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 concentrate 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 really is probably the first question you should ask yourself as a whole lot of oil stocks will be more hype than actual value. An excellent 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's because of an aggressive growth strategy including a recent land acquisition or possibly a large drilling program which is to come about down the road, attempt to determine the impact these events shall have on the oil stocks earnings. In a lot of cases the future event's influence on the oil stock will not be precisely what the investment community forsees.
You will discover a significant 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 vital quantity of cash flow and as a consequence reduce the growth capability of the specific oil stock. Therefore in case you are looking for an oil stock that can 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 within your portfolio which has a high growth potential you should keep away from oil stocks that are trust units. The reason being normal public company shares usually don't pay out large dividends to shareholders as they want to reinvest their hard earned cash within their capital program. Oil and gas capital programs include purchasing land, Mineral Acquisition 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 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 the best time to consider selling depending on what commodity experts feel the cost of natural gas will do in the years/months to come. The exact same goes for oil stocks, although it is our feeling that the cost of oil is a lot less volatile as it is doubtful the price of oil will be reduced by 50%. Whereas the price of gas can certainly be reduced by 50% in a given year. If you're planning on holding your oil and gas investment for an extended time frame then do not fret too much about the commodity prices because they should increase with inflation over a very long time frame. If you're selling or buying oil and gas stocks for short time periods, then commodity prices become extremely important when you could make a vital return in a short time frame.
It appears that everybody is either experiencing or knows someone whose experiencing financial difficulty. Many are have got 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 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 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 burden of exploration costs and mineral production or petroleum extraction are placed upon the company and not the person. 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've seen a land owner who may have let his land to an oil company. In areas where oil isn't common or even in mountainous areas where useful materials could 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 level of geological diversity throughout the United States Of America there's the best chance that regardless of 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 an increasing need for energy production domestically many land owners, especially within the Southern United States Of America, decide to sell oil and gas leases. The typical 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 which is generally not possessed through 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 might even wish to contact and conduct your own geological survey. Many people are not even aware of the composition of their land as well as for little-to-no cost you can find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security could possibly be just around the corner.
