When people write or call in with questions, one that frequently comes up is how do I get information on a 1031 Exchange? Most of the time, the people calling are real estate investors that are selling their properties and want to look at tax advantages.
With the housing market looking like it has some dark clouds on the horizon, investors want to exchange their properties for some that have reoccurring revenge and tax advantages.
Rey Trevino, Pecos Operating Corporation, stopped by, and he was able to answer some of their questions. As an oil and gas executive, Rey understands what he has seen in the real world with the different types of exchanges.
Rey is on LinkedIn, and please connect with him HERE. If you connect with him, just tell him Stu sent you. I promise that he won’t hold that against you.
If you have any questions about Alternative Investments, please see go here for the free guide.
We would also like to thank our ENB Podcast sponsor. Enverus. You can find out more at their website: Enverus.com
Enverus-
A shout-out to our fellow travelers with Enverus.
Fellow Podcast Travlers:
Mark LaCour, Editor in Chief, OGGN
Paige Wilson, Host of Oil and Gas Industry Leaders and Co-Host of Oil and Gas This Week Podcast.
David Blackmon, Author, Industry leader, Podcast Host, DB Energy Questions
ENB Podcast with RT 1031 Exchange – Episode 85
Automatic Transcription Edited for Grammar. We disavow any mistakes unless it makes us better-looking or appear smarter.
Michael Tanner [00:00:00] Today’s episode of the Energy Newsbeat podcast is brought to you by in Enverus. The energy industry faces massive challenges every day, and the events of the last two years have caused huge disruptions like never before.
Michael Tanner [00:00:11] Companies in the energy industry need actionable intelligence and a single source of truth that brings all the data together.
Michael Tanner [00:00:17] Enverus is the energy specialized technology partner that provides intelligent connections for a global energy ecosystem.
Michael Tanner [00:00:24] Only Enverus has the analytics people experience and industry scope to connect the right data and information in the right way to discover missed opportunities and deliver fast outcomes. Find out more at Enverus.com. That’s EN-VE-RUS.COM
Stuart Turley [00:00:43] Hey, everybody. Welcome to the Energy News Me podcast. My name’s Stu Turley, president and CEO of the Sandstone Group, and I always love my podcast, but I’ve got one of my favorite compadres hanging around right now.
Stuart Turley [00:00:56] His name’s Artie Trevino. He is one of the head dogs over there at Pecos Operating, but he’s also a fellow traveler podcast host himself of the Crude Truth. Welcome, Artie. How are you today?
RT Trevino [00:01:11] I’m doing great today, Stuart. How are you doing?
Stuart Turley [00:01:15] I’ll tell you, I’m just having a barrel of fun, and there is so much news going on out there, Artie, you’re always on top of the news. And not only are you a NPR operator, you’re in the news, you got your podcast. You had a very nice, successful one just a little while ago with Ola.
RT Trevino [00:01:36] Yes. Yes, I did.
Stuart Turley [00:01:38] Now I’m going to do a little bit of a inside baseball with our listeners here. And that’s you and I and David Blackman are on the three podcasters walk into a bar.
RT Trevino [00:01:51] Yes. No, that one has been a blast. You know, for those out there that do know me and watch the Crude Truth get ready.
RT Trevino [00:01:58] By the way, I got two great railroad commissioner. What do you call those gentlemen? People running for office for real issues coming out to politicians, I should say.
Stuart Turley [00:02:09] There you have.
RT Trevino [00:02:09] My last one with Dan Clark. If you haven’t seen that one. Oh, boy. It was a great one. Just real great motivation.
Stuart Turley [00:02:15] Oh, it was fabulous.
RT Trevino [00:02:17] He I tell you what, he wow, he was such a great man. I’ve had to go back and rewatch this this past week just for myself when you.
Stuart Turley [00:02:26] Have an article coming out on that one so that article coming out on it is phenomenal since he is such an inspiration.
RT Trevino [00:02:34] Yeah, but, but no, but to talk about the three podcasters, it’s a little bit more relaxed you’ll come on it’s called three podcasters walk into a bar, we get to sit there, you know, shoot the hay, so to speak, and just talk about the oil and gas industry.
RT Trevino [00:02:49] And it’s been real great. I can’t wait for the one where we got to spend an hour with a road dog truck, Sirius XM Road, Dog Trucking.
Stuart Turley [00:02:56] So that’s the next one out. And then we had another one where you and David were in the bar. So and that was it.
Stuart Turley [00:03:05] But Artie, there’s some really wild things going on in the market right now, and that is the investor market is going this you know, this way in the stock market, alternative investments are all trying to figure out where to go.
Stuart Turley [00:03:20] We have a real estate side as well, too that is really important and as far as news, our energy news, the website and everything else is just doing phenomenal.
Stuart Turley [00:03:32] And alternative investments is some of the biggest ways are trying to get away from their stock market.
RT Trevino [00:03:39] Yeah.
Stuart Turley [00:03:40] Therefore one case, everybody’s looking at it going, they’ve lost 25% here this year. And so you and I have been talking about royalties in a year.
RT Trevino [00:03:52] Yeah,.
Stuart Turley [00:03:52] And AMP, let me throw this out at you because a lot of those real estate folks may need a 1031 exchange because if they sell a property, there’s tax benefits for going into the 1031 and can you explain a little bit about that?
RT Trevino [00:04:08] Yes, no, thanks. First of all, let’s you know, since this is not a show, thank you so much for having me back on the Energy News Beat Stu always enjoyed it always enjoyed just talking with you.
RT Trevino [00:04:20] Yes. So there are some great advantages to 1031 exchanges and what those really are is it’s really as if you’re buying another piece of property and to where you can roll all the funds from that seller that property into a royalties or a mineral property that is already cash flowing, a lot like a commercial building or a portfolio of houses and real estate.
Stuart Turley [00:04:49] Wow. So if somebody sells a big house or if somebody sells an office building or if somebody sells a multifamily building, they’re going to look for tax advantages when they do that. And I understand that, correct?
RT Trevino [00:05:05] Yes, you’re absolutely right. Because when you’re looking at, you know, you buy a piece of property, you know, the goal is for it to go up in value and when you sell it, you’re going to sell that for profit and you do have your capital gains tax if you were able to do something there.
RT Trevino [00:05:21] However, when you do a 1031 exchange, you’re basically taking a property that you may have bought for 750,000 and sold it for a million, and now you’re taking that 4 million and rolling it into an income, producing minerals or royalties property.
RT Trevino [00:05:39] And the really cool part about that is not only is it Income Producing, just like your portfolio that you had of ten or 20 house rental houses or that big commercial building with several different businesses in there. But you don’t have to worry about the TNT, and I’m talking about the tenants and the toilets. This is a flowing product. Yeah.
Stuart Turley [00:06:01] I was like, Wait, what? And so that is hilarious because that can get a little goofy sometimes.
RT Trevino [00:06:10] Oh, absolutely. It can get a little goofy. And you know, the cool part about a mineral income producing property royalties is that, you know what? It’s good to let’s say you get a package deal you know I’ll be easy 10,000 acres and only 50% of it is actually drilled don’t dare I say producing.
RT Trevino [00:06:33] In the next year, you could have another ten wells drilled on that remaining acreage that’ll then even increase the value not only of your property but of your royalties income checks that you get every month.
Stuart Turley [00:06:48] Wow! Now that’s pretty darn cool. And from the industry, I’m seeing that we’re going to need all the energy we can get and we’re going to need gas, we’re going to need oil, and we’re going to need tax deductions. With the 87,000 IRS agents covered.
RT Trevino [00:07:10] Yes.
Stuart Turley [00:07:13] So what you know, as an EMP operator, you have funds that are available, that are already producing oil and gas so they have passive income when they invest there.
Stuart Turley [00:07:27] But on a royalty, there’s a difference between the two. What’s the difference between an EMP? We talked a little bit about the real estate. What’s the difference between an MP and a producing and then what you described with the royalties and then all of a sudden, if one are well-known?
RT Trevino [00:07:45] Yes.
Stuart Turley [00:07:46] Two different.
RT Trevino [00:07:47] They are. Yes. No, you’re absolutely right. See, they are two different they’re two different entities all together. If I can use the word entity, I’m not one not a word expert sometimes.
RT Trevino [00:07:59] But when it comes to ENP exploration production, what we have are properties and packages where we are drilling oil and gas well on these leases. Okay. And what it is, is that I already have production and I’m going to go in and drill more wells.
RT Trevino [00:08:17] And what people are purchasing is known as working interest for then they can use tax deductions on all the tangible and intangible costs, and they can even write off up to up to a certain amount of money every year on their taxes, on those tangible and intangible cost of drilling an oil and gas well.
RT Trevino [00:08:43] And so that’s where the MP with the working interests, with royalties or minerals in these income producing minerals. It is as if you are the one that owns the underground minerals,.
RT Trevino [00:08:56] For example. You know how like a lot of people own their home and they own the minerals that are just underneath the ground. So you would then own, you know, the farmer that probably passed away the kids weren’t into this little bit of money, so we buy those royalties from them, then their income producing to us.
RT Trevino [00:09:15] And so then if a big publicly traded company like a Chevron or an Exxon comes in and then they start pumping out more wells well, that’s money right off the top, because the general rule is that the mineral owner gets 25%, sometimes a little more, sometimes little less.
RT Trevino [00:09:34] And so that means that when that well comes in online and that’s just what each well, that comes online, they get right off the bat 25 out of every hundred barrels they get 25 barrels right off the top.
RT Trevino [00:09:48] And that’s for every single well that comes online. So that’s and there’s no other than the normal taxes that come along with that. You don’t have any other taxes. You’re not paying anybody else that’s as if you own the land and you’re the minerals and they’re coming and putting a hole right there and you’re producing.
Stuart Turley [00:10:08] Well team, when you sit back and take a look. I we are not giving financial advice right now, but what we are is just informing folks so that if you do need some advice, go to your CPA. Just throw that disclaimer.
RT Trevino [00:10:23] Oh, absolutely. Yes. No. You know, we’ve what we’ve what we have found very unique and very neat about these income producing royalties minerals is are these 1031 exchanges that you can do.
RT Trevino [00:10:37] So when we have had properties in the past that it’s like, oh, we’re going to sell these and we want to do our best to sell them at a good price, but we haven’t just found that right property yet,.
RT Trevino [00:10:50] Then we can sell that property moving into these minerals that do a 1031 exchange that’ll go up in value while the publicly traded companies are drilling new wells on it and will we see the that next great commercial real estate property that we want to go.
RT Trevino [00:11:09] We can sell those mineral rights and then go by that. And guess what? We didn’t have to spend a single dollar on any taxes because all that continue to roll as a 1031 exchange from property to property.
Stuart Turley [00:11:23] Oh, that’s kind of cool.
RT Trevino [00:11:26] It’s very unique. We like it.
Stuart Turley [00:11:28] We like following the rules.
RT Trevino [00:11:30] So yes, So when we’re about to have 87,000 more IRS agents,.
Stuart Turley [00:11:36] My goodness.
Stuart Turley [00:11:38] That that just kind of makes the head hurt a little bit. But if people want to reach out to you, how would they find you? RG Oh.
RT Trevino [00:11:46] They could definitely find us at our Paco’s country operating that’s PC operating dot com and of course I’m on LinkedIn at Ray Trevino the third r e wide and I’ll see you there as well.
Stuart Turley [00:12:01] Your website is also the crude truth.
RT Trevino [00:12:05] Yes yes. No by the crude truth that com. I can’t believe this day and age in 2022 that the crude truth was available but the crude truth that come and you can definitely reach me there as well.
Stuart Turley [00:12:19] All right. Well our thanks for stopping by the Energy Newsbeat podcast and till the next time.
