Risk in the Oil Drilling Game!
1045
Finance > Wealth Building
Mar 1, 2007
Gerald Schiano
Risk in the Oil Drilling Game!
When considering whether or not to invest a portion of your assets into American oil, you must come to an understanding of risk inherent in this type of endeavor. As i have said before, if you are not a high networth or accredited investor limit your exposure to sector mutual funds and the like.
If you are an accredited investor, take a closer look at direct participation oil & gas deals.
Typically, there are two types of oil drilling deals, from a broad sense........Wildcats & Developmental Deals. Wildcats are the most aggressive types of drilling programs where oil has not been found within 1 mile of the drilling location, but the geologist might feel based on characteristics of the underlying lease that it is attractive to test for a producing well. Developmental Wells, which are the only kind I have ever invested in, are wells within 1 mile of known oil production. Many times when I have invested in these deals, I would see the adjacent leases' pumpjacks moving up and down just a few thousand feet away. The concept of a tangible investment is very reassuring in the wake of the Dot Com bubble, thus the ability to physically see a producing field adjacent to your prospect is very exciting. The fact that there are wells adjacent to your prospect does not guarantee success, but it is a great comfort.
I believe that oil will continue to be in high demand based on the growth of Asia and India. I tend to take a simplistic, common sense approach to the issue of Peak Oil. If most of the "Easy" finds or holes have been poked in the ground the last 100 years, new production will continue to gain in value. Oil will fluctuate in the short run, but the long term value seems clear .......UP! The oil wells we drill, when successful, will typically pay out for 15-20 years. Production will peak in the first few years and steadily decline, but 10 years from now oil should be higher.
Know what you own is a common refrain in investing, but it is very important in oil well investing. It is important that you meet the individuals that you are entrusting your hard earned money to. I will never invest in an oil deal without meeting the principals face to face. I want to see their operation in person. Independants vary in the amount of talent, machinery, and know-how, therefore it is important that you assess each company before giving them a dime.
I have decided to invest one third of my investable assets into the natural resource arena. The choices are not limited to oil & gas investing, but that is what i feel comfortable with. I have come to accept the fact that we will have many dry holes and unsuccessful wells over the years, but I view my investment process similiar to dollar cost averaging in mutual funds. By consistently investing in wells, I can remove the inevitable hiccups along the way. If I had quit investing in wells because my first well was a failure(true story), how could I now take pleasure every time I fill my tank! A veteran financial officer for multiple construction companies, Gerald is an experienced leader. Seeing the opportunities in the oil & gas business, he is now focusing his efforts in building value through use of new technology in the oil patch. Gerald can be reached on his cell phone 508-889-9989 or email: dynamicoilceo@yahoo.com www.oilwellinvesting.blogspot.com
If you are an accredited investor, take a closer look at direct participation oil & gas deals.
Typically, there are two types of oil drilling deals, from a broad sense........Wildcats & Developmental Deals. Wildcats are the most aggressive types of drilling programs where oil has not been found within 1 mile of the drilling location, but the geologist might feel based on characteristics of the underlying lease that it is attractive to test for a producing well. Developmental Wells, which are the only kind I have ever invested in, are wells within 1 mile of known oil production. Many times when I have invested in these deals, I would see the adjacent leases' pumpjacks moving up and down just a few thousand feet away. The concept of a tangible investment is very reassuring in the wake of the Dot Com bubble, thus the ability to physically see a producing field adjacent to your prospect is very exciting. The fact that there are wells adjacent to your prospect does not guarantee success, but it is a great comfort.
I believe that oil will continue to be in high demand based on the growth of Asia and India. I tend to take a simplistic, common sense approach to the issue of Peak Oil. If most of the "Easy" finds or holes have been poked in the ground the last 100 years, new production will continue to gain in value. Oil will fluctuate in the short run, but the long term value seems clear .......UP! The oil wells we drill, when successful, will typically pay out for 15-20 years. Production will peak in the first few years and steadily decline, but 10 years from now oil should be higher.
Know what you own is a common refrain in investing, but it is very important in oil well investing. It is important that you meet the individuals that you are entrusting your hard earned money to. I will never invest in an oil deal without meeting the principals face to face. I want to see their operation in person. Independants vary in the amount of talent, machinery, and know-how, therefore it is important that you assess each company before giving them a dime.
I have decided to invest one third of my investable assets into the natural resource arena. The choices are not limited to oil & gas investing, but that is what i feel comfortable with. I have come to accept the fact that we will have many dry holes and unsuccessful wells over the years, but I view my investment process similiar to dollar cost averaging in mutual funds. By consistently investing in wells, I can remove the inevitable hiccups along the way. If I had quit investing in wells because my first well was a failure(true story), how could I now take pleasure every time I fill my tank! A veteran financial officer for multiple construction companies, Gerald is an experienced leader. Seeing the opportunities in the oil & gas business, he is now focusing his efforts in building value through use of new technology in the oil patch. Gerald can be reached on his cell phone 508-889-9989 or email: dynamicoilceo@yahoo.com www.oilwellinvesting.blogspot.com
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links owned by this user
It is amazing to me that not many retail investors understand the concept of generating cash flow from their stock positions. When I tell people that I utilize covered calls to generate extra income, hedge my stock positions, and set strict sell
Category:
A very successful entrepreneur recently gave me an article from Business 2.0 talking about Domaining. As many of you know, I invest in oil wells and other things that give me passive income. When I wrapped my mind around the concept of ning and
Category:
When considering whether or not to invest a portion of your assets into American oil, you must come to an understanding of risk inherent in this type of endeavor. As i have said before, if you are not a high networth or accredited investor limit your
Category:
Did you know that much of the oil in the ground is still present after primary recovery? In the king's english that means there is still a lot of oil left in a well even after 10 years of pumping. The reason oil production slows is that the natural
Category:
The well drilling and servicing businesses have been very prosperous the last few years. The industry, although, has been marked by an extreme cyclical past that discouraged capital investment. It doesn't feel too good to have a multi-million dollar
Category:
Other links at Finance > Wealth Building
For almost anyone, one of the biggest concerns in life is building wealth so that you and your family are comfortable and prepared for the future.
Category:
Stocks -- When you buy stocks you essentially own a little share of the company you just bought. The more shares you buy the more of the company you own. When the company whose shares you have bought makes a profit you will receive that profit in the form
Category:
The heated debate over whether average individuals can actually make a living online.
Category:
Garfield says, ?I hate Mondays!? You just can?t help but agree. You start your week dreading the days ahead and the work you have to do. Just thinking of the tasks exhausts you already. You count every second you spend to the endless
Category:
To find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest.Now before you start to think?.?well I don?t have
Category:
Site Sponsor
Directory Statistics
Articles: 68228
Categories: 501
Yahoo Entertainment
