RESOURCES
Understanding Mineral Rights, Working Interests, & Royalties
Energy investments span everything from the production, transportation, storage, and consumption of energy, including power generation, renewable energy, utilities, infrastructure, and traditional fuels such as oil and natural gas.
While public market energy investments tend to offer greater liquidity and ease of access, private energy investments can provide more direct exposure to underlying asset economics. This means, for example, that the investment is less closely tied to the performance of the operating business and therefore has a different risk and return profile, and often lower liquidity.
At Invico Capital Corporation, we focus our expertise specifically on private oil and gas investments across North America, using working interests and royalty interests to access production-level cash flows and long-term asset value.
That cross-border approach matters because oil and gas ownership structures, especially mineral rights, work differently in Canada than in the United States. Explaining the difference can help investors understand why royalties are more prevalent in some regions than others and why deal structures can vary.
For an overview of mineral rights, Invico’s energy strategy and a 2026 forecast, you can watch the first episode of “The Subsurface Scoop” with Vice President, Energy Investments, Sara Pettigrew.*
*This content is subject to the disclosures and disclaimers presented in the video.
An Important Distinction on Mineral Rights
Mineral rights determine who has the right to explore and produce the minerals and resources beneath the land in which they exist.
In Canada
Mineral rights are usually held by the Crown, with a smaller portion held as freehold mineral rights (The Canadian Association of Petroleum Producers, or “CAPP,” says that about 19% of mineral rights in Alberta are freehold). This is why in Canada, you will often see the Crown identified as a major royalty owner.
In the U.S.
In contrast to Canada, mineral rights in the U.S. are often owned by private individuals or corporations, creating a large private market for mineral and royalty interests.
What is a Royalty Interest?
A royalty interest is an ownership stake in the resource itself, rather than in its production. The benefits of a royalty interest are that risk is reduced, as the investor is not liable for any operational costs associated with extracting the resource. Instead, once the asset is producing (for example, when oil is being extracted from the earth), owners of royalty interests will receive passive income as a percentage of the revenue earned.
With the lower risks associated with royalty interests often comes increased competition and higher price of entry. They also have a lower revenue percentage and, therefore, potential than working interests.
What is a Working Interest?
A working interest is an ownership stake in the actual operation and development of a resource. At Invico, we often describe this as a minority partnership with an operator (an organization that finds, drills, and extracts resources from the earth, such as Suncor Energy Inc. or BP). A working interest means the investor is directly involved in the project’s costs, risks, and management. In return, they receive a share of the profits from the sale of extracted oil, gas, or minerals.
While the risks associated with a working interest are higher due to exposure to operational costs, the revenue potential is higher than that of a royalty interest.
The Importance of PDP &“White Space”
In the first episode of “The Subsurface Scoop” featured above, Sara walks through a recent royalty acquisition in the Eagle Ford basin in Texas. This acquisition is a perfect example of two key drivers of value when it comes to energy investments for both royalty and working interests:
- PDP cash flow (producing wells generating revenue today), and
- “White space” (undeveloped acreage that may retain or increase value if drilling continues)
By targeting investments in areas with a mix of both currently producing wells and white space, you ensure that your cash flow is not only immediate, but you also increase the potential longevity and growth of the investment as wells continue to be drilled and further resources extracted.
In Summary
Energy investments can add differentiated exposure within an alternatives allocation, but suitability depends on your objectives, risk tolerance, and liquidity needs. If you’re a financial advisor interested in learning more about Invico’s oil and gas investment opportunities, please contact us. Or, if you’re an investor, speak with your financial advisor about whether energy exposure fits your portfolio.
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