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Exchange Real Estate

for PRODUCING OIL AND GAS ROYALTIES

 
 

ENERGY ROYALTIES
& THE “LIKE-KIND” 1031 EXCHANGE

Investors have been enjoying the benefits of private royalty ownership and “like-kind” 1031 exchanges for over 60 years.

Oil and gas royalties investment began in the 1900’s. Owners of royalty assets receive monthly “mailbox money” from oil and gas companies who drill and operate wells on their property.

Oil and gas royalty assets qualify as a “like-kind” replacement for all forms of investment real estate. Private royalty ownership is an income-generating property investment that offers cash flow and portfolio diversification.

Unlike oil and gas drilling investments, royalty owners do not invest in capital equipment or field operations. Royalty interest holders do NOT get billed for exploration, drilling or operating wells, nor do they hare in any of the risks or liabilities associated with that side of the industry. Instead, royalty owners simply receive a share of each well’s revenue generated from monthly oil and gas production.

In 1968, the IRS published the Revenue Ruling 68-331 clarifying Section 1031 of the 1954 Act. The ruling established that real estate ownership interests, whether above or below the ground, met the definition of “like kind” for an exchange.

Over the past four decades, court rulings have re-affirmed that oil and gas royalty interests qualify as “like-kind” to all other forms of real property. In addition, several Revenue Rulings and Private Letter Rulings have further established the like-kind nature of royalties when exchanging out of traditional real estate. Investors have been able to take advantage of the 1031 tax deferral by exchanging between brick-and-mortar real estate and royalty interests.

Wolf Hanschen

CJ Tibbs

Josh Prier

HOW PEREGRINE
CAN HELP

Peregrine 1031 Energy Partners assists clients selling investment property, including selling oil and gas royalties, who are looking to diversify their 1031 Exchange proceeds into more than traditional real estate, especially with the low cap rates we are seeing in the market today.

Over the past two decades, our team of energy experts at Peregrine has worked to place over $250 million of 1031 exchange dollars. The founders of Peregrine have established relationships with mineral right owners around the country which provide a consistent pipeline of oil and gas royalties available for acquisition by cash and 1031 investors.

We specialize in sourcing high-grade portfolios of energy royalties across the country which our clients acquire directly into their exchanging entity. We’ve worked with clients from all 50 states and have helped source royalty properties around the country including Alaska, Texas, Oklahoma, Pennsylvania, Colorado, and North Dakota.

Do more with your exchange than just avoid the taxes. Benefit your portfolio by increasing its level of diversification and take advantage of the domestic oil & gas shale boom by owning the minerals.”
- Wolf Hanschen, Managing Director

ROYALTY
ADVANTAGES

 

Transaction Size Flexibility

Royalty ownership is a 1031-exchange alternative that allows you to customize your investment level. Whether you need $100,000 or $5,000,000 worth of replacement property, we can carve out the exact interest that fits your exchange.

Superior Cash Flow Potential

Peregrine typically targets royalty properties that generate annual returns over 2X what is available in today’s comparable real estate market.

No
Capital Calls

Investors in oil and gas drilling programs or tenant-in-common real estate offerings bear the risk of future capital calls. Royalty owners do not face this risk.

Investor Independence

Owners of undivided interests in royalty properties are not locked into an ownership structure that links them to other investors in the same property. Each owner is free to exercise control over holding period and exit strategy to suit individual investment objectives.

 
 

Tax
Savings

15% of royalty income is shielded from tax regardless of the carry-over basis from the previous property.

Portfolio Diversification

Cash flow from multiple producing wells and undeveloped acreage for potential future production can alleviate the risk of owning a single property or being over-concentrated in traditional real estate.

 

CLIENT FEEDBACK

“We wanted to diversify our exchange since we already owned a fair amount of real estate. Peregrine was able to find several royalty properties that fit our needs and helped bolster our monthly cash flow.”

“With oil and natural gas prices near historical lows, it made sense to make royalties part of our exchange… especially with the real estate market approaching all-time highs.”

“I like the independence that royalty owners enjoy, each being able to control their own hold or liquidation strategy. The typical higher returns over traditional real estate is also a nice plus.”

“We knew nothing about oil and gas, let alone royalties. Peregrine helped us understand the asset class and how their clients in the past had incorporated it within their 1031 exchanges.”

LEARN MORE

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