Tips on Making Investments with Oil and Gas Companies
In the world of investments, there are many pros and cons to deal with and consider. This is especially true for oil and gas companies, that you may plan to invest in, or partner with. The three main avenues which most experienced resource investors look at are;
- Commodity Trade Agreements – the contracts and options for the commodity delivery
- Types of partnerships involved, related to the exploration and production, and
- Existing stakeholder interests and revenue sharing agreements
In production partnerships, one would need to have buyers qualifying as investors with high net-worth. Investing at wells can be done directly by anyone; however, the investor needs to have a reliable source, one who is able to provide all the details of the investment. This can often be a challenge in the natural resources industry, say sources, because leaseholds may be encumbered, or production assumptions not accurate. Most analysts in this sector suggest that under producing properties are the best to invest in. This is because reworking potentials and more drilling can be done. When the property is re-developed effectively, it can provide a lot of upside potential and tremendous returns on investment.
The importance of finding the right professionals
When re-developing an under producing resource property, it’s critical to hire petroleum engineers. These professionals will be able to help with the improvement plans on the property in question, making it a profitable venture to deal with. Costs that are associated with engineering companies, in the re-development of a property, can sometimes be deducted from profits, going forward. This would either be done on the spot, or in some cases, over a period of seven years to ten years. With that in mind, finding an honest and reliable petroleum engineer should be your aim now, and how do you do that?
- Check online to hire someone with expertise needed for the project. Speak to as many petroleum engineers as possible and check their backgrounds, credentials, references, licenses and documents.
- When you do hire an engineer, ask them for an estimate. This would include the expenses and costs that would make re-developing the under producing property, generate more revenue than it had in the past. They would also be the best guides to let you know of other unlisted, under producing properties, where you may possibly find more deals. The engineer should also bring to your notice ways of cash flow analysis too. If he or she doesn’t offer you this, look for someone who does.
- When your lease has been purchased (working interest deals), you then should have possession of a title deed. This would make you the owner of all interests earned from the lease or maybe a portion of it from the under producing land or property you have invested in.
Other ways to invest in the resource sector
There are many categories one could invest in with regard to such investments. Mutual funds for example are a good choice to think of, ask your financial advisor for help on the same. One can even check online for more information and suggestions on mutual funds too. The criteria and returns, costs and volatility, performance and fees, everything would be given to you in detail.
These days, one would find many companies online that promise investors with high returns on minimum investments, but they don’t come without any greater pitfalls. Public trading is the name of the game with all major companies dealing in oil and gas production. Such stocks can be bought online or through reputed agents and brokers too. Check the analysis well and ask your broker for guidance, they would know it all at the tip of their fingers.
Take a look around and check out the portfolios of various oil gas companies that are doing well. These companies would surely have a list of loyal investors who have been with them since inception. It would be wise to learn more from them by checking out what they did different when thinking of putting their money into a venture for more profits, says Lily Noronha