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1) Asset Allocation
Whether royalty or other real estate income makes up a large or small portion
of your assets,
you may wish to convert all or a portion of this asset into cash
you can use immediately for some
other purpose or investment.
2) Income Stream
Uncertainty
With the major fluctuations in oil and gas prices and the production declines
in many wells,
you may wish to reduce the uncertainty of future income streams
by converting all or a portion of
your interest into a lump sum cash payment and
let someone else take this uncertain future income
risk.
3) Elimination of Record
Keeping
Depending upon your type of royalty or real estate interest/ownership, the
record keeping and
tax reporting responsibilities can be quite burdensome.
4) Estate Consideration
You may inherit royalty or real estate interests that
may be too small to
have much value to you or may actually contain an underlying tax or other
liability you may not be aware of.
5) Risk Reduction
The cold hard facts are most Oil and Gas companies never drill on leases they
acquire.
And for those wells that do get drilled, the majority are dry holes. By
selling all or a
portion of your minerals or royalty, you are 'hedging your
interest' by insuring you receive
some income regardless of whether or not a
well is ever drilled. In addition, when an oil
company drills a dry hole on or
near your minerals, they may in essence 'condemn' your lands,
and it becomes
more unlikely that it will be leased again in the future. In essence, a 'bird in
the hand beats three in the bush' and 'have your cake & eat it too' are
reasoning behind this
sensible logic.
6) Investment Returns
'Buy Low, Sell High' is the golden rule for investments.
With oil and gas prices at an all time historic high, there has never been a better time to sell.
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