Valuation Of Mineral And Leasehold Rights

Oil and gas investing begins with the investor determining what oil and gas stocks he should invest his hard earned cash into. While some will concentrate on oil and gas stocks which yield a larger return on investment opportunities like oil sands stocks and Canadian oil stocks, we feel that you should start by reviewing the next key three factors:

Will be the Oil Stock Over valued? This is probably the very first question you should ask yourself as a great deal of oil stocks will be more hype than actual value. The best indicator of an oil stocks value will be the oil stocks price earnings ratio. Should the price earnings ratio is greater than 20, we would suggest you further investigate why the oil stocks price earnings ratio is so high. If it's because of an aggressive growth strategy including a recent land acquisition or perhaps a large drilling program that's to come about down the road, try to determine the impact these events shall have on the oil stocks earnings. In a lot of cases the future event's effect on the oil stock will not be what the investment community forsees.

You can find a considerable amount of oil and gas stocks that have converted to become trust units. The main purpose of these oil stocks becoming trust units is to save and defer tax to unitholders. However, the distributions that these oil stocks (trust units) pay out require a significant quantity of cash flow and therefore reduce the growth capability of the specific oil stock. Therefore in the event that you are looking for an oil stock which could present you with steady cash flow than an oil stock which is a trust unit is your decision. Whereas if you would want to hold an oil stock within your portfolio which has a high growth potential you should avoid oil stocks that are trust units. This is because normal public company shares usually do not pay out large dividends to shareholders because they prefer to reinvest their hard earned cash in their capital program. Oil and gas capital programs include purchasing land, mineral rights, drilling programs etc., all of that are more likely to generate shareholder value rather than just paying these funds out to unitholders.

Investors should be aware what percent of their oil and gas stocks interest is in gas versus oil. This really is important as if you buy a natural gas focused oil and gas company as well as the price of natural gas will be at an all time high then this is most likely not the time for you to buy. However this really is probably a good time for you to consider selling determined by what commodity experts feel the cost of gas shall do within the years/months to come. The exact same goes for Oil and Gas Leasing stocks, though it is our feeling that the cost of oil is much less volatile since it is doubtful the cost of oil will be reduced by 50%. Whereas the price of gas can certainly be reduced by 50% in a given year. If you are planning on holding your oil and gas investment for a very long time frame then don't fret too much about the commodity prices because they should increase with inflation over a very long time frame. If you're selling and buying oil and gas stocks for short amounts of time, then commodity prices become extremely important as you might make a vital return in a short time frame.

It appears that everyone is either experiencing or knows someone whose experiencing financial difficulty. Many are have got the barter-trade route of Craigslist to provide the extras for their family and others have decided to lease rooms or sell items of property.

An often overlooked and lesser-known source of revenue is the option to sell oil and gas leases or possibly a mineral rights lease to generate income from deep-pocketed petroleum and mining companies with whom you can enter into "working interest" agreements. Lots of people decide to sell oil and gas leases on their property being an easy way to generate extra income from land that they've already invested in. Working interests are beneficial to the property owner as the responsibility of exploration costs and mineral production or petroleum extraction are placed upon the company and not the person. Individuals may elect to sell oil and gas leases to oil and gas exploration companies in exchange for a portion of the proceeds of the land on which exploration firms have agreed to invest in.

If you have ever driven down a highway and seen a lone pump jack, common in areas for example West Texas, then you have seen a land owner that has let his land to an oil company. In areas where oil is not common or in mountainous areas where useful materials could be located, an option for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of which are lucrative commodities. Due to the high level of geological diversity across the USA there's the best chance that irrespective of where you own land you may sell oil and gas leases to working interests - effectively generating revenue with little to no initial investment. Some property owners have received payouts within the millions of dollars for a 100 acre oil rights lease!

With an increasing need for energy production domestically many land owners, especially within the Southern USA, decide to sell oil and gas leases. The average royalty is around 1/8th of the production - meaning that roughly one hundred and twenty five thousand dollars per $1,000,000 per working interest is generated for oil and gas royalty. This is quite the hefty profit for little-to-no upfront investment. Typically the exploration/extraction company shoulders the logistical burden of processing the site, which could require specialized equipment and expertise that is generally not possessed by the typical landowner.

If you own land it may be within your interest to consult with a mineral or oil and gas exploration service near you. You could even wish to contact and conduct your own geological survey. Lots of individuals are not even aware of the composition of their land as well as for little-to-no cost you might find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security could possibly be just on the horizon.