In the new shale-dominated world, we all know the industry is changing. With threats including geopolitical issues, shale production declines, and 25% fewer rigs drilling from oil and gas than a year ago, the oil markets anticipate a spike in oil prices by end of the year or first quarter 2021.
As high-net-worth investors grow restless in today’s low-yield environment, many are more willing than ever to abandon the investment mainstream in search of opportunities that may deliver higher returns. With a strong combination of long-term passive income, high-ROI potential, significant tax benefits, and portfolio diversification, direct participation in oil and gas programs qualifies for a wide variety of these aggressive investment objectives.
The way the vast majority of oil and gas investment deals are traditionally structured leaves limited running room (scalability) and little diversification. If something goes wrong, few alternatives are available to correct the problem without pouring more money into a literal hole in the ground. In these instances, it becomes nearly impossible for the investors to recoup their investment.
After speaking to a lot of people in a variety of industries about their business operations and how they approached investors, I realized that investors’ true desire is to have a genuine shot at making money and to be treated not just as ‘money,’ but as true partners. They aren’t interested in a guarantee—some of them are wary of any empty “promises”—rather, they want to believe their investment has a real shot to make a profit.
In 2015, I changed the business model for my company to one that instead of acquiring one location, drilling and hoping for the best, we purchase large volumes of oil and gas mineral acreage, develop the asset by drilling wells, and divest of the project with the investors participating in the entire process. We sold 1/3 of our first asset in less than one year returning 131% back to investors. Additional oil and gas mineral acreage was acquired and with $32.5 million in equity and a $49 million credit facility the proved reserves in April 2018 were over $194 million.
By implementing this new strategy, without being required to drill all the wells, projects can be completed faster. This allows for a better opportunity with a quicker turnaround time and for invested funds to be returned to the investors’ pockets faster, while ideally starting another project with the same investors on board.
Because no one truly knows the timing with the markets or oil and gas prices, having built-in exit strategies over the life span of a project is important.
I believe offering investors a new deal with innovative investments and planned exit strategies is important for the future of oil and gas investments. While we certainly never guarantee our future projects will be successful, in my opinion, this new investment model of combining the oil and gas mineral acres and development by drilling the proposed wells provides our clients a better opportunity to achieve positive returns.
When you combine the cutting-edge technology for extracting hidden oil with our business model and the global demand for oil, participating in the energy investment game today could enhance your financial well-being for many years to come. The good news is, in this lower price environment, opportunities to drill more wells exist with equity, as vendors are hungry for new business.
I truly believe there couldn’t be a better time to get in the game for those who are investing in oil and gas today and are doing it the right way.