Reasons To Sell

There are various reasons why an entity or individual would consider selling. The following are some of the more common reasons why people sell their oil and gas properties.

Bigger Payout Now: Rather than waiting for monthly, quarterly, or yearly checks to arrive, selling would provide a lump sum cash out opportunity. This type of payout would allow for the elimination of high interest credit card bills, home or car payments, medical expenses, or any other number of liabilities.

Elimination of Paperwork: The sale of oil and gas properties can help eliminate the necessary maintenance of depletion schedules and property tax records. In addition, selling would simplify a federal income tax return. The paperwork and financial record keeping associated with owning oil and gas properties can be cumbersome and tedious for anyone not dedicated to this type of asset management.

Depleting Assets: All oil and gas properties are depleting natural resources, not appreciating financial assets. Rather than wait for the day when the property stops producing, proceeds from a sale will give the financial ability to redirect assets into investments that will appreciate over time.

Elimination of Trusts, Estates and Partnerships: The sale of properties held in a trust or estate would help eliminate associated expenses as well as the need to maintain separate bank accounts. It would also allow for the elimination of monthly distributions and their associated tracking, as well as simplifying tax returns.

Fractionalization: As minerals and royalties are handed down through various generations, they become increasingly fragmented. Because of this, the economic benefit to each generation declines exponentially. They also become more expensive and complicated to manage and pass down.

Tidying up an Estate: Many interests, after having been divided several ways, have relatively little financial value to the heirs. Also, many heirs know little or nothing about the paperwork associated with transferring and maintaining an oil and gas property.

Elimination of Property Taxes: Texas property taxes, also known as ad valorem taxes, are assessed based upon the future value of the oil or gas instead of the current income from the oil or gas. The amount of tax is also driven by the school or county's tax base. Some counties levy property taxes exceeding 25% of income.

Removal of Uncertainty: Oil and gas assets are subject to many uncertainties such as alternative energy, political taxation (e.g. windfall profits and carbon tax), and foreign oil (aggressive foreign imports drive down U. S. oil prices). Weather variances also dictate pricing. A mild winter for example would drive natural gas pricing down, as the demand would be lower at that time.