Owning mineral rights can be quite lucrative. By leasing the rights to the hydrocarbons underneath the surface of the earth to operators wanting to drill wells, you can enjoy significant earnings, without the risk associated with having a working interest in an oil or natural gas well.
The average landowner typically lacks the knowledge and experience to turn their real estate into lucrative mineral rights leases. The chances that you own a large amount of acreage in a desirable area (such as the STACK or SCOOP Plays) are very slim. Yet, investments in mineral rights can be a tempting endeavor for investors looking to create cash flow and build wealth without all the financial risks and commitments that come with working interest projects.
That is where mineral funds, like Redhawk's Minerals Fund II, come into play. By allowing multiple investors to participate in the project, acquiring and managing large amounts of mineral rights can lead to significant profits, for all involved. Here is how one can profit from investments in minerals funds.
Investments in minerals funds allow you to access prime real estate.
When it comes to purchasing and leasing mineral rights, location is critical. Where the mineral rights are located is one of the biggest factors that determine their value and desirability. For example, land located in Maine is unlikely to contain significant amounts of gas or oil. But, land located in the STACK or SCOOP Plays of Oklahoma, or the Permian Basin of Texas, are much more likely to contain enough gas and oil to create long-lasting, revenue-generating wells. As a result, mineral rights are far more desirable, and valuable, in those latter areas.
However, unless you are one of the rare (and fortunate) individuals who have land in or near these preferred geographic areas, it can be difficult to earn a profit from mineral rights leases. If you want to participate in the wealth generating possibilities of mineral rights investments, you will need to consider making investments in minerals funds.
These funds use the money provided by participants to identify, acquire, manage, and lease land in desirable locations. For example, Redhawk's Minerals Fund II is going to be located in the STACK Play in Oklahoma, currently one of the most productive areas for oil and gas.
By obtaining mineral rights in these locations, and then leasing them, mineral funds maximize their profits and minimize their risks. As a result, your oil and gas investments are much more likely to yield a healthy ROI.
Investments in minerals funds give you access to upfront lease bonuses.
Instead of waiting for months or years to begin realizing profits from an oil and gas investment, you can begin to earn money almost immediately when you make investments in well-located minerals. These early returns usually take the form of upfront lease bonuses.
These bonuses are lump sums of money, agreed upon when you draw up the leasing documents, that are usually paid out within 90 days of the signing of the lease. This money is paid by the company leasing the mineral rights regardless of whether they ever find anything underneath the land, and regardless of whether or not they ever even drill.
When you make investments in minerals funds, you can bank the lease bonuses as they are paid out. That means that you begin to earn money back on your investment almost immediately after signing a lease agreement, and leases bonuses are separate from any production revenue or activity on the part of the company leasing the mineral rights.
Investments in minerals funds gives you the ability to earn monthly royalties.
An upfront lease bonus is not the only way investments in minerals funds can earn you a profit. These types of leases also include monthly or quarterly royalty payments based on the gross amount money earned by producing the minerals (in this case, oil and gas) underground. For example, royalty payments can be anywhere from 12.5 percent to 25 percent of the gross revenue generated by the well.
These monthly or quarterly royalties have a number of advantages that make them lucrative ways to earn a profit through mineral funds ownership. Remember, the royalties are paid from the gross revenue of the well. This means that they are based upon the revenue that the well generates before any taxes, operating expenses or other costs are deducted from the total amount.
In addition, you only pay taxes on produced barrels of oil from these royalty payments. This means that you earn a significant profit off of every barrel of oil produced by the wells. In fact, investments in minerals funds are some of the best ways to make a real profit without a lot of upfront expenditure or upfront risk within the oil and gas industry.
Investments in minerals funds require no capital expenditures or dry hole costs.
Typically, oil companies and others with working interest ownership in the well need to pay out a significant amount of money before they can begin to realize profits off of their oil and gas investments. For example, an oil company must put forth large capital expenditures to explore the proposed drilling site, obtain the drilling equipment, drill and complete the well and so forth.
In addition, oil companies face potential losses associated with dry holes, that is, wells that do not produce oil or gas. The expenditures sunk into these wells can often result in significant monetary losses for affected companies.
Investments in minerals funds, on the other hand, require no capital expenditures, operating expenses or dry hole costs. Instead, these investments provide the mineral rights owner (in this case, the mineral fund) with profit that is not tied to any output of expenses. For example, the upfront lease bonus and monthly royalty payments are paid out without any expenditures by the mineral rights owner.
Mineral rights owners are also free from the burden and cost of dry holes. While a well that does not produce any oil or gas will not produce any monthly royalty fees, the owner will still receive the upfront lease bonus and still avoid losses associated with paying out money for a project that never produces a meaningful revenue stream. These two facts combined make investments in minerals funds not only profitable but also low risk.
Redhawk, with Red Rock, has 95 years' worth of combined experience, positioning us to provide desirable and profitable investment opportunities for qualified and accredited investors. Our Minerals Fund I project is currently exceeding expectations, and our Minerals Fund II project is anticipated to produce similar profitability for investors. If you want to learn more about this project and how to participate, do not hesitate to reach out so you can experience the benefits of investments in minerals funds.
The material herein does not constitute an offer to see nor is it a solicitation of an offer to purchase any security. Offers will only be made through a private placement memorandum to accredited investors and where permitted by law. Investments in security are not suitable for all investors who can withstand the loss of their investment. Investors should perform their own investigations before considering any investments and consult with their own legal and tax advisors. Past performance does not guarantee future results. This presentation is copyrighted material and only for the use by Redhawk Investment Group and its affiliates.