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 1990’s. 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. Instead, royalty owners simply receive a share of each well’s revenue generated from monthly oil and gas production.
In the early 1940’s, court rulings re-affirmed that oil and gas royalties investment qualify as “like-kind” to all other forms of real property. Since these rulings, investors have been able to take advantage of the 1031 tax deferral by exchanging between brick-and-mortar real estate and royalty interests.
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.
Our team of energy experts at Peregrine has worked to place over $ 250 million of 1031 exchange dollars over the past decade and a half. We specialize in sourcing high-grade portfolios of energy royalties across the country which our clients acquire directly into their exchanging entity.
“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.”