WANT TO LEARN MORE? With the proper due diligence and professional help, direct ownership of mineral rights can provide consistent royalties. These royalty- generating assets can serve as a reliable source of long-term income in the form of monthly checks. Whether you have a long-term or short- term strategy, mineral rights ownership can be profitable. To learn more about opportunities for direct ownership of mineral rights and other oil and gas assets, contact Eckard today.
lot of money, time, equipment, and expertise. Even the exploration phase is a difficult, intensive project that requires a company with a proven track record in the exploration and mining of minerals. For this reason, the easiest and most efficient opportunity is typically to sell or lease the rights to a company that can extract said minerals. In return, mineral owners receive compensation in the form of monthly royalty checks from the mineral rights sale or income based on a lease or royalty agreement. The most popular option is to sell the rights to a mineral rights broker or a reputable company that mines the types of minerals on your property. With this arrangement, you can either sell your property outright or sell the mineral rights and keep the surface property. If you decide to keep the surface property, make sure the company’s plans for the property don’t conflict with yours. For owners who want to enjoy assets that generate monthly royalty checks and also maintain ownership of their mineral rights, leasing the underground property to an established mining company is a good option. This arrangement yields income from lease payments and royalties from the yield of extracted minerals. The leasing contract establishes specific time periods, the royalty agreement, and other conditions. Also, if you own both mineral and surface rights, an oil company may pay you a flat rate to retain future rights to drill on the land.
be aware of. Here are some important factors to consider before delving into mineral rights ownership: Mineral rights ownership has advantages that other asset classes don’t have. It provides flexibility, granting you the options to: ▷ SELL THE RIGHTS FOR A LUMP SUM. ▷ GENERATE CASH FLOW WITHOUT MANAGING LABORERS,
ASSUMING LIABILITIES, OR INCURRING BIG EXPENSES.
▷ SELL ALL OR PART OF THE ROYALTY AGREEMENT WHILE MAINTAINING OWNERSHIP OF THE MINERAL RIGHTS. ▷ RECEIVE A “LEASE BONUS” BY LEASING THE MINERAL RIGHTS TO AN OIL COMPANY. ▷ DISPERSE YOUR INCOME. Most of the risks in mineral rights ownership involve elements of the unknown. For instance, if the leasing company doesn’t find minerals on your property, you don’t get royalties. There is also the remote possibility of buying mineral rights that are being developed by a subpar exploration and production company. This type of arrangement can bring negative financial and legal repercussions. Royalty rates for minerals like oil and gas depend on current demand. As a result, a major drop in commodity prices will negatively impact the value of your mineral rights. However, you can considerably reduce the risks in mineral rights ownership through education and thorough due diligence.
DERRECK LONG
Derreck Long is a senior wealth manager at Eckard Enterprises. He served in the military from 2010 to 2014 and then attended college at Northern Arizona University, where he received a degree in global marketing. After graduating college, Long worked with the FBI, but then started researching how to become an investor. He started experimenting in notes and has been a private lender ever since. Long has experience with a broad range of notes, including equity appreciation, second- lien notes to the traditional first-lien and mineral rights in the oil and gas space. Long is active on a government relations committee, where he researches tax code and new bill/law changes at the congressional level.
ADDITIONAL BENEFITS AND RISKS
Mineral rights ownership comes with other positive and negative features to
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