How to Invest in Oil and Gas
Copyright (c) 2013 Lexstar Energy
America is currently experiencing a gas and oil boom that is likely to display impressive longevity. The International Energy Agency has predicted that the nation will be the number one producer of oil by 2020 and gas and oil production is increasing to such a rapid extent that sources suggest that in just half a decade, the US might no longer require imports of these commodities from outside North America.
It is therefore the perfect time to invest in these resources. The problem is that many people are unsure of exactly how to invest in oil and gas. Here is a guide to the steps that should be taken in order to ensure a sound investment.
Assessing the People Risk
Perhaps the most important decision that you should make is whether or not the people who are involved are honest, capable and trustworthy. A wise move when deciding how to invest in gas and oil is to be acutely aware of the nature of the other individuals who are going to be involved.
Thought should be given to whether the proposed well operator is an experienced operator and whether the company is financially sound. You should also take steps to find out whether proper insurance is in place.
Look at the experts that are being used. Is the company utilizing a top-notch geologist who has an impressive track record? The engineer, geologist and drilling company should possess a high degree of familiarity with the geographical location that they will be working in.
The last thing that you need is questionable characters onboard or people who are simply not qualified for their roles.
Deal Structure
It is also essential to pay close attention to the specific terms that are laid out in the deal. Look at whether others are getting carried along as participants with no obligation to place their finances in the deal.
Be sure to assess whether or not the monthly management fee is reasonable, as you will pay it for a considerable length of time.
Assessing the Project Itself
Those who are knowledgeable about how to invest in oil and gas will always question how a company decided upon its current project. Is there abundant and reliable data regarding the location. What sources were utilized in order to collect this data?
If the location of the project is a proven field then ask to view other local wells' logs.
Do Your Research
Try and find out as much information about the company as possible. If possible, take steps to check its drilling success rate, management team's dossier and business history.
The correct process to take when deciding how to invest in oil and gas varies according to the exact nature of the investment. However, all of the steps outlined above can help you to take advantage of the major opportunity for earning substantial profits that has been generated by the oil and gas boom.
Invest wisely and you might soon be reaping the rewards.
About the Author
Jeremy Paul is CEO of Lexstar Energy LLC. Lexstar Energy, an independent oil and gas exploration and development company, was created for the purpose of developing, exploring and producing gas and oil reserves in the Louisiana and Texas Gulf Coast regions. http://www.lexstarenergy.com
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