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.
Like most things in life, the best techniques, or ‘cracking the code’ to achieve success in the Bakken Shale in North Dakota involves some proprietary techniques used by the most successful Operators that are drilling horizontal wells being fraced in the Bakken & Three Forks Shale zones.
Here are some articles describing some of the ideas, and the process used by the companies supplying fracking fluids, and providing technical help to the developers in the Bakken Shale.
An article about fracking Fluid Producers…
Bakken Update’s 2014 Stock Picks: fracking Fluid Producers
by Michael Filloon
My call on Flotek (FTK) back in August could turn out to be a big winner in 2014. I have been positive the name since March of 2011, when the stock traded for just $6/share. It is a great story that involves a business mostly controlled by large oil service companies like Halliburton (HAL), Schlumberger (SLB) and Baker Hughes (BHI). Most of the fluids used today are a combination of chemicals designed to pull resource from rock.
The Bakken Update’s 2014 Stock Picks: Small Operator’s Well Design Outperforms In North Dakota
by Michael Filloon
Investing in small cap oil and gas isn’t for everyone. Understanding the oil business is difficult enough, but unconventional production is a different business. Valuation is tricky for several reasons. Acreage is the most important. Valuing leaseholds can be difficult, as multiple operators can get a wide range of results. Poor well performance can be from something as easy as drilling outside the interval, or as difficult as using optimal types and amounts of proppant. Without access to well files, it is difficult to know why results can vary.
In 2014, drilling pad development will accelerate which should give us a better idea of where the best leaseholds are. The large volume of wells coming on line will provide a better idea of how areas will produce going forward. The skill of the operator is also important. Well data is very important in deciphering this. Well results must be logged and compared to other operators in the same area. Well design also comes into play, as an operator could have done a very nice job drilling and completing, but under utilization of water and proppant can cause a poor result. Management is also important, and in some cases is the top reason an operator underperforms. A company can beat production and revenue estimates, and still have a bottom line miss. If costs are not kept in check, we can see a stock get crushed at every quarterly conference call. These three variables, if accomplished, can make a small cap oil and gas name a success.
SAVE THE DATES!
2014 Bakken Oil Product and Service Show
October 8-9, 2014
Raymond Family Community Center
The Bakken Oil Product & Service Show connects companies in the Bakken shale play. With more than 450 oil and gas related companies operating in the Williston area, the Bakken oil show is the place to connect, network and conduct business.
Registration and details for the 2014 Bakken Oil Product and Service Show coming soon at: http://www.bakkenoilshow.com.
Dawa Solutions Group | 115 2nd Ave. E | Williston, ND 58801
The surest and best way to make money in oil & gas production, and new drilling investment properties is by ‘piggy backing’ with, or owning fractional leasehold interests in the ‘exact producing acreage’ but not in ‘funds…where major oil companies own great oil & gas properties in the best counties with lots of production, and big recoverable reserves of oil & natural gas. (500,000 to 2,000,000 recoverable barrels of oil per bore hole is big production, or what has and is being found and proven in new North Dakota horizontal shale wells).
Investors need to be included in the same acreage where ‘key’ leasehold top county acreage is ‘owned and operated’ and managed by the major oil companies, and large independents. These are companies and large operators who are investing and making consistent, and big money in certain key county areas of the country where as major oil companies, they ‘pay to play…and stay’. This fact is well known in industry circles, and becomes obvious fairly quickly when a big field such as the 200,000 square mile area is proven-up like the Bakken Shale in North Dakota, Montana, and Saskatchewan, Canada.
Investors also want to own any available ‘public stock’ before a new public company establishes big production, and be able to do so with ‘direct ownership’ in the ‘same leasehold working interest acreage’ where the ‘big boys’ own their majority ownership as operators. This is how the big boys with a majority ownership interest in every new well they drill within a leasehold make money, and therefore, they have much to lose if they don’t find commercial quantities of oil & natural gas as owner/operators.
Simply put, when a major oil company drills a new well with the majority of the money required, and does so where, and when you as an investor own a fractional interest in every new well drilled; this is the ticket to making money in the oil patch.
You want to own a fractional interest portion of the leasehold acreage operated by the major oil company. This is where you get to participate when an ‘Authorization for Fixed Expenditures’ (A.F.E.), and the cash call and ‘right of first refusal’ is offered to you for each proposed new well. This means you want to be included as a fractional interest owner in each & every new well that is drilled on your mutually owned leasehold acreage. Therefore, you are given the ‘right of first refusal’, but not the obligation to participate in each new well drilled, based on your fractional interest owned; or just like any other ‘industry’ player who participates in oil fields where you own your fractional interest.
By contrast, ‘so called oil deals or funds, private partnerships, or special opportunities’ that are heavily promoted by high pressure salesmen in boiler rooms, and young inexperienced promoters should be avoided in most or nearly all cases; unless you can verify every aspect of their business model. This means being able to track all of the money, and see how it’s spent. strong>
Keep in mind, when consistent production cannot be maintained where large recoverable reserves of oil & gas were found & proved-up by drilling and completing new wells, the big companies leave and are gone. The best operators in the Bakken Shale can drill new horizontal wells capable of producing 800,000 to 900,000 barrels of oil in their lifetime. You want part of this big production and can have it if you invest in the leasehold acreage controlled, and operated by the major oil companies achieving this result. An interesting point is Exxon Mobile actually missed the opportunity to buy acreage positions in the North Dakota shale, and have seen the value of their stock decline as a result. Other development targets haven’t been as lucrative, or made as much money for Exxon Mobil. Other big operators working in the North Dakota Bakken Shale who’ve been drilling the horizontal wells being fraced have made big money, and continue to do so. (The news about Exxon Mobile and missing-out with the horizontal drilling in the Bakken fields was noted on the financial news channels just a few days ago).
The big boys leave ‘depleted areas’ to go after new big reserves they prove-up in the Bakken Shale for instance in North Dakota, and Montana. As mentioned in several updates on this blog and website, the standard leasehold ownership is 1,280 acres in the Bakken, and Three Forks Shale zones, and 6-8 wells can be drilled to these two very productive intervals with horizontal wells. It has been estimated another 38,000 new horizontal wells will be drilled during the next 35-40 years before the Bakken Shale is fully exploited. Approximately 6,700 producing wells have been drilled in the past 15 years.
Investors should demand controlling interest, and when they get it won’t pay extra management fees when owning ‘direct ownership’ in leasehold working interest, and wells; or where the majority interest Operators simply pay lease operating expenses (LOE’s), mineral rights owners, and the well head taxes. Operators will simply send net production distributions directly to all investors, industry and private alike. This means without you as investors being on the hook for promotional fees charged by a promoter.
To emphasize the key point when investing in oil & gas production & drilling programs involving the large operators, investors should require a ‘direct assignment’ of the fractional interest they purchase in the ‘leasehold where investors participate in all new wells drilled’ by the Operator. This must include an assignment that is ‘recorded in the county’ where the ownership is held, and the ‘recorded instrument is filed with the both the Operator, and the oil company’ that is buying the oil produced from all new wells drilled in the leasehold acreage where the investor owns his fractional interest.
Call or email me with a message for more information. 805 701 7761
Remember this quote from a great leader and statesman…”You have Enemies?” “Good”. “That means you’ve stood up for something, sometime in your life. Winston Churchill
When is investing in oil & gas properties, leasehold interests, or oil & gas production using private placement memorandums (PPM’s) Risky? Answer, almost all of the time and not for the reasons you may think!
First of all, the federal government under the Private Placement Offering or 506 D rules allow for the exemption from registration of securities if a company promoting oil & gas deals is raising money under the 506 Reg-D exemptions to the requirement to register per these federal exclusions. However, often you’ll see certain states ‘nit pick’ securities lawyer drafted PPM’s these state’s claim don’t qualify for the federal exemptions, under the law. Instead, in my 30 years of experience…the ‘certain’ state regulators find some problem or reason/reasons why the exemption isn’t legal with PPM’s used to raise funds.
There are better ways to invest to own oil & gas interests…just call or email to discuss alternative methods to own great oil & gas assets. Editor 805 701 7761
- by Bob Lonsberry © 2013
The Democrats are right, there are two Americas. The America that works, and the America that doesn’t. The America that contributes, and the America that doesn’t. It’s not the haves and the have nots, it’s the do’s and the don’ts. Some people do their duty as Americans, to obey the law and support themselves and contribute to society, and others don’t. That’s the divide in America.
It’s not about income inequality, it’s about civic irresponsibility. It’s about a political party that preaches hatred, greed and victimization in order to win elective office. It’s about a political party that loves power more than it loves its country.
That’s not invective, that’s truth. And it’s about time someone said it.
The politics of envy was on proud display last week as the president said he would pledge the rest of his term to fighting “income inequality.” He notes that some people make more than other people, that some people have higher incomes than others, and he says that’s not just. It was the rationale of thievery. The other guy has it, you want it, Obama will take it for you. Vote Democrat.
It is the electoral philosophy that gave us Detroit. It is the electoral philosophy that is destroying America. And it conceals a fundamental deviation from American values and common sense. It ends up not being a benefit to the people who support it, but a betrayal. The Democrats have not empowered their followers, they have enslaved them – in a culture of dependence and entitlement, of victimhood and anger instead of ability and hope.
The president’s premise – that you reduce income inequality by debasing the successful – seeks to ignore and cheat the law of choices and consequences. It seeks to deny the successful the consequences of their choices and spare the unsuccessful the consequences of their choices. Because, by and large, the variability in society is a result of different choices leading to different consequences. Those who choose wisely and responsibly have a far greater likelihood of success, while those who choose foolishly and irresponsibly have a far greater likelihood of failure.
And success and failure can manifest themselves in personal and family income. You choose to drop out of high school or to skip college and you are apt to have a different outcome than someone who gets a diploma and pushes on with purposeful education. You have your children out of wedlock and life is apt to take one course, you have them in wedlock and life is apt to take another course.
Most often in life our destination is determined by the course we take. My doctor, for example, makes far more than I do. There is significant income inequality between us. Our lives have had an inequality of outcome. But, our lives also have had an inequality of effort. Whereas my doctor went to college and then gave the flower of his young adulthood to medical school and residency, I got a job in a restaurant. He made a choice, I made a choice. And our choices led us to different outcomes.
His outcome pays a lot better than mine. Does that mean he cheated and Barack Obama needs to take away his wealth?
No, it means we are both free men. And in a free society, free choices will lead to different outcomes. It is not inequality Barack Obama will take away, it is freedom. The freedom to succeed, and the freedom to fail. And there is no true option for success if there is no true option for failure.
The pursuit of happiness means a whole lot less when you face the punitive hand of government if your pursuit brings you more happiness than the other guy. Even if the other guy sat on his arse and did nothing. Even if the other guy made a lifetime’s worth of asinine and shortsighted decisions.
Barack Obama and the Democrats preach equality of outcome as a right, while completely ignoring inequality of effort. The simple Law of the Harvest – as ye sow, so shall ye reap – is sometimes applied as, “The harder you work, the more you get.”
The progressive movement would turn that upside down. Those who achieve are to be punished as enemies of society and those who fail are to be rewarded as wards of society. Entitlement has replaced effort as the key to upward mobility in American society. Or at least it has if Barack Obama gets his way. He seeks a lowest common denominator society in which the government besieges the successful and productive and fosters equality through mediocrity. He and his party speak of two Americas. And their grip on power is based on using the votes of one to sap the productivity of the other.
America is not divided by the differences in our outcomes, it is divided by the differences in our efforts. And by the false philosophy that says one man’s success comes about unavoidably as the result of another man’s victimization. What the president offered was not a solution, but a separatism. He formented division and strife, he pitted one set of Americans against another. For his own political benefit. Marxist class warfare wrapped up with a bow. Two Americas, coming closer each day to proving the truth to Lincoln’s maxim that a house divided against itself cannot stand. That’s what progressives offer.