KL VERS ic KEVI KEVI Exec Execut utiv iv
TA
F. HIGG HIGGIN vice vice
CC S F
resi reside dent nt
NTIN NTIN
FREDERICK L. POTTER re id
nd RICH RICHAR
C o p yr yr ig ig h
2 01 01 0
ie
cuti cuti
ffic fficer er
A. EI HLER
O ilil a n d G a s I nv nv es es to to r
H ar ar t E n e rg rg y P u bl bl is h n g L P , H o us us to to n , T e xa xa s
or
solic solicita itatio tio
pr
to
nc
as
an
Memomndum.
All
no
section. be ll an
circte tems mstz tzmc mc Under no circ 01'
an ul
nv
nt
is the infOTmation contained to buy 01' sell 01'
"Ris "Ris Fzrc Fzrcro ror. r. with within in this this docu docume ment nt to to buy or
HE VES CLIMATE \\
In
raditionally,oil and naturalgasinvestors natural gasinvestorshave have worried abou abou coup coupleof leof thing things.Firs s.First,w t,willth illth wellin wellin which which am part partic icip ipat atin in succ succes essf sf l? priceof an gasn gasnow ow an in th futu future re
en
at is th
in
ir
ty
lt
i-
nn offs offs
re
lifo lifo ia to
rill rillin in im
fo th le pl
do
.S
ff
th ivit ivit
fo th
is
tu th
fo th futu future re it
in
tr
to il
clim climat at to -m
la
tt
iv io
oing oing forw forwar ard? d? fo in
ea ingf ingful ul affe affect ct eyon eyon thes thes ener ener ri in er on in
to th in
tr
represent
-spe -speci cifi fi
teri teri ll ff ctin ctin th tr to rais rais ne capi capita tal. l.
ltie ltie
il
less-risky involved.
in oi
ro
ener energy gy indu indust stry ry roya royalti lties es repr repres esen en
re
th
oi
indu indu
in
th
ltie ltie fi in this this
prop propos osal als, s, th thre threat at of it in ta rate rate ri
ilit ilit
ro de
itie itie
rk
hist histor oric ic high highs. s. In th
ow
ppro pproxi xi
il
tely tely ic
in in
li
less less-r -ris iskyw kyway ay to be
invo involv lved ed Fo ro alty alty owne owners rs wh ay be over over-w -wei eigh ghte te in th ir oi ldin ldin re rn futu futu ta trea treatm tmen ent, t, or av ee fo cash cash ro alti alties es repr repres esen en an asse asse that that ca
indu indu tr
asprofe asprofess ssio iona nals ls alik alike. e.
litt little le
inve inve tm
iu
ly
vola volati tile le inve invest st en
rg
is
li fo
io
an seas season oned ed oi an
am
ro re lden lden "n id fail failur ures es to prot protec ec th envi enviro ro ent. ent.
th ther theref efor or
re id
liqu liquid idat ated ed at attr attrac acti tive ve
ulti ultipl ples es
ic fe
natu natura ra
(M f) on
as adju adjust st to th
co
ne
iste iste
is
xp rt ar
para paradi di
It In tate tate
liti liti
li
te
it
th oi
is
ll
er
in
indu indu tr
fe
frie frie
avai availa la le in th
ig ti
th
ld
in th ir
orld orld of ro alty alty inve invest stin in .•
ortort-
AROYAL OPPORTUNITY i] ', dive diveis isit it
roya royalt ltie ie port portfo foli lio. o.
fe in ivid ivid
in
st rs
ig -yie -yield ld
lowlow-ri ri
in estm estm
rt
itie itie
"Thr "Throu ough gh ou rese resear arch ch we've we've conc conclu lude de that that inve invest stin in in roya royalti lties es is so ethi ething ng that that near nearly ly al diver diversi sifie fiedport dportfo fo crea creasi sing ngly ly
stee steeri ring ng l-
lt
in
lio shou should ld inclu include de Yiel Yields ds typi typica cally lly far outpa outpace ce infla inflatio tio ecau ecau oi an tura tura aspric aspric ri e, o, too, too, il th retu return rn 'the 'the inve invest stor or rece receiv ive, e, beca becaus us ou ar an owne owne of oil an gas, gas,"he "he says says.Ro .Ro altyown altyowner er do no drill drill or oper operat at ll li liti liti associatedwith associatedwith drillin or operating operating Swearin Swearingen genexpla explains. ins.
ts
iv
ot
From From left left to righ right, t, illi illiam am eari earing ng n, la cCla cClain in an Davi Davi Swea Sweari ring ngen en of Unit United ed apit apital al of Texas
to
inve inve tmen tments ts or
offe this?" this?" arin arin
ines ines
thin thinks ks
in
rr
em
ts ca
os inve inve tors tors do 't ow
prod produc uctio tio
oper operat ation ions. s. "Trivestirig in ro alti alties es
is
lo
fo ju
larg larges es inst institu itutio tiona na anag anagin in dire dire tor, tor,
th
's
-w
th
th
inve invest stor ors, s, say; say; Davi Davi Swea Sweari ring ngen en ited ited pita pita of ex divi divi io
advi advise sers rs is educ educat atin in ti th
acre acreag age. e.
it
illio illio in asse assets ts typica typicallyrec llyrecom omme mend nd clien clien alloca allocate, te, on averag average, e, 10 to 20% to royalty royalty-ba -based sedinv inves estm tmen ents. ts.
ti
to ld
ide. ide.
strate strategy gy." ."
it apit apit xas, xas, fi ia advisory practice offi office ce in alla alla an oust ouston on anag anages es abou abou $350 $350
port portfo foli li
si pl ro al
ltie ltie it in an busi busi es oppo opport rtun unit itie ie
here here ar no
ot th expe expe asset asset-all -alloca ocatio tio
inve invest stor or abou abou ho
il ep -d th
on th outc outcom om of in ia la
is ly in allo allo ated ated to ro ltie lties, s,
if ot er part part of th in ivid ivid l' fo th ir tu ti ir fi 's to in estm estm an rg ex erti erti inve invest stor or with with attr attrac activ tiv
ited ited
apit apital al
No -trad -traditio itio al
inco income me inve invest stme me
incom investm investments ents "W pref prefer er to call call them them 'vari 'variab able le inco income me inve invest stme ment nts, s, si th in om en rate rate ac onth onth il vary vary ed on chan changi ging ng co modit modit pric prices es an prod produc uctio tio volu volume mes. s.
ts in
ll as eter eter inin inin
to
im
it
port portfo foli li ar ppro ppropr priilain lain in ffic ffic in-h in-h th firm firm elps elps tc
th ll
lo
th
th ir
ff
lo
ield ield
it
lt
il
offer offered ed inve invest stor or supe superi rior or ields ields to trea treasu sury ry or corp corpor orat at
oppo opportu rtuni nitie ties. s.
lt
wide widely ly adve adverti rtise sed, d, he adds adds co
ta -f odit odit
pric prices es ta ly
re is
).
ly
io
ll ortort-li live ved. d. ia ilit ilit in
tl
solu soluti tion on fo ou inve invest stor ors' s' need needs, s, Swea Sweari ring ngen en sa s. "I fi
on-t on-tra radi diti tion on
ve icle icle th
ot only only offe offe
ig
chec checks ks over over th "Roy "Roy ltie ltie ar
ears ears fo ro alty alty owne owners rs ot erfe erfe t, ompa ompa ed to th
risksrisks-rew reward ardsinh sinhere erent nt in traditi tradition onal al fixed-in fixed-incom com invest invest
hedg hedg to infl inflat atio ion. n.
oyalti alties es
Valu Valuab able Inve Invest en
ppor pportu tuni nity ty
il an
Ga
Inve Invest stor or
Ju
I0
ts it
iffi iffi
plac plac in
lt to
ro
ltie ltie
ld
os inve invest stor or port portfo foli lios os," ," Swea Sweari ri ge
refo refore re
ts li
tr
itio itio
fi
in
in
tm
re re rv
re
th
ra
sa s.
ts
il
ro
ty
rs
fi
(w ic
ro
in re
," is
im
rt
rs
re
eval evalua uate te roya royalty lty inve investm stments. ents. th
il
rgro rgro
th
fore fore th
term terminin inin
te ia
lo rnin rnin
ts li
ro is
in
in
rgro rgro
rl
ri
le
it
le
th
in
to 's
th re is fo furt furt
in ra ri
sign signifi ifica cant nt impa impact ct on th long long-te -term rm retur retur ri
te
ri
tely tely
ts
il
on inve investm stment. ent.
ubli ubli ly tr ded? ded?
ra
's
leve levera ra e, frau frau in
tors tors
to
cr
ro
lt
ro ra
tr
ture ture
or corr corr ptio ptio ." rsta rsta
ot only only acqu acquir irin in th
lace lace
is th
ro
in
to is
prod prod ci
ells ells
te tial tial fr
ddiddi-
ow ersh ership ip of exis existi ti
e; it is ls
cq irin irin th
lt
tion tional al well well deve develo lope pe on that that acre acreag ag in futu future re ears ears tt
tu Publ Public ic Roya Royalt lt
In
rsif rsific ic ti
ro
ra
ic
re s,
tm nt
Trus Trusts ts vs U.S. U.S. Supe Supe Majo Majors rs
1200% ,-----------------------------------------------------,-------------------------------------------------------------------------------------------------------------------------------------------
1000%
+-------------------~----------------------------------------------------------~----------------
200%
0% Oct-OB
Publ Public icly ly trad traded ed roya royalt lt Pllbli Ro)'alt inc/lldes
BR
y e ar ar s o f
Jun
T rlrl isis t
trusts
i n thi charr reflect P R T s n 'a 'a de de d on
i nc nc /l/l ld ld e H]
U n itit e
en r S ta ta te te s p llll bl bl i e xc xc h an an g w itit h t e y en
of conrnu.ous
Sour Source ce
dat availabl availabl an
Yaho Yaho market
oila oiland ndga gasinvest vestor or.co .co
XOM, C V X a n C O P m a ri ri
