Oil And Gas Lease Review
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 focus 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 following key three factors:
Is the Oil Stock Over valued? This is probably the first question you should ask yourself as a lot of oil stocks tend to be more hype than actual value. The best indicator of an oil stocks value is the oil stocks price earnings ratio. In the event 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 is because of an aggressive growth strategy including a recent land acquisition or a large drilling program that is to occur in the future, try to determine the impact these events may have on the oil stocks earnings. In a whole lot of cases the future event's effect on the oil stock will not be precisely what the investment community forsees.
You can find a vital quantity of oil and gas stocks which have converted to become trust units. The main purpose of these oil stocks becoming trust units is to save and defer tax to unitholders. On the flip side, the distributions that these oil stocks (trust units) pay out require a considerable amount of cash flow and so reduce the growth capability of the specific oil stock. Therefore in the event you are searching for an oil stock that could provide you with steady cash flow than an oil stock which is a trust unit is your choice. Whereas if you would like to hold an oil stock in your portfolio which has a high growth potential you should steer clear from oil stocks that are trust units. This really is because normal public company shares usually don't pay out large dividends to shareholders since 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 which 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 natural gas versus oil. This really is important as if you buy a natural gas focused oil and gas company and also the cost of gas is at an all time high then this is most likely not the time for you to buy. However this is probably the best time to consider selling determined by what commodity experts feel the price of gas will do within the years/months to come. The exact same goes for oil stocks, although it is our feeling that the cost of oil is much less volatile since it is doubtful the price of oil will be reduced by 50%. Whereas the cost of gas will be able to be reduced by 50% in a given year. If you're planning on holding your oil and gas investment for an extended time period then do not fret too much about the commodity prices as they should increase with inflation over a very long time frame. In the event you are buying and selling oil and gas stocks for short periods of time, then commodity prices become extremely important while you may make a significant return in a short time period.
It appears that everyone is either experiencing or knows someone whose experiencing financial difficulty. Many are took 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 a Mineral and Leasehold Acquisition rights lease to generate income from deep-pocketed petroleum and mining companies with whom you may enter into "working interest" agreements. A lot of men and women choose to sell oil and gas leases on their own 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 burden of exploration costs and mineral production or petroleum extraction are placed upon the company and not the individual. Individuals may opt 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 such as West Texas, then you have seen a land owner who has let his land to an oil company. In areas where oil isn't common or even in mountainous areas where useful materials may be located, a choice for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of that are profitable commodities. As a result of the high amount of geological diversity throughout the USA there is an excellent chance that no matter 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 in the millions of dollars for a 100 acre oil rights lease!
With an increasing need for energy production domestically many land owners, especially in the Southern United States Of America, choose to sell oil and gas leases. The normal royalty is around 1/8th of the production - meaning that roughly $125,000 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 which is generally not possessed through 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. Many individuals are not even aware of the composition of their land and then 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 nearby.
