| Oil and Gas Royalties Explained | | | | in Oil and Gas Royalties, it's important to find |
| Owning oil and gas royalties is much different | | | | properties with multiple wells, shallow decline and |
| from owning oil wells. Royalty investments | | | | active drilling. |
| generally lack the risks inherent with owning an oil | | | | 1031 Exchange |
| well outright because you are not responsible for | | | | Oil and gas royalties are actually considered real |
| the expenses associated with drilling for oil. There | | | | property for purposes of a 1031 Like-Kind |
| are two types of royalty rights: | | | | Exchange, and thus present an attractive |
| Surface Rights - The right to cultivate the land | | | | alternative to the traditional 1031 exchange of |
| and build structures on the surface (houses, | | | | commercial real estate. The 1031 Exchange offers |
| farms, ranches, etc.). This is what we think of | | | | extremely good tax advantages for those who |
| when we think about “traditional real | | | | qualify. The advantages of royalties over other |
| estate.” | | | | types of property in the 1031 exchange include: |
| Mineral Rights - The right to drill and explore for | | | | Transaction Size Flexibility |
| minerals under the ground. These rights are | | | | - Superior Monthly Cash Flow |
| usually leased to drilling companies such as Exxon, | | | | - 9-11% Cash-on-Cash Yields |
| Shell, as well as hundreds of independent | | | | - No Capital Calls |
| producers. When a well is hit, a mineral right then | | | | - Investor Independence |
| becomes a royalty interest. | | | | - Multiple Liquidity Options |
| Investing in Royalties | | | | Owning oil and gas royalties can be superior to |
| Are oil and gas royalties considered a depreciating | | | | owning oil wells outright and can be a profitable |
| asset? Take a look at the results obtained from | | | | addition to the 1031 exchange portfolio. As with |
| the three public royalty trusts, the Sabine Royalty | | | | any type of investment, it's important to consult |
| Trust, the San Juan Trust and the Cross Timbers | | | | with your attorney and the appropriate financial |
| Trust. It's important that you invest in oil and gas | | | | advisors before making any investment decisions. |
| royalties with a reputible company. When investing | | | | |