Noble Royalties Inc.(Interview)

Publication: Oil and Gas Investor

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COPYRIGHT 2005 Hart Publications, Inc.

Oil and Gas Investor: Why did you form Noble Royalties?

Noble: After experiencing the normal cycles of highs and lows associated with the drilling and operations side of energy, I decided that investors need a more conservative approach to energy without subjecting themselves to significant risks normally found in this industry. Acquiring royalties satisfied those needs, and we built a company around what we feel is missing in the industry.

OGI: Why is it more interesting?

Noble: We have the pleasure and challenge of evaluating almost every producing field in America. That is exciting. Then we target the large reserves with longevity. It is much more diversified. I operate 72 wells, and we now own royalties on 39,000 wells. If properly evaluated, we should never run out of revenue, technically.

OGI: How do folks invest?

Noble: We are a private company, but we may set up an MLP in the near future to attract specific funds. Currently, we buy a property in advance with our money and then we bring in the long-term relationships we've earned. These are people seeking lower returns with lower risk in the energy sector. They do not want to have the excitement of drilling or the returns of drilling; they seek a safer avenue in the energy sector.

OGI: Are the investors mostly in Dallas?

Noble: They started out in the Dallas community, but we have a lot of heavy real estate investors nationwide. They're heavy in real estate and light in energy, and they would like to be more diversified.

OGI: What rate of return are investors seeking?

Noble: Between 9% and 15%.

OGI: That's as good as or better than the stock market and certainly better than bonds.

Noble: Yes. When you study the publicly traded royalty trusts out there, they trade between a 7.5% and 12% yield, which tells you that's where the public market puts royalties when comparing them with fixed-income rates. It puts them fairly close to a risk-free return, if you buy royalties in bulk.

OGI: Are the assets depleting?

Noble: If you were to buy royalties on a small scale, that's...

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