Where would you want to be in a major market correction downward, or worse a major market crash where stock values, and equities lose their appeal?
If you can own oil & gas royalties, overrides, and working interests in the best area of the USA, and these investments are paid regularly by reputable Operators, and major oil companies; and at the same time are relatively unaffected by the stock market, wouldn’t you want this income during a bear market or crash?
Okay, change is tough sometimes, but riding a market down isn’t any fun. Diversification in instruments providing cash flow while markets sort themselves out lets you have some peace of mind.
Call or email me with questions. Editor: 805 701 7761
What evidence do you need to know with certainty that you are investing in a real oil & gas investment, and/or ownership in oil wells in producing leasehold interests, and the oil & gas field is being operated by legitimate Operators?
SIMPLE! If you receive a ‘recorded assignment’ of fractional interest and direct ownership in an oil & gas leasehold being operated by a national Operator working in a well known area such as the North Dakota Shale; and you can contact, and receive recorded documents in the counties where production can be verified in those states where there is known production, and thereby, you can be assured of the legitimacy of your investments.
You can also be look-up the identity of your oil & gas wells by checking out NDIC in North Dakota for example. The state keeps excellent records of drilling, completed wells, and their locations, and production history.
You can focus on the ‘track records’ of the best Operators working in the oil & gas industry, and pay particular attention to ‘proved production’, ‘proved recoverable reserves’, as this is what the industry does to estimate value, and is the basis for further drilling in those counties where long term production is the norm. Bottom-line, if the major oil companies, and big independents are still drilling, the oil is being found.
Call me at: 805 701 7761 and let me know what you have in mind…
Meet Fracking Millionaires of Texas By David Usborne
Two planes, a Rolls-Royce and an Aston Martin – meet fracking millionaires of Kenedy, Texas
That’s the loot Michael Joseph has amassed just by selling the mineral rights to his land.
David Usborne reports from Kenedy, Texas – a town teeming with instant millionaires thanks to America’s shale gas revolution
Midway through his chicken-fried steak Michael Joseph, rancher, big game hunter and pilot, kicks himself for not having offered his visitor a spin in his aircraft for an aerial view of what is going on hereabouts in Karnes County, one hour south of San Antonio. “You’d be amazed.” Then again, low clouds mean it would have been a bust anyhow.
But you grasp what’s going on pretty quickly at ground level. Even this place, the timber-frame, raucous Jerry B’s in Kenedy, tells its own story. Bursting at the rafters and with hard hats resting on every table alongside plastic jugs of iced tea, it is not, shall we say, a restaurant for old men. Like the country all around.
Welcome to the new American oil rush. Measure it anyway you like, including the instant riches it has bought to so many who were living here before. Mr Joseph actually has two aircraft sharing a hangar on his ranch with a new Rolls-Royce Ghost and an Aston Martin. (A Bentley is on its way.)
One is a Citation eight-seater jet. These were not paid for by his cattle or even his salary as a captain for Southwest Airlines. He has mineral rights and his tale of cheques dropping on the doormat is only one of a multitude here. He knows how to spend them; not everyone does.
Karnes County is one hour south of San Antonio in Texas Karnes County is one hour south of San Antonio in Texas Or we can count drill rigs and barrels.
US crude oil production is forecast to grow by almost 50 per cent between 2011 and 2014, a rate not seen in nine decades.
Output of natural gas is exploding, too, even though most of it is simply being burnt off in orange flares that punctuate the landscape of mesquite trees and cactus. Mostly, this is thanks to advances in fracking, where wells go more than a mile deep before turning horizontally to penetrate huge oil- and gas-soaked deposits of shale.
Texas is producing three million barrels a day, most of it from fracking in two huge shale fields. Here, we are atop the Eagle Ford formation. In West Texas a similar frenzy has descended on the even larger Permian Basin.
By next year, Texas will be spewing four million barrels, which will put it ahead of old oil powers such as the United Arab Emirates, Iraq and Iran. If it were a nation, Texas would already be the ninth biggest oil producer in the world.
It is globally transformative too, turning the US into an energy superpower again and threatening to end the grip of Opec on world markets and, maybe one day, Russia’s natural gas hegemony over Ukraine and western Europe.
It’s no surprise that this week Congress, with Vladimir Putin in its sights, called for accelerated exports of shale-produced gas across the Atlantic.
Like all blessings, it comes with potential costs, not least the danger posed, according to environmental groups, to local water supplies. That, though, might not be a conversation you’ll want to strike up in Jerry B’s.
“They don’t know what they are talking about,” declares Ignacio Farias, 31, who started out washing tanks and today is pulling in upwards of $300,000 a year as a supervisor with an oil field support firm, Supreme Vacuum Services. He has opened four bank accounts for members of his extended family.
Another cost is the hammering disruption to the old ways of life in towns such as Kenedy and countless others all across the 400-mile-long Eagle Ford formation.
Karnes County used to be the poorest part of Texas. Now it is the beneficiary of the biggest inflow of industrial dollars in American history.
But it can’t keep up. Roads are collapsing, sewage and electrical grids are overwhelmed, and roadsides are suddenly crammed with welding shops, pipeline suppliers, brothels, half-built hotels and clusters of metal, one-window dwellings not much bigger than dog kennels for workers to sleep in.
In nearby Tilden, in McMullen County, a surly fellow invites us inside to sign a rental agreement for one such hutch for $2,400 a month. He calls his not-quite-paradise the Tilden Country Inn.
It is a rough place where crime is rising but any man with stamina and strength can make out like a bandit. Barcley Houston just recently sold both his Eagle Ford wells and a company that helped oil companies dispose of contaminated waste water – his forebears include Sam Houston, the first president of Texas before it joined the US.
He says: “There is a disproportionate amount of wealth creation going on here in an IQ bandwidth of 80 to 100. This is the definition of Darwinism down here.” As for crime, he says, whole tankers filled with oil have been known to self-drive off into the night, never to return.
But perhaps nothing has been more disruptive than the creation of so many instant millionaires. Mostly, they were people making a living, often an extremely modest one, farming cattle and cereals, but who happened also to hold those precious mineral rights beneath the sod when the oil boys rolled in.
Rancher Michael Janosak, 52, bought a helicopter so that his son could fly around shooting wild hogs that invade his maize fields. Asked how many millions he receives a year from oil companies drilling on his acreage, he replies: “I don’t know – many millions.”
He mocks a neighbour who has agreed to let one of them run a pipeline across his land for a mere $5,000. “Five thousand dollars? I wipe my ** with that every morning,” he says.
For Mr Joseph, it started with a note left on his door from a company asking to lease his land for drilling. He got together with neighbours and they held out until they got the deal they wanted. He has bought his toys in the hangar and pledged an annual $50,000 scholarship to his alma mater, the University of Texas, in perpetuity. He won’t say how much he is collecting in monthly cheques.
“You look at me and it’s a Cinderella story,” he admits. But meanwhile he tells of his postman, Bennie, who is still carrying letters, even though he is probably collecting about $3m a year.
Most crazy is the predicament of the local banks, which are taking in so many deposits that they can’t fund the margins over and above them required by federal regulations, and also can’t make money with loans because no one needs them any more.
“We are awash with cash, but if you can’t make any business with it, then that becomes a big responsibility,” laments Ron Hyde, who runs the local credit union bank in Kenedy and is also lunching in Jerry B’s. Recently, when customers have been coming in with suitcases of cash, he has been turning them away, he says.
These are all the problems of oil-boom Karnes County, problems most of us would like to have.
Fracking Turning US Into Big Oil Producer
Fracking is turning the US into a bigger oil producer than Saudi Arabia
By DAVID USBORNE
The expansion in volumes of oil and gas produced by hydraulic fracturing is taking experts and politicians by surprise, with profound consequences for US geopolitics, and even Europe’s reliance on Russian gas
The phenomenal growth in shale fields, seen here in Pennsylvania, is turning the US into a glut producer of oil and gas, and an energy superpower
Tuesday 11 March 2014
Hector Gallegos sits in the cab of his pick-up enjoying a few hours of calm.
A day earlier, workers finished carting off the huge rig that had drilled three new wells beneath this small patch of south Texas farmland and he’s now getting ready to prime them for production.
He reckons that about three weeks from now each will be producing 1,000 to 2,000 barrels a day. “That’s money!” he exclaims with a broad smile.
It’s also power, and not in the combustion sense.
Thanks to the success of engineers like Mr Gallegos in pushing the frontiers of hydraulic fracturing, or “fracking”, to access reserves of oil trapped in shale formations, notably here in Texas and North Dakota, America is poised to displace Saudi Arabia as the world’s top producer.
With that could come a hobbling of Opec and unforeseen shifts in US foreign policy.
So rapid has been the change in its energy fortunes that even some experts, as well as policy-makers in Washington, are struggling to keep up. Nor are we just talking oil.
So much natural gas is being released by the shale also that for now outlandish quantities of it are simply being burned off into the atmosphere.
Even predicting future oil output isn’t the precise science you’d expect. “We keep raising our forecasts, and we keep underestimating production,” Lejla Alic, an analyst with the International Energy Agency noted recently.
Last year US production reached 7.4 million barrels a day, an increase over 2012 of 15.3 per cent. A jump that large hasn’t been seen since 1951. This year the US should produce 8.3 million barrels a day.
Take another indicator – the volumes of crude being moved by trains, often a mile long, from the shale fields to refineries and terminals. In all of 2008, train companies moved 9,500 wagons of the black stuff. Last year, 400,000 of them rumbled across America.
How long America’s shale boom will last is hard to forecast also. In Texas, which on its own is set to increase production to 4 million barrels a day this year, the drilling peak still hasn’t been reached, says Mr Gallegos.
But, he suggests, “in the end it’s not the oil fields or the wells that will determine where all this goes. It’s the politicians around the world who set the price and make the markets.” Increasingly, the decisions that matter will rest with the US, as it adjusts to its new status as a glut producer.
“The United States is now poised to become an energy superpower,” write By Robert D. Blackwill and Meghan O’Sullivan, in the current issue of Foreign Affairs magazine.
The consequences are likely to be far-reaching, notably affording Washington a chance it hasn’t had since the energy crisis of the early 1970s to reassess its relationships with those countries, often ruled by unappetising despotic governments – Saudi Arabia included – on which America has had to depend for so long to feed its fossil fuel needs.
“Since 1971, when US oil production peaked, energy has been construed as a strategic liability for the country, with its ever-growing thirst for reasonably priced fossil fuels sometimes necessitating incongruous alliances and complex obligations abroad,” they write.
“That logic has been upended, and the newly unlocked energy is set to boost the US economy and grant Washington newfound leverage around the world.”
Among the determinations Washington must make is whether to overturn a federal law, also dating back to the early ‘70s, that forbids US companies from exporting crude in all but a few circumstances.
Full energy independence may still be many years away, but proponents of ending the ban argue it would not only further boost the US economy – fracking added 0.3 per cent to GDP growth last year – but also help America mitigate or even end Opec’s market influence and lessen Russia’s leverage also.
The Russia equation has, thanks to the Crimea crisis, raced to the fore, though it is more about gas from fracking than oil. America will see captured output touch 70 billion cubic feet a day in 2014, reaching over 100 billion cubic feet per day by 2040.
In the past days, Bills have been tabled in both houses of Congress demanding that the federal government speed up the granting of licences to companies to export natural gas across the Atlantic precisely to reduce the dependency of Western Europe and Ukraine on Russian supplies.
Among those wading in is House Speaker John Boehner. “The US Department of Energy’s excruciatingly slow approval process amounts to a de facto ban on American natural gas exports that Vladimir Putin has happily exploited to finance his geopolitical goals,” he said in a statement last week.
Building the infrastructure to export quantities needed to alter the energy politics of Europe will take several years. Nor will changes in America’s foreign policy stance because of its new found oil fortunes become obvious overnight.
Indeed, some experts warn against over-stating the likely effects. “The US has a lot of interest in what’s going on around the world, in the Middle East and elsewhere, regardless of whether it is independent or self-sufficient in fuels,” Adam Sieminski, the administrator of the Energy Information Administration in Washington told the
Financial Post. “Those political and economic interests will remain whether we become an exporter or not.”
As vivid as the gas flares in the Texas sky at night, however, is America’s new-found love affair with fracking. Environmentalists warn loudly of water contamination disasters and some home owners speak of being rattled by man-made earthquakes, but there is no giving it up now.
It’s a whole different world to 2008, when US oil production was at a historical low and Sarah Palin was drawing liberal ire declaring that “Drill, Baby Drill!” was the answer to all of America’s problems. Suddenly she seems to have been right.
Investors who want to diversify, and take advantage of great returns from energy produced with oil & gas can do so in several ways!
1) Buy oil & gas energy stocks in US major public companies, and hold for the long term. This strategy has worked for those investors buying big company oil company stocks for the past 30 years, or during my career in the industry. Oil hit a low of about $14.00 per barrel in the 1983-1984 time frame, but has steadily gone up during the past 30 year period, and increased on an annualized basis of about 743% in 30 years. That’s a 24.7% per annum per year average without adjusting for the overall return on your money by compounding, or dividend reinvestments.
2) Actually, until just recently Exxon Mobile was the most profitable corporation in the world.
3) So, why did your professional advisors, accountants, stock brokers, and financial planners often omit oil & gas stocks from their recommendations, and kept them out of your holdings? Would you believe because of their misconceptions, fear, or simple bias…probably for all three reasons, and because of the perception that oil deals, or oil investing is somehow more risky than everything else? Well the point is, private or public drilling deals are risky, very risky, and now maybe as risky as counting on the government to take care of your health care, the education of your kids, and the proper handling of the country’s money?
4) The bottom-line is most investors should hold energy stocks in their investment portfolios. The main reason is very simple. We will be relying on oil & gas supplies, and production for decades to come, and you might as well profit from this fact.
5) Accredited investors who are qualified, sophisticated, and need tax write-offs on their money, or on funds at risk, and this means your money not being held in IRA’s, or pensions with a tax deferred status, or tax free accounts; should look into certain kinds of drilling programs. The drilling programs which make the most sense are very specific to the industry, and the major oil companies make consistent money in certain areas of the country.
If you have been reading my updates, and postings on the website, you know my bias, and why. But, before you decide to go further with any decision about investing in oil & gas deals make sure you can afford to lose your money, and the tax write-offs make it possible to offset, or help you break even if you do lose money when you invest in a drilling program that doesn’t turn-out well.