DEALING WITH ROYALTY INTERESTS

Abstract

Exploration companies (particularly junior exploration companies) at the time of acquiring acreage under exploration permits, are often required to consider farming out their interests in order to sustain development. In such circumstances, it is usual to retain some form of royalty or carried interest arrangement. However, the form and nature of the interest retained, and the rights and obligations attaching to it are of vital importance in the subsequent development of the acreage. The basic understanding of these arrangements may make the difference between a project being economic or uneconomic. The conference paper proposes to review the different types of royalty or similar interests and their relative advantages and disadvantages. In doing so, it will review some of the more pertinent aspects of Australian and, to some extent, U.S. oil and gas law.