What are oil and gas mineral, royalty and overriding royalty interests?                               
 
Minerals, royalties and overriding royalties receive revenues from the production of oil and gas from a well without paying the drilling or monthly operating expenses from the well. The term "royalties" can be used interchangeably to mean mineral interests, royalty interests, or overriding royalty interests. However, there is a difference between minerals and royalties, and an even greater difference between overriding royalties and both minerals and royalties. The similarity between mineral interests and royalty interests is that both involve ownership of minerals under the ground. Both receive portions of the income from the production of oil and gas. However, the difference is that the owner of a mineral interest also has the right to execute leases as well as collect bonus payments; whereas, the owner of royalty interests does not execute leases or collect bonus payments. Even though mineral and royalty owners receive income when the well is producing, only the mineral owner receives the bonus payment upfront. Overriding royalty interests does not constitute an ownership of minerals under the ground. Rather, it constitutes ownership of a portion of generated revenues from oil and gas production in which the ownership expires when the lease has been neglected due to termination of production. Overriding royalties are created from the working interest. Therefore, like mineral and royalty owners, overriding royalty owners also receives a portion of the income from the production of oil and gas. However, the difference is owners of overriding royalty own only proceeds from the production of minerals and not the minerals under the ground. Overriding royalty interest expires once the lease has expired and production has stopped, whereas, minerals and royalties owners maintain their ownership after production stops.

Sector Overview:

The oil & 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 & drilling have traditionally been the mainstay of production/industry growth and investment has largely been confined to these two areas.
 
Long term investment vehicles are often vulnerable to changes in global market conditions, tax laws, and the inflation rate, all of which can dramatically impact expected returns. Investing in private royalties gives access to prime royalty and overriding royalty properties with existing cash flow and documented stability and growth. These quality properties incur no monthly expense or liabilities related to additional development, making it easy to track their performance record and potential yield. The result is attractive, risk-adjusted investment performance. Investing in royalties generates monthly income with low correlation to global equity and debt markets which can enhance overall portfolio returns.

Today, 1031 Exchange Alternatives is expanding into Royalty Fund Offerings - bringing the stable cash flow of diversified private royalty ownership to the private investment community.

History Of Private Royalties:

Astute investors seized the opportunity of investment in private royalty & gas interests in the early 1900's. This investment niche was a natural by-product of an overall increasing demand for oil. This new type of investment in the energy sector eliminated the complications of capital equipment and field operations and focused on one thing-royalties. No exploration. No drilling.

Exploration & Drilling vs. Private Ownership:

Royalty investment allows investors/sellers to participate in a powerful industry while remaining protected from market fluctuation and operational factors of the business. The risks associated with exploration, inactive wells, and unsuccessful drilling are eliminated because royalty investment is centered on proven oil & gas production numbers (past, present and projected). Investments and acquisitions are linked only to properties with existing equipment and adequately producing wells. Additionally, value is based on current production and estimates of proven reserves-not with the current price of oil & gas.


By investing into Oil & Gas Royalties you can execute your 1031 exchange, gain professional property/royalty management, and recognize immediate cash flow. Call us today or submit the form on the Contact Us page to learn more or examine currently available properties.