Gallatin Natural Resources, LLC (Gallatin) works hard to help mineral & royalty owners understand the opportunities and options available to them. Gallatin ensures both parties are treated fairly and is committed to honest and ethical transactions. Ultimately, we seek to create win-win scenarios. Deciding to sell mineral & royalty rights is a personal decision, and each individual’s situation is different. Here are a few reasons why a mineral owner may want to consider the sale, or partial sale, of their oil and gas mineral & royalty rights:
Partnering Together – It is our philosophy that when we purchase a portion of a mineral owner’s interest, we are partnering with that owner for the long term. With Gallatin as a co-owner in your mineral tract, you are partnering with experts in the energy industry that will advocate for your best interest in the future. We strive to learn an owner’s current situation and are able to assist in the introduction to a well-qualified financial advisor or 1031 like–kind exchange tax expert. Our goal is to create win-win scenarios and help a mineral owner achieve financial security.
Capitalizing Today – Oil & gas plays come and go, and prices go up and down. What is promising today may not pan out in future years. Across the country, drilling has slowed significantly or come to a halt due to falling commodity prices, specifically natural gas. By capitalizing on your mineral asset today, you can hedge against any uncertainty that the future holds.
Tax Savings – If you signed an oil & gas lease on your mineral interest, this may have resulted in a hefty tax bill. Lease bonus payments, as well as monthly royalty income generated by a productive well, are treated as ordinary income. However, a sale of oil & gas mineral rights typically qualifies for long-term capital gain taxation, generally resulting in a lower tax rate. Additionally, in most cases, sale proceeds can be used in a 1031 like–kind exchange to purchase new property and defer the tax entirely.
Delays in Development – As a mineral owner, development timing of your mineral interest is out of your control. Typically, an oil & gas lease gives exploration companies 3, 5 or up to 10 years in which to begin drilling. For owners that would prefer to capitalize on their mineral rights today, selling may be an option to consider.
Marginal or Uneconomic Wells – Unfortunately, there is no sure thing in the oil & gas business. Even when wells are generally productive in an area, there can be considerable variation between them – poor wells can occur beside good ones. This means even if your land is drilled, resulting payments could be lower than expected. By selling a portion of your minerals now, you hedge against the possibility of poor wells being drilled under your property and assure yourself a significant cash payment.