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Reasons to Sell
Statewide Minerals Company is commonly asked why someone should sell their oil and gas royalties. We have experienced almost every one of those reasons over the years we have been in business and here are the most common reasons:
Preference of lump some payment now: This seems to be the most common reason for selling. Some people prefer to have a lump sum payment now in order to do various things such as retire high interest credit card or other personal debts, put a down payment on a home or car, pay medical expenses or pay off federal income taxes.
Market volatility: Oil and gas assets, like no other, are subject to so many outside forces and uncertainties such as weather, political turmoil, geographic unrest, possible future political involvement such as windfall profits tax and carbon tax and of course up and down swings in world wide economies.
Elimination of added paperwork Possession of oil and gas properties forces taxpayers to maintain a depletion schedules for your tax returns. Also, bookkeeping can be quite cumbersome when trying to keep up with the various tiny royalty interests you might have.
Eliminating a depleting asset All oil and gas properties are a depleting natural resource. Like death and taxes, all producing oil and gas assets will eventually quit producing. Rather than wait for the inevitable, the divesting of these properties allows you to redirect your assets into appreciable assets like the stock market and real estate.
Elimination of Property taxes: Getting that tax bill, or ad valorem tax bill, from anywhere from 5% to 10% of your total income off your production can be quite frustrating after paying your regular federal, state and property taxes. These ad valorem taxes are based on the future value of the property and not the actual income made from the oil and gas produced from the property. The amount of tax is also driven by the school or county's tax base. Some counties property taxes can exceed 25% of the income.
Take advantage of current tax codes: The income derived from selling your oil and gas properties would fall under the long term capital gains tax, if you have held it over a year. This tax is one of the lowest tax rates in the world at 15%. This tax rate could change depending on the countries political climate but at it's present rate it is the lowest it has been in over half a century making for a tremendous opportunity if your in the market to sell.
Alternative to fractionalizing an asset to estate heirs: Many times an estate will have many heirs to oil and gas properties that make little or no income. Selling provides an estate with ability to exchange these tiny fractioned interests for cash so that heirs of the estate might inherit a more manageable asset. This is particularly helpful when heirs have little or no knowledge of the oil and gas industry. Also, the transfer of these properties can be cumbersome and confusing, leaving heirs with a lot of work while providing sometimes little reward.
Selling in a sellers market: This section might have to be updated as soon as tomorrow but at current prices and the current tax environment, there is no question we are in a sellers market. Buy low, sell high is not only good financial advice but with oil and gas at historical highs, selling is highly justified. However, no one, including Statewide can predict the future of prices but we can look at history and know that there was a time not long ago when the thought of prices reaching these levels would cause much laughter among peers.
Preference of lump some payment now: This seems to be the most common reason for selling. Some people prefer to have a lump sum payment now in order to do various things such as retire high interest credit card or other personal debts, put a down payment on a home or car, pay medical expenses or pay off federal income taxes.
Market volatility: Oil and gas assets, like no other, are subject to so many outside forces and uncertainties such as weather, political turmoil, geographic unrest, possible future political involvement such as windfall profits tax and carbon tax and of course up and down swings in world wide economies.
Elimination of added paperwork Possession of oil and gas properties forces taxpayers to maintain a depletion schedules for your tax returns. Also, bookkeeping can be quite cumbersome when trying to keep up with the various tiny royalty interests you might have.
Eliminating a depleting asset All oil and gas properties are a depleting natural resource. Like death and taxes, all producing oil and gas assets will eventually quit producing. Rather than wait for the inevitable, the divesting of these properties allows you to redirect your assets into appreciable assets like the stock market and real estate.
Elimination of Property taxes: Getting that tax bill, or ad valorem tax bill, from anywhere from 5% to 10% of your total income off your production can be quite frustrating after paying your regular federal, state and property taxes. These ad valorem taxes are based on the future value of the property and not the actual income made from the oil and gas produced from the property. The amount of tax is also driven by the school or county's tax base. Some counties property taxes can exceed 25% of the income.
Take advantage of current tax codes: The income derived from selling your oil and gas properties would fall under the long term capital gains tax, if you have held it over a year. This tax is one of the lowest tax rates in the world at 15%. This tax rate could change depending on the countries political climate but at it's present rate it is the lowest it has been in over half a century making for a tremendous opportunity if your in the market to sell.
Alternative to fractionalizing an asset to estate heirs: Many times an estate will have many heirs to oil and gas properties that make little or no income. Selling provides an estate with ability to exchange these tiny fractioned interests for cash so that heirs of the estate might inherit a more manageable asset. This is particularly helpful when heirs have little or no knowledge of the oil and gas industry. Also, the transfer of these properties can be cumbersome and confusing, leaving heirs with a lot of work while providing sometimes little reward.
Selling in a sellers market: This section might have to be updated as soon as tomorrow but at current prices and the current tax environment, there is no question we are in a sellers market. Buy low, sell high is not only good financial advice but with oil and gas at historical highs, selling is highly justified. However, no one, including Statewide can predict the future of prices but we can look at history and know that there was a time not long ago when the thought of prices reaching these levels would cause much laughter among peers.