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Why Does My Conveyance Say Ten Dollars Instead of the Sale Price?

Royalty and mineral interests are a form of real estate.  There are two ways to transfer real estate from one party to another, by gift or by sale.  In order for a sale to be valid, something of value must be exchanged for the property.  This is something of value is known as consideration, and in our case is whatever it is we are paying you for the property.

The first paragraph of our Conveyance states:  "in consideration of the sum of Ten and more dollars ($10.00) cash in hand paid and other good and valuable consideration."

Volume Risk and Price Risk

Owning oil and gas interests has two main types of risk that an owner needs to be aware of. Factors outside of your control may result in large and unexpected gains, or may lead to sudden loss of income. In this blog post, I’ll explain how I view these factors.

Understanding 1031 Exchanges

One of the tax advantages that mineral rights owners may be able to take advantage of as a result of the sale of their mineral rights is called a 1031 Like-Kind Exchange. By using a 1031 Exchange, you can actually qualify to pay no taxes at all on the proceeds of your sale.

Value Determination

The absolute best way to determine value would be to engage an oil and gas engineering firm to calculate a market value based on assumptions about future production and product prices.  These firms are mostly located in the cities you would think of as being in oil and gas country. Houston, Dallas, Tulsa, etc.

One could also get an offer or offers from the company operating the lease, from a royalty buyer such as TAS Royalty Company, or from an independent investor or investor group.

Please give me a call if you would like to discuss this further. 

 

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