Mineral And Leasehold Acquisitions
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 begin by reviewing the next key three factors:
Is the Oil Stock Over valued? This is probably the first question you should ask yourself as a lot of oil stocks tend to be more hype than actual value. The best 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 a large drilling program that's to happen down the road, try to determine the impact these events shall have on the oil stocks earnings. In a lot of cases the future event's impact on the oil stock will not be what the investment community forsees.
You will discover a substantial 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. Alternatively, the distributions that these oil stocks (trust units) pay out require a substantial quantity of cash flow and thus reduce the growth capability of the specific oil stock. Therefore in the event that you are trying to find an oil stock that could give you steady cash flow than an oil stock which is a trust unit is your decision. Whereas if you would like to hold an oil stock in your portfolio which has a high growth potential you should stay away from oil stocks that are trust units. This is only because normal public company shares usually don't 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 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 gas versus oil. This is important as if you buy a natural gas focused oil and gas company and the price of natural gas will be at an all time high then this really is most likely not the time to buy. However this really is probably the best time to consider selling according to what commodity experts feel the price of gas shall do within the years/months to come. The same goes for oil stocks, even though it is our feeling that the price of oil is much less volatile since it is doubtful the cost of oil will be reduced by 50%. Whereas the price of gas can easily be reduced by 50% in a given year. If you're planning on holding your oil and gas investment for an extended period of time then don't fret too much about the commodity prices as they should increase with inflation over a lengthy time frame. If you are selling or buying oil and gas stocks for short periods of time, then commodity prices become extremely important when you may make an important return in a short time frame.
It appears 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 will be 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. Many people decide to sell oil and gas leases on their property as 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 and Leasehold Acquisition production or petroleum extraction are placed upon the company and not the individual. Individuals may decide 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 that has let his land to an oil company. In areas where oil is not common or in mountainous areas where useful materials may be located, an option for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of which are lucrative commodities. As a result of the high level of geological diversity throughout the USA there's a good chance that irrespective 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 a growing requirement for energy production domestically many land owners, especially in the Southern United States Of America, decide to sell oil and gas leases. The typical royalty will be about 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 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 in 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 people are not even aware of the composition of their land and for little-to-no cost you may find yourself literally sitting upon a gold mine. You never know. Your lifetime financial security might be just on the horizon.
