Owning oil and gas properties can be an expensive asset to maintain. “The most common reason for selling interests is that oil and gas properties are depreciating assets,” Royalty Clearinghouse reports. “Instead of waiting for the eventual production to cease, selling your interests eradicates the uncertainty surrounding these types of assets.”
When you’ve decided to sell oil and gas royalties in your possession, choosing the right buyer who will pay you a fair amount is crucial to making your investment worthwhile. This might sound easy but if you have not done the legwork and research beforehand, you might end up getting far less than you should for your oil and gas property.
If you’re considering liquidating your oil and gas royalties, there could be any number of reasons you’re deciding to cash out your investment. However, regardless of the seller, there are benefits to keep in mind if you sell oil and gas royalties from your investment portfolio, such as the tax savings, liquidity to invest elsewhere, and ridding yourself of the hassles of owning these royalties.
Sell Oil & Gas Royalties: What Does It Mean?
Before listing your assets with a broker or self-promoting it, you have to understand what it means to sell oil & gas royalties. “Selling your royalty is merely selling the stream of royalties you might receive if your land were put into a producing drilling unit,” explains Gateway Royalty. “The oil and gas royalty buyer cannot execute leases on your property and is not entitled to any future lease bonus money.”
Valuation of Oil & Gas Royalties
What exactly are you trying to sell? Depending on how long ago you made your initial investment, the value of your mineral rights has probably changed drastically. You can use a royalty calculator, such as this one, to get a ballpark idea of what your oil and gas property is worth before looking into your selling options.
To sell oil and gas royalties, you have to decide how you are actually going to sell it. Basically, you have four options:
- Digitally list your oil and gas property on a website.
- Work with a broker who will list your property online and market it through other channels.
- Use an investment bank to work directly with potential buyers, particularly for those who wish to keep the sale as private as possible.
- Act as your own broker and self-promote the oil and gas royalties you wish to sell.
No two sellers are the same so choosing the best option to sell oil and gas royalties depends on your needs, timeline, and other factors. There are benefits and disadvantages to all four selling options, and exploring each one thoroughly will help you choose what will make you the most money. For instance, when you self-promote and act as your own broker, you are in complete control of the sale, however, the deal relies solely on you and the time you put in. Working with an experienced broker takes a lot of pressure off of you in during the process but could cost you extra in additional fees.
Mistakes to Avoid
Ultimately, you want to choose the company that will pay you the most for your oil and gas property. However, if you do not take the time to research and explore all of your selling options, you could wind up losing out on the deal. To receive the lump sum you are expecting when you sell oil and gas royalties, talk to other royalty owners to learn from their experiences. You can also meet with brokers and banks to discuss your situation to see if they can offer you the best deal on selling your royalties. The biggest mistake you can make is jumping at the first offer you receive without completing your due diligence.
For those investors looking to sell oil and gas royalties, the most important tactic to execute is getting your property in front of the largest audience of interested companies as possible. This creates competition for your royalties and helps you increase the lump sum pay out you’ll receive when the sale is complete. If you are capable of engaging this audience without the assistance of a broker or bank, more power to you.
However, using a seasoned professional to drum up competing bids for your oil and gas royalties will maximize the value of your asset and make the overall investment far more lucrative for you. Really take the time to speak with brokers and meet with banks to learn how they can serve your needs and promote your oil and gas royalties to the biggest audience of companies possible.
If you’re ready to sell your oil and gas property or have more questions about the selling process, contact BWAB today to get started!