Investing in the Petro Industry – Buying Oil and Gas Royalties

by | Dec 9, 2014 | Business

You can invest in one of several ways in the petro industry. You can either make it easy on yourself and buy stock or become involved in more sophisticated investments. As royalties from the production of oil can last quite a long time, many investors like the idea of buying oil and gas royalties.

Investing in Oil Stocks

However, in all fairness, it does not hurt to look at the other investment areas before you decide. For example, you can simplify the investment process by investing in oil or natural gas stocks. All it involves is a call to a broker. Major companies include BP, Exxon Mobile and XTO. However, if you choose this approach, you have to remember the spills that have occurred as well in the recent past – all which pose a disaster and political risk.

Investing in an Oil Well

You can also incur a good deal of risk by buying an oil well. Either your entire investment will be lost or you will make sizable gain; you just don’t know what will take place when the rewards are so volatile. Of course, if you are a gambler, then the return can be as much as 10%.

Investing in a Lease

Naturally, buying an interest in a gas or oil lease can also produce good results. Plus the chance you will be faced with large, unanticipated expense is significantly reduced. The production from such a well is generally constant too. A superior return of as much as 15% can be realized when you invest in a lease. However, you can still be faced with risks that are associated with regulatory compliance or an accident-related lawsuit.

Royalty Trusts – The Advantages

If the above investments are not what you are seeking, then you can make sizable gains by either purchasing stock in royalty trusts or by buying oil and gas royalties. If you choose to buy stock in the trust, then, unlike buying stock in an oil company, you won’t have to worry about geopolitical risks. An expected return of about 8% can be realized over time. These kinds of investment are recommended for older investors who cannot afford to invest in stocks that may lose their initial value.

Buying Oil and Gas Royalties – High Gain and Low Risk

Buying oil and gas royalties, however, features several advantages, with the top benefit being the amount of the return. Investors can make as much as 50% from buying oil and gas royalties and adding the investment to their portfolio. Although buying royalties from owners is not as simple as calling your broker, it can be well worth your while. The low risk and high return that comes from buying oil and gas royalties makes it the number one choice of insightful and shrewd investors.

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