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. |
Investors who like making money need to without delay contact us at our private oil & gas company prior to the end of the year. We're now closing-out our funding for a current oil & gas private direct participation program we've been funding during the past year. We have current production, which is increasing dramatically as a result of making new acquisitions, and because of our extensive development & new drilling we've accomplished during the past year. We are making revenue distributions to our investors each month now.
We have more drilling planned during the first quarter of 2008. Investors who like to invest at the end of a funding period in a successful private oil & gas program have the opportunity and can now take advantage of the successful efforts of our staff, and fine tuned field operations we've established during the past year.
We have acquired, because of our careful negotiations at prices well under value, a very good collection of producing oil & gas leases in several areas of the country. Our extensive past experience and as a result of performing a lot of prior 'due dilligence' made this possible. Because of our considerable amount of preparation and work, our revenue returns to investors is expected to soon exceed all or most of the current programs I've checked-on, or heard about recently.
The chief reason we've been able to attain our present performance, and reach respectable and increasing revenue distributions to our investors, and now increasing pay-outs to our investors is because we kept, and keep our overhead costs down. We find leases and structure our private oil & gas investing programs to pay a majority of the working interest to our investors. We don't charge promotion or advertising costs, and cannot charge commissions, since we own our private oil & gas company, and rarely need to work through sales organizations, or selling brokers. This makes a big difference relative to the amount of net revenue you can pay to investors.
If you are looking to invest in oil & gas before the end of the year, and want to take advantage of the tax advanatages, and start making money right away, let me know. We would like to show you what's possible in this industry. |
Investing in direct participation private oil & gas drilling programs can make it possible for investors to achieve big first year returns, and even multiples on their money after some new oil & gas wells are drilled, completed, and hooked-up. I have recently run numbers on both current completions, and historical records in select mid-continent areas of the US where I'm familiar. I've also been looking at historical records in a few areas of the US where returns at present costs can exceed more than 20 to 1 because of today's prices of oil & natural gas.
You can sit on the sidelines, and lose money in the market, or real estate for awhile, or get involved with the right private oil & gas operators, and smaller companies now developing oil & gas leases in certain lucrative areas where risk is very manageable. These same companies have often acquired their acreage, and oil & gas leases at much lower oil & gas prices then we see right now, and in some cases, for less than half of current prices.
It doesn't hurt to diversify in private oil & gas drilling programs, particularly if you need big tax write-offs, and you can afford to take some risk to boost, and hedge your portfolio returns. In fact, the big first year tax write-offs alone can warrant investing in private oil & gas programs for those investors who have yearly incomes exceeding six figures. Tax write-offs can also be taken against active, ordinary income, and passive income while reducing gross income for tax purposes. Investors get accelerated depreciation, and 15% yearly depletion allowances on income they receive from their oil & gas wells until they receive their money back. The 'passive loss rule' still favors oil & gas investors.
If you want to hear more, and would like to discuss some options when considering oil & gas investing, just call or email me. |
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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