WHY SHOULD I SELL MY MINERAL RIGHTS?

Cash Brings Certainty

Significant risks are involved in the oil and gas business and cash today reduces your exposure to these risks. Some of the key risks include oil prices, production of wells and development timing. Energy prices are volatile and unpredictable, and many people who own mineral rights would rather not deal with the risks associated with ownership.

Diversification

The value of minerals can fluctuate dramatically and selling some or all of your interest allows you to diversify into other investments that are more stable.

Tax Considerations

When you sell oil and gas assets that you've owned for more than a year, any long-term capital gain proceeds you receive will be taxed at rates of only 15% in many cases, whereas bonus and royalty income is always taxed at regular income tax rates, which can be as high as 39% if you're in a high tax bracket. Please check with your tax or investment professional for questions related to tax or investment advice.

Oil and Gas Interests are "Depleting Assets"

Ownership can be more profitable over the long run than selling, but only if everything goes well. It's very difficult if not impossible to predict how profitable (or not) a property might be in the future, and no matter how good a producing well is, it will eventually stop producing as the field it's producing from becomes depleted. Once that happens the mineral rights will be virtually worthless. New drilling technologies do occasionally bring old areas "back to life", but once the oil and gas is really gone, so is the value of your mineral rights. This is why mineral rights are classified as "depleting assets." Since it's hard to predict exactly when a well or field may become depleted, many people decide at some point to convert some or all of their mineral properties into other assets that are more predictable and less risky.

Estate Management

It is usually easier to liquidate mineral holdings while you are living and let your heirs inherit cash rather than mineral rights. If you die, and own mineral rights in more than one state, your estate would have to be probated in each of them in order for title to pass to your heirs in most cases. In addition, if you reside in one state at the time of your death, but your mineral rights are in another, your estate would perhaps need to be probated in both states in order for title to pass to your heirs. This can result in a lot of expense and headache for an estate, and thus your heirs.