Oil And Gas Company
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 greater return on investment opportunities like oil sands stocks and Canadian oil stocks, we feel that you should begin by reviewing the next key three factors:
Is the Oil Stock Over valued? This really is probably the first question you should ask yourself as a great deal of oil stocks will be more hype than actual value. A great indicator of an oil stocks value is the oil stocks price earnings ratio. If 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 as a result of an aggressive growth strategy including a recent land acquisition or perhaps a large drilling program that is to occur in the foreseeable future, attempt 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 exactly what the investment community forsees.
You can find an important amount 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. In contrast, the distributions that these oil stocks (trust units) pay out require a significant quantity of cash flow and as a consequence reduce the growth capability of the specific oil stock. Therefore in the event that you are searching for an oil stock which will supply 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 within your portfolio which has a high growth potential you should try to avoid oil stocks that are trust units. It 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 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 probably not the period to buy. However this really is probably an excellent period to consider selling based on what commodity experts feel the cost of natural gas will do in the years/months to come. The same goes for oil stocks, although it is our feeling that the price of oil is significantly less volatile because it is doubtful the price of oil will be reduced by 50%. Whereas the cost 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 a lengthy time frame then do not fret too much about the commodity prices because they should increase with inflation over a lengthy time period. In the event that you are selling or buying oil and gas stocks for short time frames, then commodity prices become extremely important while you will make a vital return in a short period of time.
It appears that everyone 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 perhaps a mineral rights lease to generate income from deep-pocketed petroleum and mining companies with whom you may enter into "working interest" agreements. Many 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 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 such as West Texas, then you've seen a land owner who has let his land to an oil company. In areas where oil isn't common or in mountainous areas where useful materials could possibly be located, a choice for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of which are lucrative commodities. Because of the high amount of geological diversity throughout the USA there's a good 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 within the millions of dollars for a 100 acre oil rights lease!
With a growing requirement for energy production domestically many land owners, especially in the Southern United States, decide to sell oil and gas leases. The average 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 and Leasehold Acquisition 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 could find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security could possibly be just around the corner.
