Thinking About Selling Your Oil & Gas Interests? Read This First!

If your property has oil and gas interests, you have probably been approached by a number of salespersons and companies. These people are focusing on one thing: getting you to sell your mineral rights to them for a one-time cash payment. Keep reading to find some reasons why it may be smart to sell your rights and other reasons why selling might just be the worst thing you can do. 

Pros for Selling

Of course, one of the biggest incentives that may prompt you to consider selling your oil and gas interests is the possibility of a large lump sum cash payment. This can come in handy in a variety of ways, especially during some of life's rockier seasons.

Perhaps, you have been in need of extra money for a while now to offset the cost of your kid's college education, to take that around-the-world voyage you and your spouse have been dreaming up since retirement, to start a new business venture, or to remodel a home. All of that can be made possible if your interests are deemed worthy of a large upfront payment. 

Another factor that you might consider for selling would be a significant tax savings. If you owned your interests for at least a year or more, the sale of the rights would be labeled as "long-term capital gain". A one-time lump sum payment is generally taxed at a 20% rate which could mean less taxes paid out over the long haul. Taxes on those monthly royalty checks can certainly add up if you are in a higher tax bracket!

Pros for Keeping

Put simply, if you are not in dire need for cash, then selling your rights might not be necessary. One of the perks for selling is that you can get the money you would typically receive spread out over a period of time all at once. While this may be an advantage for some, if you are not pressed for cash, you might want to hold on to your rights for now. At least forego selling until you have gotten the appropriate legal counsel from an oil and gas lawyer (such as Roberts Miceli Boileau & Doutt LLP). 

Furthermore, if you have a strong instinct that your rights might be worth a good deal more than you would make in a one-time sale, then you may be well-advised to keep them. In some cases, a lump sum cash payment may actually be less than what the long-term worth of your oil and gas interest. However, it is necessary to have your property evaluated to know this for sure.

If you are still not fully decided on whether you should sell or keep your mineral rights, contact a trusted oil and gas attorney to discuss your options today.