Very interesting and informative thoughts. I really appreciate your look under the hood at FRMO, WELX, RCG. I have a bit of trouble understanding your WUBA concepts, but that is probably just me.
So, what I'm doing it not very scientific, but basically...
Consider the concept of net royalty acres for royalty companies. When an operator extracts oil from some acre of land, they need to pay the mineral rights owner some negotiated percent of the value; this percent can be anything. NRAs normalize all of a royalty company's acreage to a single presumed 1/8th interest, even though we may know that is not the reality on the ground where different lots of acreage may have different royalty interest percentages applied to them (also note that not all royalty co.s normalize to 1/8th when calculating NRAs, but 1/8th is common). Using the 1/8th normalization, we can have some kind of standard unit of economic interest that can be used to compare total acreage across companies. Say co A has 1000 acres at 1/4th rate and B has 2000 acres at 1/8th rate; both A and B have 2000NRA (1000x(1/4)/(1/8)=2000x(1/8)/(1/8)), even though A has less gross acres. it lets you know that both A and B have same effective economic interest from their acreage (though nothing really about the profitability, as acres can differ in quality).
In a similar manner, I made up the idea of a WUBA to normalize different usage-types of acreage to a single common unit that can be used to compare acreage across companies that may have different mixes of acreage type contributing to their actual top-line revenues (as is the case with TPL and LB that are not pure mineral rights owners, but also have differing revenue mix from surface- and mineral-rights).
Very interesting and informative thoughts. I really appreciate your look under the hood at FRMO, WELX, RCG. I have a bit of trouble understanding your WUBA concepts, but that is probably just me.
So, what I'm doing it not very scientific, but basically...
Consider the concept of net royalty acres for royalty companies. When an operator extracts oil from some acre of land, they need to pay the mineral rights owner some negotiated percent of the value; this percent can be anything. NRAs normalize all of a royalty company's acreage to a single presumed 1/8th interest, even though we may know that is not the reality on the ground where different lots of acreage may have different royalty interest percentages applied to them (also note that not all royalty co.s normalize to 1/8th when calculating NRAs, but 1/8th is common). Using the 1/8th normalization, we can have some kind of standard unit of economic interest that can be used to compare total acreage across companies. Say co A has 1000 acres at 1/4th rate and B has 2000 acres at 1/8th rate; both A and B have 2000NRA (1000x(1/4)/(1/8)=2000x(1/8)/(1/8)), even though A has less gross acres. it lets you know that both A and B have same effective economic interest from their acreage (though nothing really about the profitability, as acres can differ in quality).
In a similar manner, I made up the idea of a WUBA to normalize different usage-types of acreage to a single common unit that can be used to compare acreage across companies that may have different mixes of acreage type contributing to their actual top-line revenues (as is the case with TPL and LB that are not pure mineral rights owners, but also have differing revenue mix from surface- and mineral-rights).