SEP funds a disproportionate share of capex for the right to purchase a portion of future production at a pre-set price​

Not a royalty because do not have an interest in the land and there is an ongoing cash payment required to purchase the physical oil & gas​

Upfront amount for a predefined quantity of physically delivered product​

Looks and feels like an amortized loan​

Lowest risk as structure is based on PDP​

Finite term (i.e. lease term or life of well)​

Royalty rate paid by operator usually lower compared to other royalty structures as payment is tied to the operator’s “top line” revenue​

Payments made based on the profitability (as defined in the royalty agreement) from a defined area​

Can be structured so payments begin after the operator has recovered its capital costs​

Royalty holder exposed to operating costs​

Total payments by operator tied to a specific volume of production from a defined area​

The deal expires after a pre-determined amount and the operator is left with the remaining reserve tail​

Free and clear of all operating costs, capital expenditures and taxes​