SmartOilAndGas.org grew from a desire to inform and educate the investing public about the oil and gas industry and the investment opportunities available.
When asked, most people believe that the only way to add oil and gas to their portfolio is to buy oil stocks or energy mutual funds, without the knowledge that direct investment in domestic oil and gas wells is a possibility. The few that are aware of direct investment opportunities may have not taken the time to understand their unique benefits, including long-term revenue, capital appreciation and tax savings.
At SmartOilAndGas.org, we recognize that the oil and gas industry as a whole has been the unfortunate casualty of poor timing, and a target of critics, environmentalists, special interest groups, consumer protection advocates and disillusioned investors. A combination of market forces and legitimately bad actors stamped a broad “risky” flag across this massive industry altogether, a flag that is quite undeserved.
We know that it is only the spread of information that will help our domestic wells to provide returns for savvy investors, and it is incumbent upon us to provide transparency and cultivate goodwill in what has gained a reputation as an intimidating and misunderstood industry.
As industry insiders, we want to level the playing field for sophisticated investors, instilling in them the confidence and the right tools to make smart oil and gas investment decisions. Some of the information below can be found in the Smart Oil and Gas Insider’s Guide, a free, comprehensive resource for investors considering the oil and gas industry.
Industry Overview
To paraphrase the complete information that can be found in the Smart Oil and Gas Insider’s Guide, the US produced about 15 million barrels of petroleum products in 2015, but consumed more than 19 million barrels. This discrepancy represents an unacceptable economic risk for the US.
In order to achieve independence from foreign oil, American companies must continue to increase domestic oil production, leading to lucrative investment opportunities and unique tax incentives.
Today, global oil companies are driven by targeting bigger reserves and acquisitions to replace producing reserves, and are constantly selling assets that are depleting. This leaves opportunities for small or independent operators to acquire prime properties with tremendous life and value that the major companies would otherwise find to be too small. Plus, while the majors of “Big Oil” may seem to dominate the oil and gas landscape, they do not offer individual investors the opportunity to invest directly in drilling wells.
The “survival mentality” of investors after the mid-2014 downturn resulted in a mindset shift toward shorter-cycle projects (i.e. the types of independent American companies that allow direct investments). The growth of short-cycle, unconventional projects makes for a different investing landscape than in previous cycles, which tended to see safer harbors in long-term, globally and geographically diverse projects.
As the long-term investments of international oil companies are slowly rebuilding, nimble, short-cycle players and the more pure-play exploration companies are providing more attractive investment for domestic, short-term returns.
Evaluating Investments
There are a myriad of reasons immediate return is not the only reason to consider an investment successful. Long-term revenue, capital appreciation and immediate tax savings are factors that can tip an investment far into the “attractive” range. Depending on your portfolio goals, oil and gas may be well worth consideration. The US tax incentives alone for investing in production can be enough for many investors to feel comfortable diversifying their holdings in this way.
Learn more about tax incentives and use the free Individual Investor Tax Calculator here…
Risk
An investment is defined by risk, and like any, there are no guarantees of high returns in oil and gas production. However, like any other investment, there are factors that can be helpful in determining exactly which sort of oil and gas investments are more likely to be affected by such risks.
Much of the projected risk is associated with the potential for slow returns on major capital projects and global endeavors, such as deepwater and oil sands exploration. In addition, Iran could ramp up production, and US production could begin to ramp back up following the rig count upturn. Also, large inventories have been amassed during this downturn that may take time to liquidate.
As a prospective investor you need to ask yourself tough questions to ensure you have the right mindset to invest in oil and gas wells. The importance of your answers to the following questions is covered in the Smart Oil and Gas Insider’s Guide:
- Am I a risk-taker?
- How will this investment affect me financially?
- How will it affect me emotionally?
Speak with your investment advisor or reach out to a production investment expert in order to identify specific well risks before fully deciding to make any investment.
Our Insider’s Guide and Investor Checklist are designed to educate and inform the investing public about how to evaluate direct oil and gas investment opportunities.
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The Insider’s Guide and Investor Checklist are neither an offer to sell nor a solicitation of an offer to buy. The information contained therein is for informational purposes only.