1031 Eligible Oil and Gas Royalties - A different security blanket
Posted by Andy Gustafson on Mon, Mar 28, 2011
Oil and gas royalties provide 1031 exchanges with a different kind of security blanket. Miriam Webster Online (m-w.com) defines a security blanket as a usually familiar object whose presence dispels anxiety. I think that fits pretty well with the idea of finding investment security as well… Hard assets such as oil and gas minerals have a strong appeal to those who are experiencing anxiety about the devaluation of the dollar, hyper-inflation and want to diversify their 1031 exchange.
Why the play on words? Oil and gas royalties tied to BLANKET Shale…
Blanket Shales are tight geologic formation’s that literally blanket hundreds or thousands of contiguous acres and are known to contain potentially billions of barrels of oil and/or natural gas. Recent advances in horizontal drilling technology have created a new “oil boom” here in the U.S. and over the last three years, while most of us have been trying to get through one of the toughest recessions in U.S. history, Billions of dollars have been invested into our domestic onshore oil and gas shale plays by the biggest and best oil and gas companies in the world.
Conclusion
So, why does blanket shale present for me a security blanket? Because I can diversify a 1031 exchange into mineral properties, that contain these shale oil and gas assets, with a great degree of certainty that I own a very popular commodity and am essentially partnering with the biggest oil and gas producers in the world by owning those assets that they are actively producing. In doing so, I benefit from owning the hard asset of oil and gas reserves in the ground, and receive monthly royalty income as the oil company sells the oil or gas that is produced from the blanket shale that I own.
Now there’s a blanket that reduces my anxiety…
Guest author Mark Mersman is Managing Director with Unity Resources LLC in Plano, Texas. He manages a wealth management firm helping high net worth individuals identify and benefit from alternative investment opportunities in the oil and gas shale market. Contact Mark at 972.378.0261 to discuss.