Are Oil Wells a Good Investment?
Are Oil Wells a Good Investment?
Generations of Americans have built their futures by direct ownership of oil and gas wells. As the cornerstone of the commodity market, this direct ownership continues to be an accessible, reliable way to grow personal wealth.
Reinforced by a domestic demand of more than 13 million barrels a day, wells produce both oil and natural gas that not only supply the nation’s energy needs but that are essential to producing thousands of everyday items.
As it has been for generations, the answer to the question, “Are oil wells a good investment?” continues to be, “yes.” Below, we’ll explore how investing in an Oil Fund can enhance your direct ownership of oil wells by mitigating risk and providing more profitable yields through direct ownership.
The Benefits of Direct Oil Investing
Building on this steady demand, the sponsors of oil and gas offerings continue to develop new investment models leveraging the advantages of ownership to provide a range of wealth-producing benefits.
Oil Fund investing offers five clear advantages:
- Tax offsets. Oil Fund investors can claim first year deduction of up to 90 percent of invested capital, which can lead to substantial income tax relief. Investors from states with high state income rates can reduce their actual invested capital amount by the reduced income tax liability due to claiming the first year deductions on their federal and state returns.
- Consistent monthly revenue distributions. After an Oil Fund receives the subscribed capital as presented in the offering memorandum and implements the plan of oilfield development deploying this capital, usually consistent monthly distributions of net production income from the oil and gas sold in the prior month are distributed to the Oil Fund subscribers.
- Scalability. The Oil Fund favors drilling in proven and usually underdeveloped oil fields. Your ownership percentage entitles you to participate in the development of all active resources in the oilfield being developed into the future—this advantage differs from a single-well scheme that limits your potential earnings to the value of the wells rather than the oilfield being developed..
- Multiple on invested capital returns. This term refers to the reality that owners benefit not only from the oil and gas produced by the well but the increase (accretion) in the value oil and gas mineral acres and the oilfield being developed. A $100,000 investment in development of the oilfield which possibly doubles in value during the holding period could provide a multiple on invested capital equal to 2:1 or more. This could be a powerful method of accumulating wealth.
- Multiple exit strategies. As the Oil Fund deploys capital, the Fund seeks opportunities to scale while vigilantly evaluating possible emergent exit strategies which could increase profitability.
A single oilfield may contain multiple drilling locations, and your direct ownership in the oilfield allows you to profit from each drilling location either developed or to be developed at a future date. These undeveloped drilling locations are commonly referred to as “PUDs” (Anticipated proven reserves to be recovered from new wells being drilled on said location).
How to Profit From Oil Wells
Are oil wells a good investment? They are if your investment strategy creates several ways for you to realize strong ROI within the industry.
- Financial returns. Oil wells can offer constant monthly cash flow after invested capital is deployed and divestiture opportunities ideally within two to three years. These timeframes compare favorably to typical stock market returns and potentially outpacing rises in real estate values.
- Rising prices. Higher demand for oil and gas directly impacts oil and gas commodity prices.
- Increased divestiture options. Oil well owners may benefit from early returns achieved by oilfield divestitures to external companies. Once a commercial well is established, with the Fund owning an undivided interest in the commercial well, the Fund could elect to sell a percentage of this undivided interest to create a liquidity event to spike ROI (Return on Investment).
Diverse Demand Protects Investment
The 13-million-barrel-a-day U.S. demand for oil, which is expected to increase as the COVID-19 pandemic recedes, is driven by a diverse range of markets. While the majority of crude oil supplies will become petroleum products that feed the nation’s energy requirements, there are thousands of everyday items that depend on the same resource. And as each oil well will also produce a quantity of natural gas, product mix begins at the wellbore.
The following list provides a few examples of the thousands of oil well-farmed products:
|Cosmetics||Contact lenses||Shampoo||Hearing aids|
All of these products, combined with domestic energy needs, produce a market as resilient and diverse as any in the commodity investment sphere. These markets project positive growth for decades to come and underpin the lasting value of oil well investment.
Are Oil Wells A Good Investment? Yes, If You Invest In Direct Ownership
This new oil investment model expands revenue potential by broadening the venture focus from single-well schemes to oil and gas mineral acreage and oilfield development ownership opportunities. Accredited investors—that is, individuals with annual income of $200,000 for the past two years and expectation of similar earnings in the current year or couples with joint earnings of $300,000 for the past two years and expectation of similar earnings in the current year or possessing a net worth of over $1 million excluding primary residence—may participate in an Oil Fund.
This accessible ownership approach to investment is the number one reason why, after a century of reliable production, the answer to the question, “Are oil wells a good investment?” is still a resounding, “yes.”
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Investments in oil and natural gas partnerships are speculative and involve a high degree of risk. Oil and natural gas wells are naturally depleting assets. Cash flows and returns may vary and are not guaranteed. Past performance is no indication of future performance. Nothing herein shall be construed as tax or accounting advice. Investors may lose money. Some of the risks other than those described herein associated with investment in Larimer County Energy Fund are described in the Risk Factors section of the Confidential Private Placement Memorandum concerning the Larimer County Energy Fund accompanying, preceding, or following this Executive Summary. Prospective investors are urged to read and consider carefully the risks described in that section. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the investment opportunity described in this Executive Summary. Neither the Securities and Exchange Commission nor any state securities commission has determined the accuracy or completeness of the information contained within this Executive Summary or in the Confidential Private Placement Memorandum concerning the offering of limited partnership interests. The offering of limited partnership interests is made only by the Confidential Private Placement Memorandum, which must accompany, precede, or follow this Executive Summary, and an investment decision can only be made by the execution of definitive investment documents. Investors in Larimer County Energy Fund are required to be “Accredited Investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933.