'Investing in Oil & Gas When Prices Are High'

Investing in oil & gas can be profitable, and is especially exciting when both oil & natural gas prices are high, and still rising, however, there are some important points to consider when you do invest with companies developing and drilling for hydrocarbons in the US oil & gas fields.

First, remember when prices are high, or the buying frenzy is keen, everything goes-up correspondingly. Lease options, technical support and oil field services costs, and a range of other necessary, and specific jobs that are part of our industry, plus of course; equipment, and pipe expenses can, and do increase dramatically, and can really get out of hand when oil & gas prices are as high as they are now. Incidently, we see no end in site for the increase in oil & gas pricing during the next 20 years or more.

I see 'day rates for drilling rig charges', labor costs, and most oil field services costs increasing to levels that make drilling in certain areas of the US cost prohibitive. You need to find people who don't gouge, and who are not 'killing the goose laying golden eggs' like the 'get rich quick crowd', or the 'johnny come lately's'. This can be tough to avoid, but knowing your people, and having very long term relationships, can be the key to keeping the costs in check, or at least manageable, so you can make a reasonable profit for the risks you are taking when you invest in oil & gas direct participation drilling programs.

Once you develop your leases by drilling, and with various development operations, and you are successful, production buyers will start approaching you to buy your finely tuned production. Production buyers don't want to take the risk in both capital, and time to determine if an oil & gas play is going to be successful. Production buyers simply wait for you to establish cash flow, and prove-up recoverable reserves of both oil & gas, and then they buy. You can now see your opportunity to make even greater returns on your money. We call this having an 'exit strategy' for oil & gas drilling programs, and this is usually after you've already taken the majority of the tax write-offs. (Remember, you are getting outstanding tax benefits, and write-offs when you become involved in oil & gas drilling program investments.)

If you would like to learn more about how to evaluate oil & gas drilling program, and to find-out what to look for when you do, just give me a call, or email me your questions.

Sincerely, Dennis Office: 408 975 0800 Cell: 805 701 7761 americanenergy@gmail.com