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| Reasons NOT to Invest in Private Oil & Gas Drilling Programs |
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Dear Investors, After 25 years of working dilligently to make investors and myself reasonable profits in the 'niche' we call the private company oil & gas investing business I've come to a few inescapable conclusions about why you should or shouldn't invest in direct participation, or private company oil & gas drilling programs. First, I'm going to do my best to communicate to the point, and give you my ten best reasons in paragraph form for why you should not invest in small company private oil & gas deals under the provision of and utilizing 506-Reg D federal rules. 1) If you have no idea what constitutes 'risk' versus 'reward', when investing or you don't understand the risk pyramid...don't invest until you do, and can accept the investment world's advice about allocating your money, and how and where it should be invested...based on the prudent, and intelligent investor's 'risk tolerance model', which is well known in financial circles, etc. 2) If you are a person who wants to invest as a 'passive investor', and you want to make money quick, and fast, and you want someone else to help you make money, and you cannot afford to lose any part of or all of your money you are investing in oil & gas, and don't understand being 'long a security', and are not aware of, or intrinsically know; that 'good things happen to those who wait', and you 'don't have appropriate patience' when investing in private deals, don't even consider investing in private oil & gas drilling programs. 3) If you don't need the substantial federal tax write-offs available for oil & gas drilling program investing, and don't presently understand what constitutes being a 'sophisticated', and/or 'qualified', and 'accredited investor', and know what it means according to, or as defined by present securities regulation definitions, don't make investments in oil & gas drilling programs, unless you are doing so with an amount of money you can afford to lose, and your life style won't change a wit! 4) If you do not know the difference between a business deal where-by you can acquire a 'equity working interest ownership' in any business, or asset being offered; or in the case I'm providing, which is oil & gas drilling programs that are organized, and managed by small oil & gas companies, then you must learn what equity means. Oil & gas equity investments may or may not pay you consistent, or steady monthly production revenue. They don't pay dividends, or fixed returns! Usually, you must wait for developments to be completed, or a sale of the oil & gas assets being developed in order for you to make the returns investors look for when making oil & gas investments. The other type, or category of investments are 'debt instruments', or 'fixed return' investments such as CD's, money market funds, or different types of bonds which pay coupon interest, or treasuries for example which can also be sold at maturity for what you pay for them plus interest, or in the secondary market for cash, and for usually at least the face value, unless discounted, or again, for it's coupon value for example at maturity...don't invest in oil & gas drilling programs until you do know the difference and what to expect with each type of investment...equity or debt. 5) If you don't understand what businesses need to succeed, or appreciate the ways small companies need to capitalize themselves during their growth, and development phases, in order to get a pay-out at some point in the company's history, then find-out! Most businesses in the United States are small businesses, and they have their unique and many problems to overcome while trying to be profitable. 6) If you cannot find someone you trust, and plan to be with in an investment for the long term, in a fully diversified oil & gas program for example, where disappointments will and do occur while the company does it's best to achieve a successful outcome for you and itself, then wait until you know what to expect in a business relationship, or wait until you do develop the emotional, and business maturity to invest over time, and not to succumb to a 'get rich quick' philosophy, playing the lottery, or gambling system...which is usually what causes an investor's grief when things go south. I've always had more problems with the smaller $10,000 investor rather than the $100,000 investor. This is based on how people get to the point in life where they are successful, and truly understand risk/reward. If you can't take the risk, don't expect the reward, and certainly don't look for 'guarantees'. Governments and politicians attempt to convince you of what they will guarantee you. Apparently, to make a point, only 11% of the population believes congress these days. 7) If you don't want to learn about our industry, or accept certain key elements about what oil & gas companies are challenged with today in business, and like never before in the US today, don't invest. labor, contract services, and equipment pricing move with the market upward. This takes away much of the apparent profit you can make with high oil & gas prices. We can still be successful, however, we have far fewer active drilling rigs than in the late seventies, and early eighties. We have very few competent professionals, and field workers now in our industry compared to the old hey-days. Competition for qualified industry workers can be fierce. We find ourselves having to work with people who we wouldn't have hired in our business if we were hiring them 25-30 years ago. Our best people, and the 'old codgers' are retiring, are sick, or getting complacent, and the young folks don't want to work week-ends now. 8) Making money is best done the old fashion way or 'slow and steady' unless you are a rock star, or plan to be in the entertainment business. There is a book called the 'Millionaire Next Door'. Get this book and read it, and you'll discover most of the millionaires today are families who make it over the long term, own their homes, and own businesses, acquire assets, save and invest, and wake-up after 30 to 40 years in the family business with a little money. Be one of these investors, and relative to oil & gas, keep your investments diversified, know the people you are doing business with, and hang-in there for the pay-offs, or be prepared for the loss if it occurs. You can successfully hedge your portfolio while making diversified investments in well conceived private oil & gas deals, but you need to be very careful to do it. 9) If you require liquidity, and must have it whenever you want it, don't invest in private oil & gas drilling programs. 10) If you are planning to run to 'big brother', or someone to make you whole when you lose any money in a legal, and legitimate oil & gas drilling program, or become frustrated because you cannot liquidate your investment any time you want, don't invest in oil & gas private deals. If this is your plan, please avoid our industry. Save us all the grief, lawsuits, and expecting the government to bail you out. All legitimate oil & gas companies today must pay securities attorneys to review to determine legality of any offer made to the private, or public investor. Attorneys usually write the private placement memorandums (PPM's) which must have everything about an oil & gas offer included to be in compliance & legal, according to both state and federal laws. This is true whether a company is operating under an exemption, when dealing with private investors, or is offering a security to the public. Operators, and oil & gas companies must pay filing fees to file the appropriate documents to meet the federal and state requirments to offer 506 Reg D PPM deals. Thanks, Dennis Call me with any questions, or comments...
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