Thu Nov 01, 2007
Investing in Oil & Gas to Receive Tax Write-offs & Hedge Your Portfolio'
Investing in private & direct participation equity oil & gas programs which are formed to take advantage of very lucrative tax write-offs is a great way to kill two birds with one stone.
First, you get great tax-write-offs while you lower your gross income for tax purposes, and second you have an excellent possibility to make greater returns on your money while taking advantage of the hedging technique of investing in oil & gas when prices are high, and going higher. Why not take advantage of this wonderful opportunity we must deal with whether we like it or not?
If you would like to discuss who to consider investing with, and where to invest... call or email me at: Dennis W. Stutes, Ceo, American Energy Developments Ofc: 408 975 0800 Cell: 805 701 7761 email: dwstutes@sbcglobal.net
P.S. World demand for fossil fuels isn't going down and prices aren't either. Why not be on the upside of the moving market place, and not the downside as an investor? Doesn't this reduce the sting of pump prices, and higher costs for anything containing oil & gas? Because, believe me, oil & gas, and it's derivatives are a component of nearly everything you use in your life.
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Wed Oct 31, 2007
'Investing in Oil & Gas Based on Estimated Reserves'
Investing in successful, or determining which are likely to be successful private oil & gas direct participation oil & gas programs with oil & gas issuers, company owners, and operators can be like looking for a needle in a hay-stack. This is particularly true when you'll find an absense of clear records of historical production, or be able to figure-out what future potential recoverable reserves, and reasonable reserve estimates are in any given deal, but most importantly to most investors is...finding-out what cash flows investors can count-on when investing in private oil & gas programs.
Track records are also sometimes difficult to follow in smaller oil & gas deals, simply because you are often 'only as good as your last picture show', as they say in Hollywood. So, you end-up taking a chance on people, an area, the deal, and luck, or serrendipity. This isn't a big problem unless you place all of your eggs in one oil & gas basket. Diversification is still a vital requirement.
Call or email me with questions about how to pin-down the important ways you can evaluate the oil & gas business, a particular deal, or to figure-out where to go to get historical information about oil & gas production in any area of the US, identify who the competent people, and professionals are in an area you want to focus, plus find-out how to verify what someone is telling you during your due dilligence.
Dennis W. Stutes, Ceo, American Energy Developments Email: dwstutes@sbcglobal.net Office: 408 975 0800 Cell: 805 701 7761
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Fri Oct 26, 2007
'Investing in Oil & Gas Drilling Programs...Big or Small Companies?'
Investing in private oil & gas direct participation drilling programs should usually be done with smaller companies, who have low overhead, and must micro-manage their projects, as opposed to large, promotional type companies with sales people who expect to get rich on your money, while they legally keep the lion's share for themselves. The reason is very simple and basic.
The larger the company becomes, the less return, and interest they feel they have to pay for their money. Public offerings are the worst, because they can ring the money chow bell almost any time they want, particularly when they have good market makers who can quickly move their stock in offerings to the public. This dilutes your investment, and typically the company gets less and less concerned about making the private investor any real money.
As a private investor you want great tax write-offs, and a high pay-out for the money & time risks you take. This should be something like 75% of the working interest in a private deal you are being offered, and you also don't want high royalty overrides which burden your investment. If you can avoid high lease operating expenses, and severance taxes, or what are known as well-head taxes, so much the better.
The most important point to remember, if the deal itself is too expensive, or the up-front costs are too high, or hidden; it doesn't really matter how high your pay-out is going to be, simply because a 300% promote or more reduces your pay-out percentage by an equivalent amount. Do the math, and you'll find-out big companies with lots of bells & lights, and pretty pictures are sticking-it to you.
Call with questions or to discuss my points.
Dennis W. Stutes, CEO American Energy Developments email: americanenergy@gmail. com or dwstutes@sbcglobal.net Office: 408 975 0800 Cell: 805 701 7761
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'Investing in Oil & Gas & the Right Way to Use Advisers'
Investing in private oil & gas direct participation drilling and development programs with smaller oil companies, issuers, and operators is a unique niche for most private investors. Very few investors know how to use their advisers to determine how to make accurate decisions while discussing oil & gas investing.
First, lawyers can determine the legality of investment documents, and private placement memorandums and can if told to do so, review the legal contracts and securities compliance. However, lawyers most often cannot pass on the merits of the quality of the oil & gas assets, or lease areas being developed. This requires oil & gas petroleum engineers, and geologists familiar with the 'specific areas and oil & gas fields', or where oil & gas leases are being targeted, and drilled. I've done a fair amount of business with lawyers over the years, as investors, and usually have had good outcomes. Lawyers understand the risks, and are often willing to take them when investing.
Second, working with CPA's is also problematic when trying to make a decision about whether to invest. CPA's will make oil & gas investments for their own account. Tax preparer's can review K-1's, and 1099's and should be able to fill-out and file the appropriate tax schedules to enable the private investor to receive all of the tax write-offs associated with oil & gas drilling programs, and investments. However, again, tax professionals almost never understand the 'oil & gas deal'. It's just not their focus. Also, if an adviser passes judgement on a 'deal', he often feels he is on the hook. It therefore becomes much easier to just say no, in this fashion, the professional doesn't lose you as a client. This can be a real conflict of interest. So, you must get the professionals you hire to make calls to the principals, or issuers, or operators involved with the oil & gas investment project. I have rarely seen this happen in my 25 years of being in the oil & gas industry.
Third, certified financial planners (CFP's) know more about oil & gas, or should at least be aware of the vehicle to get tax write-offs and about how the oil & gas direct participation private drilling deals work. Don't count on it though. CFP's make their money based on getting paid a small percentage of the portfolio, usually 1%. If the portfolio grows, the CFP makes more money.
Fourth, the highest category of advisers are the Certified Financial Advisers (CFA's). These are the top dogs in the business, and need more expertise than anyone else in the financial world when advising investors. CFA's have the most training, and must pass a very difficult test to become certified. They should know about oil & gas investments, and be aware of the tax write-offs available to private investors making oil & gas investments. However, again, unless you direct your advisers to personnally get involved by making phone calls, and talking to principals, and oil & gas issuers, and operators they are not serving you properly, and you will be passing-up some very good investment opportunities available today, with direct participation, private oil & gas drilling programs.
Frankly, the best way to invest in private oil & gas drilling programs, is to diversify as much as you can, look at the total you have to invest, which should be no more than 10% of your portfolio, and then start with an amount you can spread-out over a half dozen programs. I like muliti-well programs, and in this case you can greatly reduce the risk of losing your capital, or getting stuck with a bad apple in the business. You can weed-out the 1 to 2 oil companies not serving you properly.
Call or email me with any questions about this article, or to discuss private oil & gas investments.
Dennis W. Stutes, Ceo American Energy Developments email: dwstutes@sbcglobal.net Office: 408 975 0800 Cell: 805 701 7761
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Tue Oct 23, 2007
'Investing in Oil & Gas Wells For Profit & Tax Write-offs'
Investing in oil & gas wells as part of a private, and direct participation working interest ownership investment is usually successfully achieved by investing with operators, or oil & gas company owners.
Investing for the long term to take advantage of both the higher and increasing oil & gas prices helps you take advantage of the trapped, and not yet recovered reserves in the ground of both oil & gas, especially if you are patient. Realistically understanding the time required to develop, and exploit recoverable reserves of oil & gas allows you to take several big tax write-offs, while you wait for the pay-off after development operations are finished, and the production revenue is established in new or re-entered oil & gas wells.
Investors need to keep in mind the oil & gas business is one requiring technical expertise, and people who enjoy the business, and really like to work in any oil & gas area deemed likely to produce and make the bigger profits everyone investing in oil & gas is looking for, and expects when taking risk.
Investing for profit and tax write-offs, while hedging your portfolio to both manage risk, and make a larger return on your money should be your chief reasons for considering private oil & gas investments with smaller companies engaged in the development, and exploration for oil & gas reserves.
Call or email me with any questions you might have, and to discuss certain areas in the US I think make the most sense to consider investing a portion of your risk funds.
Dennis W. Stutes Email: dwstutes@sbcglobal.net Ofc: 408 975 0800 Cell: 805 701 7761
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Fri Oct 19, 2007
'Investing When Oil & Gas Prices Are High'
Investing in private oil & gas direct participation oil & gas drilling programs when prices are high should not necessarily be looked at as a perplexing challenge because of the timing problem, or fear you are not following the 'buy low, sell high mantra'. This is especially true in oil & gas when you are investing with an oil & gas company as a direct participation private investor, or with an operator who has acquired leases, and equipment, and/or built infra-structure, and drilled oil & gas producers when oil & gas prices where much lower.
Also, remember, profits, and profit margins, or over-all returns aren't automatically less because you receive a smaller return based on higher development costs, or when you have to pay your suppliers, and vendors more money, and when field operation costs are higher as prices go higher. This is definitely not the case when a company is in position as part of an 'exit strategy' to be able to sell at the optimum or most profitable time to make a maximum profit. I've discussed this in other articles, but what I'am talking about is when a company controls 100% of it's leases, and can sell to production buyers at the correct or optimum time, this becomes a real advantage for a private investor who invests with such as a company.
Just simply keep in mind, and remember, the recoverable reserves of oil & gas are also worth a lot more as we crest the high 80's for oil. Higher prices reflect increased demand, a lower supply, and uncertainty about continued supplies needed by more and more nations as they become industralized, and require oil to build their infra-strutures.
Higher oil & gas prices can also mean fields, and leases which didn't justify further development at lower oil & gas pricing can become economically more viable as oil & gas prices make developing oil & gas leases more lucrative, and therefore the ratios or return on investment numbers get better and better.
Look for private companies, and deal with operators who've acquired their oil & gas leases at lower oil & gas prices, and who've already completed most of their infra-structure, or finished the majority of their development planned. You minimize your risk when you invest just before funding is completed, and development is well under-way, or nearly completed.
I like to track companies who've already positioned themselves to take advantage of the higher prices, and are managed by highly experienced management, and are able to profit from the higher pricing. I do not encourage investing with the 'johnny come lately' people who want to try to take advantage of the current high prices we have in oil & gas. The business is too complex to handle for the new kids on the block. The hard question is who do you find meeting the standards you need to provide yourself with the best chance to succeed, and make you money.
One final point, you must make sure you are dealing with a company that will handle your 1099 or K1 reporting so you can take all of your first year IDC tax write-offs, not to mention several other tax benefits you are entitiled to when investing as a direct participation working interest private investor.
Call me and we can discuss projects which make the most sense for a portion of your risk dollars in private, direct participation oil & gas drilling programs.
Dennis W. Stutes dwstutes@sbcglobal.net Ofc: 408 975 0800 Cell: 805 701 7761
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Tue Oct 16, 2007
'Investing in Oil & Gas Diversified Drilling Programs'
Investing in a diversified oil & gas drilling program, or with many different private oil & gas drilling & development companies may be the only reasonably safe way to begin investing in oil & gas drilling programs in the domestic US today. The reason is simply, you want to find-out if you are selecting a company to invest that has people who are going to be able to effectively manage an operation with multiple sources of revenue, while they are controlling an oil & gas project with an outcome where you can more likely expect a decent result. Improving your odds of success ought to be your primary goal & objective. I have a few ideas about how to do this right.
Being specific, if you roll the dice in an oil & gas drilling program which involves drilling a new offset well, or participating in a single new well drilling venture, your risk is tied to the outcome of one well only. Even if the well is a 'commercial' well, it may be a 'marginal producer'. In this case, it can take a very long time for you to get your capital back, if ever. If you need the tax write-offs, and can afford to make an investment where you can lose everything, then this is the way to go.
However, if you are going to approach investing in oil & gas as a one well 'test', the right way in my opinion is to place a small fraction of the total amount you are allocating for oil & gas investing in several private drilling companies. Let's say ten companies, and my bias would be to only deal with operators, or issuers, or company owners. Then you can sit back and see who does the best job, reports well, and executes their plan properly. Be prepared for the inevitable excuses, delays, and technical problems they will communicate they are having, not to mention the funding problems. One way you know you are with a good company is do they meet their deadlines, and forecasts for getting things done?
Another better way to consider investing in private oil & gas drilling programs in my opinion, is to pick companies, operators, and issuers who are diversifying in multiple well oil & gas programs. You could for example pick ten such companies and further diversfiy your oil & gas investing and allocation of your funds. If you invest in ten companies with 10 or more wells being developed, drilled, or enhanced in some manner, you can greatly reduce the odds or failure, and loss of most or all of your capital.
It's not as good an idea to invest with promotional companies with salespeople who know little or nothing about their company's method of doing business, their field operations, or much if any about the track records of the staff, and field personnel. In this case you will almost always be frustrated with not 'talking to the right person', or feeling you are never speaking with a principal who can accurately inform you about the investment you've made in any private oil & gas drilling program.
Call me with any questions or to discuss various ways to invest in the different oil & gas programs offered by US private oil & gas drilling companies.
Dennis W. Stutes email: dwstutes@sbcglobal.net Ofc: 408 975 0800 Cell: 805 701 7761
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Fri Oct 05, 2007
'Investing in Oil & Gas Drilling Programs at Tax Time'
Investing in oil & gas drilling programs during the tax season can be a good way to lower your gross income for tax purposes. If you have portfolio and/or passive income, you can still get the great tax benefits associated with oil & gas drilling programs as a private investor.
The oil & gas 'passive loss rules' allow you to legitimately take several tax write-offs associated with oil & gas drilling programs while you wait for your investment in the oil & gas development plan to be completed, and production established.
The best time to invest in a drilling program is when the project is nearly fully funded, and infra-structure and some wells have already been drilled, completed, and some production established. Obviously, if there is current cash flow, and distributions are being made, your risk is greatly minimized, and you may still be able to participate in an oil & gas program prior to funding closure.
Sometimes new discoveries have taken place during a funding & development period in a successful oil & gas drilling program, and you can take advantage of the momentum of these discoveries while they are being made, and new reserves found, plus something new is un-covered, and you may be able to do so before the funding is completed.
Most private oil & gas companies find they need more money as they expand fields, and further develop leases. Investors can postion themselves for this by waiting until a project is almost fully funded. Keeping track of these companies is one of the things I do during my review of various oil & gas investing opportunities.
A good thing to look for when evaluating oil & gas drilling programs is to determine whether you are dealing directly with the issuer, or operators, who must be also the owners, of any oil & gas investing situation. Making the determination is simple, as operators control 51% of any project they do, or they won't operate oil & gas leases. The advantage of dealing with issuers, operators, and oil & gas company owners is going to be especially apparent at the 'exit strategy point'. Having an exit strategy is a good way to take advantage of those selling situations where high oil & gas prices bring-out the production buyers. This can be another profit center for you, as it allows you to see an end to your risk exposure period, and this defines your profit in the process.
If you work with promoters, or people who don't control the oil & gas leases you rarely receive assignments, and therefore, you have nothing to sell, just what a promotional company may or may not be able to deliver to you. It's difficult or impossible to get sub-assignments from larger operators, and oil companies they do business. The reason is simple since the larger companies don't want to do business with small, or private investors. They don't want the liability, or hassle often associated with doing business with smaller investors. The flexibility isn't there for you as a private investor in promotional type deals.
Call me with questions you may have about the industry, and about investing in private oil & gas drilling programs. Dennis Ofc: 408 975 0800 Cell: 805 701 7761 email: dwstutes@sbcglobal.net or americanenergy@gmail.com
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Thu Sep 27, 2007
'Investing in Private Oil & Gas Drilling/Production Programs'
Dear Investors, investing in private oil & gas drilling programs involving both drilling, and acquiring existing production can not only make your money, but also save you substantial taxes on the drilling portion of your investments.
By investing in oil & gas private drilling programs, you can immediately lower your gross income for tax purposes by a large percentage of your oil & gas investment. Usually, you can get a first year Intangiblie Drilling Cost(IDC) write-off of up to 90% on your investment dollars. If you are in the maximum tax bracket this can ultimately give you about a 35% direct reduction of your gross income proportionate to the total you invest in a private oil & gas drilling program. You will also receive Tangible Drilling Cost write-offs(TDC), or accelerated depreciation on oil & gas field equipment, typically taken over 7 years. In addition, you will also receive a 15% yearly cost depletion allowance, on the money you invest. Therefore, if you hold the oil & gas investment for 6.7 years you can receive most of your money back with this lucrative tax break. Talk to your tax preparer about these great tax benefits before you invest.
Some investors have the mistaken impression you shouldn't invest when prices of oil & gas are too high. This isn't the case in drilling programs, simply because the value of the proved, and recoverable oil & gas reserves keep going-up with any price increases in oil & gas. Of course development, and field costs have gone-up too, but they don't represent a deal breaking part of investing in oil & gas today.
Investing in oil & gas private programs allow you to take advantage of steadily rising prices for both oil & gas, and should definitely be considered when deciding to hedge, or increase the over-all returns in your portfolio. If taxes are a constant issue you most certainly should consider investing a portion of your funds in energy, and in particular oil & gas drilling programs.
Call or email me with any questions or to learn about some of the oil & gas drilling programs being offered in the US today. Dennis Ofc: 408 975 0800 Field Office: 870 445 6528 Cell: 805 701 7761 americanenergy@gmail.com
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Wed Sep 19, 2007
'Investing in Private & Non-Promoted Oil & Gas Drilling Deals'
Investing in private, and non-promoted, or no commission oil & gas drilling programs is possible by investing directly with issuers and owners, and/or oil & gas operators, and is the best way to minimize the people risk, and give yourself the greatest chance to make money in private oil & gas deals in my opinion. I have spent 25 years of my life in the oil & gas industry, and this has helped me to arrive at certain conclusions about who to do business with to get the best possible outcome or return on your investment.
Of course you still have to make sure the people you are doing business with are honest, have integrity, and most importantly know what they are doing. Track records are important, and companies should be willing to share their backgrounds & experience, and their track records and current success or not in the business.
I don't think the flashy pictures, or slickly done promotional packages offered by promotional companies are the way to go. Believe it not, many sales or heavily promoted oil & gas deals can be marked-up 50% to 300% or more on the front-in. They are sold based on projections of future performance after development, and this is your best clue to listen for when dealing with these companies. Actually, most well done memorandums are prepared by securities attornies, and are quite dry, and boring, plus they don't look all that great. Good memorandums have lot's of required boiler plate, and legal phrases needed to protect both investors and companies offering the oil and gas investment opportunities.
Take your time when you analyse oil & gas deals, and compare them to one another. You can come to some fairly quick conclusions of whether your are listening to the real truth, or just being hustled, and promoted.
Call or email me if you would like more information about how to determine if someone offering an oil & gas drilling program is telling you the truth, and not just what you want to hear.
Dennis Ofc: 408 975 0800 Cell: 805 701 7761 Email: americanenergy@gmail.com
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