Mineral Title Analysis
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 higher 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:
valuation!" style="max-width:450px;float:left;padding:10px 10px 10px 0px;border:0px;">Is the Oil Stock Over valued? This really is probably the very first question you should ask yourself as a whole lot of oil stocks are more hype than actual value. An excellent 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's as a result of an aggressive growth strategy including a recent land acquisition or possibly a large drilling program that is to take place in the future, attempt to determine the impact these events will 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.
There are actually a substantial 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. Conversely, the distributions that these oil stocks (trust units) pay out require an important quantity of cash flow and as a consequence reduce the growth capability of the specific oil stock. Therefore in the event that you are looking for an oil stock which can present 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 keep away from oil stocks which are trust units. The reason being normal public company shares usually do not pay out large dividends to shareholders as 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 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 is important as if you buy a gas focused oil and gas company and also the cost of gas will be at an all time high then visit this hyperlink really is most likely not the time to buy. However this really is probably an excellent time to consider selling depending on what commodity experts feel the price of natural gas shall do within the years/months to come. The same goes for oil stocks, although it is our feeling that the cost of oil is much less volatile as it is doubtful the price of oil will be reduced by 50%. Whereas the price of gas will likely be reduced by 50% in a given year. If you are planning on holding your oil and gas investment for a lengthy time period then do not fret too much about the commodity prices because they should increase with inflation over a very long time frame. In the event that you are buying or selling oil and gas stocks for short amounts of time, then commodity prices become extremely important when you may make an important return in a short time frame.
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 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 people choose to sell oil and gas leases on their own property as 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 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 that has 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 lucrative commodities. As a result of the high level of geological diversity through the United States there is an excellent chance that wherever 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 expanding need for energy production domestically many land owners, especially within the Southern United States Of America, decide to sell oil and gas leases. The normal royalty is approximately 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 which 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 may even wish to contact and conduct your own geological survey. A lot of men and women are not even aware of the composition of their land and 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 nearby.
