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The oil and gas industry is responsible for 40% of the world's commercial energy supply. It dominates the infrastructure that links and sustains communities and the global economy.
Exploration and drilling have traditionally been the mainstay of production/industry growth and investment has largely been confined to these two areas.
To do a 1031 Exchange into Energy Royalties, the mechanics are the same
as when doing an exchange into bricks-and-mortar Real Estate. You engage an
accommodator and you have the same 45-calendar day and 180-calendar day time
frame. Nothing is different except the way the properties are identified with
the accommodator.
As good as Royalties are, they are in rare supply. Most Royalty owners
pass the Royalty Rights on to their heirs because the only thing the owner has
to do is open their mailbox once a month. The fact is the commodity values of
Royalties have increased over 200% over the last 5 years because rising energy
prices and increasing consumer awareness has increased the demand for Royalties.
Where as you may be hearing about investing in Energy Interests for the
first time...pension plans, endowments and trusts - which need cash flow - have
been buying proven energy reserves for decades. The largest buyers of
institutional grade Royalties are: Harvard, Stanford and General Electric.
Royalties have no tenants, termites, toilets or trash. The only
significant risks are the commodity price risk for domestic energy prices. So if
you don't believe that today's energy prices are either going to stay where they
are or go higher then don't invest in Energy Royalties. However, most energy
experts believe energy prices are going to rise in the long term and the only
unknown is how high.
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