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1031 Oil and Gas: Oil and Gas FAQs

Can I sell my ownership in an Oil and Gas producing property?

Yes. It is a fractional or "Tenant in Common" type ownership. Under a working interest you are taking an assignment of an oil and gas lease, recorded in the respective county court house.
HERE IS AN ACTUAL CONVERSATION WITH A REAL ESTATE INVESTOR, CONSIDERING TO MOVE THEIR INVESTMENTS INTO THE OIL AND GAS BUSINESS:
Question: Doing a 1031 from rentals into oil property appear to be a desirable apporach. To give me a sense of liquidity/cost/profitability could you let me know:

The proceeds of a rental property into an oil and gas producing lease is an option. The oil property would be held under an oil and gas lease, and can be sold via an oil and gas auction, private sale etc., similar to real estate, but you do not have to engage a real estate agent. Search the web for The oil and gas Clearinghouse, www.energynet.com etc., there are a few auction companies out there (we do not endorse any of them, this is for information only). The profitability depends on the price of oil and gas and the status of your property, similar to real estate. The cost depends on the current production, upside of the well(s) etc. The market price of oil and gas dictates the ultimate RR, therefore we have no control, similar to real estate.

a) What has been the average Days On Market for these tenant in common interests to sell for the ones that you have listed/sold this year?

An Seller could place their properties in an auction and they would be sold that day. The Seller could contact the other Parties in the oil and gas properties to inquire whether they would be interested, or sell to anyone else.

You’re welcome to sell through anyone you wish. There are several options in which to sell a property, to other interest owners within the property or through an auction.

d) If oil/gas prices were to stay unchanged, how much would a typical decline in price per year be because of depletion of the product?

Every oil and/or gas well is different when it comes to decline curves. Granted, those that are in the same field, have the same characteristics will be similar. Secondly, oil and gas owners enjoy interesting tax benefits; check out the tax calculator on our web page, comparing real estate tax burdens and/or benefits and oil and gas tax benefits. Oil and gas offer an automatic 15% depletion of the gross revenues. Castlel Oil and Gas highly recommends to dicuss the tax rules and regulations with a licensed CPA.

For an interesting comparison of tax benefits of real estate to oil and gas properties, I invite you to work with our Investment Calculator (on the left of our Home Page). It compares a typical real etstae investment and a typical oil and gas nvestment. You can also change the numbers yourself from an actual investment you may have. You will be surpised at the NET INCOME at the end of the year.

Thanks again for your interest, please call anytime to discuss 1031 oil and gas exchanges.

Dana Veitch

303-829-7306 direct

www/1031energy.com

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