Noble Royalties Inc., an oil and gas acquisition and asset management company, held an invitation-only informational briefing at the Four Seasons Hotel during NAPE in Houston on Feb. 7. The intent was to educate the audience on concepts of wealth management and risk as they relate to oil and gas companies and royalty owners.
Representatives from Bernstein Global Wealth Management also participated in the presentation, speaking to wealth preservation and maximization concepts as they related to the sale of oil and gas royalties. Founded in 1967, Bernstein has numerous offices in the United States and in the United Kingdom. The firm was founded to manage investments for private families and individuals but has grown to include investment research and institutional asset management. Bernstein currently manages just over $109 billion in investments.
Scott Noble, president and CEO of Noble Royalties, opened the session by saying that current market conditions are “ideal for selling some portion of your oil and gas royalty holdings.” He explained that oil has tripled in price and gas has doubled in price in the past six years. During this time, his firm’s royalties increased in value by about 400%, he said.
Noble is an active buyer of private royalties. Since 1997 the company has specialized in acquiring and managing royalty properties with proven production histories and potential for growth. Since its inception, the company has made about 190 acquisitions at a total purchase price of $805 million.
The number of acquisitions totals more than 127,000 plus distinct royalty interests within producing wells. These assets are located in 30 states, the Gulf of Mexico, and Offshore Pacific.
Noble’s Martin Fleming emphasized the importance of treating oil and gas royalty holdings the way an investor would treat any other asset.
In his discussion, Fleming said that the fundamental value of oil and gas royalties is driven by a combination of oil and gas pricing and decline. “Because of the recent run-up in commodity prices, many royalty owners do not realize that the underlying value of their holdings is declining.”
According to Fleming, it is Finance 101 – buy low and sell high. With commodity prices at near record levels, royalty owners need to think about taking money off the table and redeploying it into appreciating assets.
This approach represents a departure from the traditional view that oil and gas royalties should be held onto forever.
Using this and other cutting-edge strategies, Noble Royalties has become the most active royalty purchaser in the industry. The company has a high profile in the industry, and its visibility, name recognition, and reputation help provide a steady pipeline of acquisition opportunities.
“The ability to evaluate a large number of properties is critical to building a successful portfolio,” said Noble, who had 12 years in the drilling and operations business before founding Noble Royalties. “Noble has the resources to analyze hundreds of potential acquisitions each year, maximizing the value to royalty owners as well as our institutional investors.”
[Current market conditions are] “ideal for selling some portion of your oil and gas royalty holdings.” – Scott Noble
Michael Ellington, managing director of Bernstein’s Houston office, commented that market timing for this meeting could not be better. At the same time that commodity prices are near record levels, the broad market presents many attractive buying opportunities.
Bernstein’s Cory Dowell summed up that firm’s wealth forecasting process and differentiated between corporate decisions and family decisions in wealth management. He focused on ways to invest the proceeds from the sale of mineral interests, including the best strategy for transferring wealth to the next generation.
Among his topics: ways to reduce estate and gift tax exposure while maximizing and preserving wealth created by the sale of oil and gas royalties.
As for the economy, “The US is clearly on the verge of a massive slowdown,” said Dowell. “It’s highly unlikely to be severe or long, but we’re in for some very serious short-term problems.”
And, finally, Scott Noble emphasized that a portfolio diversified between oil and gas royalties and other asset classes is the best way to maximize wealth.
Noble Royalties’ 60 energy and financial professionals includes a 21-man A&D team. Corporate headquarters are in Dallas with a decentralized A&D office in Houston.
