Investing in Oil & Gas private deals is well worth considering when you compare other options to making money in passive investments, or any other investments I know of that still have very good, and legitimate tax write-offs. There is ain investment strategy using a model I've proven to work, and have been using it for 20 years. http://www.oilandgasinvesting.com
Investing in fully diversified, and risk managed investments directly with oil & gas operators, and small independent oil companies may still be the best way to go to make money in oil & gas. By investing with issuers, and oil company principals, you can enjoy the biggest upside, versus investing with those 'heavily promoted deals' which are usually offered by people not directly in the business of operating, or developing oil & gas properties. I'm talking about the boiler room operations, whereby the people selling know little about the business they are offering working interests, or equity ownership, or they are simply 'johnny come lately's, looking to capitalize on high oil & gas prices. Where we these folks when prices were at $10 per barrel at times in 1983-1984? This is when I started in this industry...as a contrarian, and made money for investors then, and certainly can now.
Investing in oil & gas seems to be a secret to many investors. Many people just don't undertand we use oil for just about everything we make. We will be doing so 20 years from now as well. You might as well profit from this truth. We often see new break-throughs, and discoveries occuring in the oil patch, and we find better ways to go about finding oil & gas and working-out new completion techniques all of the time. The truth of the matter is the oil & gas investing bargains are out there, but you must know how to find the opportunities that can stand the scrutiny of any serious due dilligence.
I like to know the company I'm doing business with purchased their oil & gas properties they operate at well under market prices. I also like to see a company provide an inventory, and equipment list, which allows you to easily compare, and determine the fair market value of their company equipment & physical assets, and net assets. I want to evidence of area production, and a history of successful development operations in an area...unless of course you want to go exploring, which of course has it's place. Obviously, this is a more risky, but necessary side of our industry.
Establishing a value of oil & gas net assets for re-sale is based on appraising the fixed equipment, and physical assets, plus 'present cash flows', as well as the 'proved producing', and 'proved un-developed reserves, or what the 'recoverable reserves' are likely to be. Price is also key. You have the best assurance of accurately determing the net asset value when an appraisal is performed by a licensed petroleum or professional engineer. This would be an appraisal acceptable during a bank review to determine value, and would make an exit strategy easily accomplished in the marketplace when selling oil & gas production, or electing to take a company public as an exit strategy' to provide liquidity for investors. I have sold oil & gas properties using appraisals, sales to private, and industry partners, and using stock sales, and bank cash-outs of investor equity. http://www.info@tcc5.com
Providing an exit strategy for selling oil & gas assets when investors are investing in private oil & gas direct participation investment programs is a must in my book. This means doing business with privately owned independents who own 'controlling interest' in the oil & gas assets they manage & operate. I like 100% of the working interest to a net revenue interest land owner as the best 'postion', or 'posture' to hold. A company must decide to structure oil & gas deals at the inception of their development plan, in order to someday sell to industry partners, or package net assets for sale, for example, in a public auction, or by taking a company public. http://www.energynet.com
Its your money, and you can do what you want with it of course. Losing money, or your capital is no fun. Having your money, or your profits taxed away isn't either. Keep in mind conventional thinking isn't always the answer. You must get comfortable with uncertainty, and develop some patience when you are investing in oil & gas private deals. It takes some time to fully realize all of the benefits associated with oil & gas investments with private independents. However, your upside can be much better than with public companies, especially when you consider the tax write-offs, and the exit strategy provided for liquidity.
How can you find the companies who will help you succeed, because it can be harder than you think? Better results are achieveable when the investor is willing to do his homework. Track records and time in the business are important, but I think the most important elements are... the 'model' being used, the structure of the deal, and the manner in which the company spreads-out the risk, and provides the amount of diversification required to keep from losing your principal. I also think having an 'exit strategy' is a must today. This allows the investor some degree of comfort, and means the liquidity is available at some point during the investment holding period. The main reason for having an exit strategy other than to provide liquidity, is to be able to sell when 'lease operating expenses'(LOE'S) get close to matching or equaling your profit from the sale of your production revenue. You want to be able to 'exit, stage left', when nearing your break-even point after finishing, or completing your development plan.
There are some good independent oil & gas companies out there doing a great job at making investors money, and they can be trusted to do the best job possible while doing the work needed to achieve a successful outcome with oil & gas investing. Here is my blog site with Google. I offer some advice, and from time to time provide some helpful links you can use during your research and while looking to find-out who to invest with in oil & gas private programs.
http://www.americanenergydevelopments.blogspot.com/
Finally, look for, and people who love the oil & gas business, and have a real passion for it, and most particularly enjoy the feeling they get when making their investors money. Accessing the best minds in the oil & gas world is an important requirement to consistently making money, however, even the little guys can score when the big boys don't. Actually, there has been more oil & gas found by independents than by the 'majors'. Nothing is free in this life, however, my advice is to do your homework, talk to people in the business, and no matter what you decide, spread-out your risk by diversifying in many wells, and with more than one company no matter how good their deal looks & sounds. Dennis W. Stutes, CEO American Energy Developments.
P.S. Quote of the day. "Short term moves in the market are like tales told by an idiot!" Shakespeare
Contact me by calling 408 975 0800 or my cell at: 805 701 7761 americanenergy@gmail.com or my direct email address at: dwstutes@sbcglobal.com