Let An Industry Insider Help
and Educate You Step by Step
and Educate You Step by Step
| Investing in Oil & Gas Private Programs |
|
Investing in oil & gas drilling projects being offered by private companies is usually like investing in a small business. My preference, for many reasons, is to invest in a Limited Liability Company (LLC). The advantages are you can be a passive investor yet still take the generous federal tax write-offs which are still available with our current oil & gas tax codes. Beware, as believe it or not, some accountants, and CPA's are not familiar with the big tax write-offs you can take in oil & gas drilling programs. Talk to CPA's or tax preparers who can intelligently discuss oil & gas tax write-offs. Professionals often say no, as it is a safe position to take relative to evaluating any investment. They charge consulting fees, and bill by the hour, but their big fear is if they recommend an investment, and it doesn't make you money or perform well, they risk losing you as a client. Most won't do this. Therefore, you must do your own homework, and invest only what you can afford to lose if things go South. What's pretty important is coming to grips with the risk you are going to be taking with people you don't know when investing in oil & gas, however, at some point during your 'due dilligence', and review of the private placement memorandum (PPM) which must contain all of the pertinent details of an offer, you need to arrive at the point of feeling comfortable enough to invest at some level. I haven't seen a deal yet that doesn't allow you to invest in smaller increments. If you cannot do this, don't invest in the oil & gas program. The main reason to invest is because of our current tax advantages, and write-offs associated with making investments in 506 Reg-D programs. This can be another way to hedge your portfolio and reduce your gross income for tax purposes at the same time. It also allows your developer, operator, or oil company time to fully develop the oil & gas assets they've targeted and are described in the PPM used to provide a mechanism for investors to invest. I have noticed lately some investors who are looking to invest, but tell me they know little about the oil & gas business. This can be a problem, since learning everything about any business is hard to do in a short time. Investors can approach investing in essentially one of two ways. Learn everything you need to know which could take an inordinate amount of time & effort for example, or simply invest an amount of money to begin that isn't going to cause you to lose sleep at night. It takes time to make an oil & gas project successful...and the more fully diversified, and more complex deals with more wells and profit centers, usually take longer to complete. However the downside is minimized, and the upside is assured or is better than investing in a new 1-2 well drilling program for example. This is true because your downside is spread-out relative to risk. You still get the tax write-offs in any drilling program where a K-1, or 1099 is provided you by the company you are investing with at tax time each year. Call or email me to find-out more, and to take advantage of the investing opportunities in oil & gas drilling programs at the end of the year for tax write-offs.
|
||||