Acquisition 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 an increased 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 first question you should ask yourself as a whole lot of oil stocks tend to be more hype than actual value. A good 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 as a result of an aggressive growth strategy including a recent land acquisition or a large drilling program that is to occur in the foreseeable future, try to determine the impact these events shall have on the oil stocks earnings. In a great deal of cases the future event's effect on the oil stock will not be precisely what the investment community forsees.
There are an important 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. Alternatively, the distributions that these oil stocks (trust units) pay out require a considerable quantity of cash flow and thus reduce the growth capability of the specific oil stock. Therefore if you're trying to find an oil stock which will provide 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 in your portfolio which has a high growth potential you should steer clear from oil stocks that are trust units. This is because normal public company shares usually don't pay out large dividends to shareholders since they prefer to reinvest their hard earned cash within their capital program. Oil and gas capital programs include purchasing land, mineral rights, drilling programs etc., all of that are more very 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 the cost 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 the best time for you to consider selling depending on what commodity experts feel the cost of natural gas will do within the years/months to come. The exact same goes for oil stocks, even though it is our feeling that the price of oil is a lot less volatile because it is doubtful the price of oil will be reduced by 50%. Whereas the price of natural gas can certainly be reduced by 50% in a given year. In the event that you are 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 an extended period of time. In the event that you are buying or selling oil and gas stocks for short periods of time, then commodity prices become extremely important as you can make a substantial return in a short period of time.
It seems that everybody is either experiencing or knows someone whose experiencing financial difficulty. Many are have taken 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 choose to sell oil and gas leases on their property being an easy way to generate extra income from land that they have 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 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've seen a land owner who may have let his land to an oil company. In areas where oil is not common or even in mountainous areas where useful materials might be located, an option 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 degree of geological diversity across the USA there is a good chance that regardless 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 requirement for energy production domestically many land owners, especially within the Southern United States, decide to sell Oil and Gas Lease Review and gas leases. The normal 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 in your interest to consult with a mineral or oil and gas exploration service near you. You may even wish to contact and conduct your own geological survey. Many people aren't 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 be just around the corner.
