How To Invest In Oil..."what your Stock Broker Won't Tell You!"
by MW Childers
Most stock brokers will not tell you about a little known oil & gas industry secret involving direct oil and gas well investment programs and the fact that there are other ways to invest in energy. While most investors are familiar with online trading and trading directly through their stock broker, investing directly into an oil well or group of oil wells can be both financially beneficial as well as provide some significant tax benefits. You choices aren’t limited to just publicly traded stocks such as Exxon Mobile, Shell or BP.
Most investors will never have an opportunity to invest directly into an individual oil well because there isn’t a public format for such investments. Since it is a little know secret from within the oil and gas industry, each investor would need to be a part of the “investment club” or partnership to be able to participate. Let me explain a little further on how direct investing in an oil well works.
Independent oil and gas companies spend significant capital developing oil and gas prospects through geological research and evaluation. If successful, these drilling prospects will produce crude oil and/or natural gas in commercial quantities. The Texas Alliance of Energy Producers has stated “Independents have drilled 96% of wells in Texas, and produced 88% of the oil and gas in Texas. These independent oil and gas companies rely heavily on investment partnerships to provide the needed capital to fully develop oil fields and produce oil and gas in commercial quantities.
When an oil or gas company has completed the preliminary synopsis, they will put together what is know in the industry as a “drilling prospect” which contains an overview of the potential drilling location. These drilling prospects are usually only available to select “investment clubs” or partnerships which have the sufficient capital to drill and complete the well. It may be difficult to find these investment partnerships since they are generally comprised of a small group of high net worth individual investors. The individual members will review the merits of the drilling program and if the project looks viable, they will commit to the funding of the well.
While a majority of independent oil and gas operators are not fully capitalized to fund each and every drilling prospect, they rely heavily on these investment partnerships once they have a developed prospect in an effort to make it a win/win scenario for the company as well as the investment group. The investors and investment group agree to pay for the cost of the drill and in return, they share in the monthly revenue from the producing well. Generally the individual investors are paid a monthly revenue check for the previous months production. This process helps to drill multiple oil and gas prospects in a much quicker pace than could be drilled with the company dollars alone.
While investing directly into an oil or gas well can be extremely rewarding financially, there are certain things to consider before making such investment. Because of the level of risk involved, many of the partnerships require each individual investor to be considered an “accredited investor” before joining the partnership. This is due to the inherent risk of a dry hole or non production of the intended well. Another important fact to consider is that by participating on an oil well drilling venture, there may be an opportunity for significant tax advantages in addition to a favorable financial return which is why most of these types of oil and gas investments appeal to high net worth individuals.
To find out more specific information on Finding Oil Deals or for additional types of oil well investing, take a look at Oil Well Restorations for further info.
Most investors will never have an opportunity to invest directly into an individual oil well because there isn’t a public format for such investments. Since it is a little know secret from within the oil and gas industry, each investor would need to be a part of the “investment club” or partnership to be able to participate. Let me explain a little further on how direct investing in an oil well works.
Independent oil and gas companies spend significant capital developing oil and gas prospects through geological research and evaluation. If successful, these drilling prospects will produce crude oil and/or natural gas in commercial quantities. The Texas Alliance of Energy Producers has stated “Independents have drilled 96% of wells in Texas, and produced 88% of the oil and gas in Texas. These independent oil and gas companies rely heavily on investment partnerships to provide the needed capital to fully develop oil fields and produce oil and gas in commercial quantities.
When an oil or gas company has completed the preliminary synopsis, they will put together what is know in the industry as a “drilling prospect” which contains an overview of the potential drilling location. These drilling prospects are usually only available to select “investment clubs” or partnerships which have the sufficient capital to drill and complete the well. It may be difficult to find these investment partnerships since they are generally comprised of a small group of high net worth individual investors. The individual members will review the merits of the drilling program and if the project looks viable, they will commit to the funding of the well.
While a majority of independent oil and gas operators are not fully capitalized to fund each and every drilling prospect, they rely heavily on these investment partnerships once they have a developed prospect in an effort to make it a win/win scenario for the company as well as the investment group. The investors and investment group agree to pay for the cost of the drill and in return, they share in the monthly revenue from the producing well. Generally the individual investors are paid a monthly revenue check for the previous months production. This process helps to drill multiple oil and gas prospects in a much quicker pace than could be drilled with the company dollars alone.
While investing directly into an oil or gas well can be extremely rewarding financially, there are certain things to consider before making such investment. Because of the level of risk involved, many of the partnerships require each individual investor to be considered an “accredited investor” before joining the partnership. This is due to the inherent risk of a dry hole or non production of the intended well. Another important fact to consider is that by participating on an oil well drilling venture, there may be an opportunity for significant tax advantages in addition to a favorable financial return which is why most of these types of oil and gas investments appeal to high net worth individuals.
To find out more specific information on Finding Oil Deals or for additional types of oil well investing, take a look at Oil Well Restorations for further info.
