How To Make Money Investing In Oil And Gas

 Aug, 23 - 2017   Financial

Oil has represented wealth to Americans since well before the days of Jed Clampett and the Beverly Hillbillies. While it’s not very likely that a farmer will magically discover oil while hunting or digging the garden, there are still many ways to get rich on oil and natural gas, the two top energy resources that power the world. The following are just a few of the ways that people are making money in the oil and gas industry.

Drilling Rights

Some people own the ground where oil wells are drilled, just like Mr. Clampett, and receive large monthly royalty checks. Others may not own the land, but they own drilling rights, which they lease to an oil company for a profit. In some states, like Texas, mineral rights and surface rights may be separated, so different owners hold title to the land above ground and the well itself. Sometimes, these rights are inherited and can be discovered in court records of land ownership.

Well Ownership

Another way to make money in the oil and gas industry is by owning, or sharing ownership in, a well. In 2012, legislators increased the number of shares a company could sell to investors without going public, and this opened the door to many smaller companies that wanted to buy oil wells. Investing directly in oil wells can be very lucrative, sometimes tripling the initial investment when the well turns out to be a productive one. Owners of wells actually own the oil that comes out of the ground, so they earn all of the profits from selling it.

Stocks

Investors who prefer a more hands-off approach can consider investing in mutual funds or exchange-traded funds (ETFs). These investments are baskets of stocks that spread out the risk and follow the energy sector as a whole. An alternative is to purchase stock in large companies that specialize in oil exploration and development. These companies have a strong track record of good performance and are likely to offer healthy returns.

There are many opportunities for investors in the energy sector these days and many success stories. To learn more about investment opportunities in oil and gas, check out these reviews of top stocks and analyses of industry trends.


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