This is a reprint of the article “Performing Due Diligence on a Micro-Cap Oil & Gas Company” written by Erik Nelson, President of Coral Capital Partners, Inc. that was published in the Fall, 2011 edition of Micro-Cap Review Magazine. It takes a look at some of the essential items to consider when evaluating a micro-cap oil and gas company as a potential investment. It is an excellent primer on understanding the various terms and their definitions when looking at a potential oil and gas investment. This is the 2nd article authored by Erik Nelson to be published in Micro-Cap Review Magazine, and the 1st through Coral Capital Partners.
Tag Archive for net revenue interest
This is the percent of revenue that the working interest holders keep after paying the royalties to the owners of the mineral rights and all other non-operating interests. In the past it was typical for the owner of the mineral rights to keep a one eighth, or 12.5% Net Revenue Interest. This meant the holders of 100% of the working interest had an 87.5% Net Revenue Interest. With the current high price of oil the owners of the mineral rights are able to keep a higher percentage than in the past and as a result an 82.5% to 80% Net Revenue Interest is much more common. I would look to avoid any companies that have less than 80% NRI on their oil leases.