5 INVESTMENT RISKS OF OIL AND GAS MINERAL RIGHTS Kay Properties has long believed that certain asset classes are too risky for many 1031 exchange investors. Perhaps at the top of the list of these is the oil and gas production/mineral rights asset class. While it is true that oil and gas mineral rights have long attracted investors with the promise of outsized cash flows (often touting 10% or more), it is also true that beneath the allure of potential high returns lies a highly speculative and volatile investment class.
Unlike traditional investment, real estate, such as industrial net lease properties, and mineral rights are subject to risks that can be difficult, if not impossible, to quantify accurately. For many investors, this can translate into much lower cash flows than the oil company projected and
potentially include the total and permanent loss of capital. So, what exactly are some of the risks associated with oil and gas production and mineral rights? Six specific areas pose extreme risk to investors.
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