Mineral 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 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 begin by reviewing the following key three factors:
Is the Oil Stock hop over to this web-site valued? This is probably the very first question you should ask yourself as a great deal of oil stocks are more hype than actual value. An excellent indicator of an oil stocks value will be 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 is due to an aggressive growth strategy including a recent land acquisition or a large drilling program that's to happen later on, attempt to determine the impact these events will have on the oil stocks earnings. In a whole lot of cases the future event's impact on the oil stock will not be just what the investment community forsees.
There are actually a considerable 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 amount of cash flow and therefore reduce the growth capability of the specific oil stock. Therefore in case you are searching for an oil stock that could 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 stay away from oil stocks which are trust units. This really is because 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 rights, drilling programs etc., all of that are more prone 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 is important as if you buy a natural gas focused oil and gas company as well as the cost of natural gas will be at an all time high then this is probably not the time to buy. However this really is probably a great time to consider selling based on what commodity experts feel the price of natural gas shall do in the years/months to come. The exact same goes for oil stocks, though it is our feeling that the price of oil is significantly less volatile because it is doubtful the cost of oil will be reduced by 50%. Whereas the price of natural gas can easily be reduced by 50% in a given year. In case you are planning on holding your oil and gas investment for a lengthy period of time then do not fret too much about the commodity prices as they should increase with inflation over a very long time frame. If you are buying or selling oil and gas stocks for short time, then commodity prices become extremely important as you could make a considerable return in a short time frame.
It seems 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 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 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 own property as 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 opt 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 have 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 might be located, an alternative for many is to sell mineral rights to extract: copper, gold, quartz, topaz or amethyst, all of which are lucrative commodities. Due to the high amount of geological diversity across the USA there's the best 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 in the millions of dollars for a 100 acre oil rights lease!
With an ever-growing requirement for energy production domestically many land owners, especially in the Southern USA, choose to sell oil and gas leases. The standard 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 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's 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 may even wish to contact and conduct your own geological survey. Lots of individuals 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 may be just nearby.
