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 focus on oil and gas stocks which yield a higher 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 really is probably the very first question you should ask yourself as a lot of oil stocks will be Get More Information hype than actual value. A great indicator of an oil stocks value is 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 really is due to an aggressive growth strategy including a recent land acquisition or perhaps a large drilling program that's to take place in the foreseeable future, attempt to determine the impact these events shall have on the oil stocks earnings. In a whole lot of cases the future event's impact on the oil stock will not be precisely what the investment community forsees.

There are actually 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. Conversely, the distributions that these oil stocks (trust units) pay out require a substantial amount of cash flow and so reduce the growth capability of the specific oil stock. Therefore if you're trying to find an oil stock that will provide you with steady cash flow than an oil stock which is a trust unit is your choice. Whereas if you would want to hold an oil stock in your portfolio which has a high growth potential you should try to avoid oil stocks which are trust units. This is only because normal public company shares usually don't 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 prone 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 is important as if you buy a natural gas focused oil and gas company and the price of gas will be at an all time high then this really is most likely not the time for you to buy. However this really is probably a great time to consider selling depending on what commodity experts feel the price of natural gas will do within the years/months to come. The exact same goes for oil stocks, though it is our feeling that the price of oil is significantly less volatile as it is doubtful the price of oil will be reduced by 50%. Whereas the price of natural gas will be able to be reduced by 50% in a given year. In the event that you are planning on holding your oil and gas investment for a lengthy time frame then do not fret too much about the commodity prices as they should increase with inflation over a lengthy time frame. In the event that you are buying and selling oil and gas stocks for short amounts of time, then commodity prices become extremely important when you may make a significant return in a short period of time.

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 as well as 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 may enter into "working interest" agreements. Lots of individuals decide to sell oil and gas leases on their property as 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 individual. Individuals may choose 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've 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 who may have let his land to an oil company. In areas where oil is not common or in mountainous areas where useful materials could possibly be located, an option for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of that are lucrative commodities. As a result of the high degree of geological diversity throughout the USA there's a great chance that irrespective of where you own land you can 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 a growing necessity for energy production domestically many land owners, especially within the Southern United States Of America, choose to sell oil and gas leases. The common royalty is approximately 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 really 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 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. Lots of individuals are not even aware of the composition of their land as well as for little-to-no cost you may find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security could be just nearby.