While we all envy the person on television like Jud Clampett that receives some great news on a royalty interest, (or misses a rabbit only to hit oil) …in real life frequently this can be more trouble than gift.
Living in Texas a state that produces oil and natural gas royalty rights are very popular and frequently handed down from one generation to the next.
Continued Disposition Problems
We are continuing to run into an ever increasing number of need to dispose of seemingly small mineral right properties that maybe had an offer at one time or another that actually cost more to dispose of them the offer.
Please don’t run out and dump that long ago relative’s income producing oil or gas property that has been in the family for years producing a nice monthly check … but the hundred dollar or seemingly worthless offer for that very small parcel of land that has a very small mineral right may be a good offer not only from a small tax reporting over the years that you may have to do but also from an organization standpoint in your estate.
While there are exceptions and of course when oil prices were in the mid 100s there were extreme cases of payments, it is very likely if you are receiving a very nominal amount of money from your mineral interest over the past decade that that mineral interest likely has very little value and maybe more of a burden to you from a tax standpoint and especially to your heirs from an estate cleaning standpoint than it’s worth.
No Need to Be Reckless – Do some Research
This is once again not an endorsement to go recklessly sell the mass form of income property but rather a recommendation to maybe think twice and do a little research when receiving a seemingly low offer by a professional mineral person who wants to consolidate his portfolio and take that interest off of your hands!
Have a Great “Cleaner Estate” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
What Do You Say When Someone Says They Will Give You Their Oil? …. Sorry, No TANKS … Neat Chart Explaining
On Monday while in a Zoom study group meeting, an Oil Futures contract expiring on Tuesday went negative ….
What?
Yep … in theory, had you bought one of those Futures contracts (there were about 100k open interest), you would be the proud owner of 1000 barrels of oil, AND the seller would pay you to take his oil….. the only issue, you need some place to store it!
Being forever market nerds … when the contract went negative about 5 different alerts hit my vision and Donald “The Brain” texted within about a minute… Digressing…
Interesting Chart of the Events, Stay Tuned
Take note of the cost to store oil, late in this chart ! Hence the reason to “Pay” to get rid of the oil, plus the possible cost to shut the rig down….
Enjoy!
Of course from our friends at Visual Capitalist…. Well done guys!
Have a Great “Free Oil” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
-96.808100
Share this:
Like this:
Leave a comment
Posted in Investing/Financial Planning, Market Comments
Tagged Futures, Negative Oil, Oil, Oil Future, Visual Capitalist