Accredited investors are determined on income, assets and other factors. Only accredited investors may participate in EnergyFunders projects at this time. An accredited investor includes anyone who:
- earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, or
- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
$5,000 is the minimum to invest in a project.
Yes. Investors are able to invest through an LLC or trust. Investors are also able to invest through their traditional self-directed IRAs.
Once a project starts producing an investor can expect to receive monthly distributions. Keep in mind that with a oil well there’s usually a 60 day lag from production to distributed payment to investors.
Investors can access updated account information 24/7 by logging into the investor portal. They will also receive asset management updates via email on each investment and a detailed investor report every month.
No. By their nature, oil and gas assets have a longer term time horizon than that of liquid stocks or bonds.
One of the biggest differentiators of oil and gas investing compared with other asset classes is the tax incentives. EnergyFunders provides investors with the option to take incredible tax deductions unique to oil and gas. Investors have the option to offset 100% of the investment over seven years. We always suggest that you consult your tax or financial professional for tax advice as they will be familiar with your tax situation, which may affect your ability to take advantage of these tax benefits and incentives.
Prior to investing, you will electronically sign a contract giving you ownership in the specific project limited partnership (LP), set up to purchase working interest in the well(s). You will receive revenue generated from the project at your pro-rata share of the distributions in the LP. Your right to receive revenue is nontransferable except in the event of death or court order (e.g., inheritance or divorce). However, EnergyFunders may direct the LP to sell its assets in an arms-length transaction on behalf of investors when EnergyFunders determines it makes economic sense to sell. EnergyFunders generally anticipates holding wells for a five-year period; however, this is decided on a case-by-case basis. Payment to investors will be made on a monthly basis.
Similar to a 1099, a K-1 form is an accounting of the tax income for the year. Each investor receives one per investment.
Yes. Entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Depending on your circumstances, the following may be relevant to you:
- any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person, or
- any entity in which all of the equity owners are accredited investors.
EnergyFunders focuses on proven fields, multi-well oil and gas drilling, reworking or recompletion projects to be funded in whole or in part by investors. Investors own interests in a project limited partnership (LP) set up to purchase a non-operating working interest in a specific lease with drilling opportunities. The investor has the option to invest as a general partner during drilling and completion or can invest as a limited partner. EnergyFunders’ compensation is a 10-20% carried interest in the project LP. Investors receive their pro-rata shares of the revenue from the well(s) less the carried interest owned by EnergyFunders. You will never have to deal directly with oil and gas operators, and your interest is professionally managed by a team of experienced oil and gas professionals. EnergyFunders’ interest is aligned with yours and our reputation is tied directly to how well we protect investor interests.
Yes. All individual project funds are held separately in a secure bank account with a major financial institution. Investors receive their money back if a project is not fully funded.
No. However, you may elect to pay via an electronic method that charges a fee or you may pay via wire transfer. Payment via mailing a check is also acceptable. Bitcoin payments are covered in a separate portion of this FAQ. EnergyFunders will never receive fees from oil and gas investors for putting together an investment opportunity. We are right there with you and only profit when a well is successful.
The oil and gas operator proposes a purchase price in exchange for a certain working interest percentage (ownership percentage) in a well. The project cost will be clearly disclosed in investor materials, and EnergyFunders will have negotiated to keep the purchase price as closely aligned to drilling and completion costs as possible. However, it is important to remember that large expenses have likely been incurred to get a deal in place and ready to go. Geological, technical and legal expertise are necessary to get a well permitted and ready to go. It is not uncommon for oil and gas investors—including major oil companies—to pay a premium for access to more lucrative projects. Operators on the site must compete with each other for investor dollars.
Investing in oil and gas wells is a high risk/high reward investment category. You must be prepared to lose your entire investment in any given project. That is the reality. It illustrates the importance of diversifying your investment dollars across different wells and different operators and keeping oil and gas investments at a percentage of your investing portfolio in which you are comfortable. The risk of a dry hole is arguably the greatest risk in oil and gas investing. Geology involves theorizing about what happened millennia ago thousands of feet below the earth’s surface. Drilling in mature fields (infill drilling) that have proven production can lower the overall risk of a dry hole, along with investing in multiple well packages. EnergyFunders is focused on finding drilling projects in proven areas with more than one well. Oil and gas prices are volatile and present another risk. Prices could fall to a level where an investment is not profitable and an operator is forced to shut in the well.
The buy-in is the lowest amount at which you may participate in a project. These will be determined on a case-by-case basis. Most of our current projects have a $5,000 minimum buy-in.
No. You are free at any time to contact EnergyFunders at info@EnergyFunders.com or via the purple bar or button at the bottom of the page. One advantage of EnergyFunders is that operators are free from the task of investor relations with numerous investors. Additionally, the outlook for each project must remain as presented in the vetted due diligence package for verified investors. Directly contacting an oil and gas operator may result in loss of site privileges and loss of access to exciting projects not yet available.
The EnergyFunders platform is enabled under regulatory changes and legislation, including the JOBS Act of 2012. Only accredited investors are able to participate in EnergyFunders projects. EnergyFunders has carefully examined letters issued by the SEC regarding crowdfunding guidelines and has consulted with the lawyers at the SEC Division of Trading and Markets to narrowly tailor its activities to be in compliance with securities laws and regulations and we also rely on our own securities counsel for compliance matters.
Simply sign up and follow the instructions. We have made the process as simple as possible. Unfortunately, non-accredited investors may not participate in projects at this time.
If they invest through a company, the ownership of the company will determine the descent. If the ownership is in their personal name, it is an asset of their estate and will follow their will or the probate of their estate. Likewise, if they have a pour-over trust, it would go into the trust.
Yes. For existing Bitcoin owners, we strive to make Bitcoin payment convenient and straightforward, but you need to be aware of the major caveats involved. All investment deposits made via Bitcoin will be converted to U.S. dollars. EnergyFunders does not endorse the use of Bitcoin, which has unique risks and tax consequences associated with it, and the user should be aware of these risks and tax consequences. EnergyFunders cannot guarantee Bitcoin valuation and assumes no liability for fluctuation in value prior to conversion to U.S. dollars. EnergyFunders cannot be liable for the security of third party Bitcoin payment or conversion platforms. The user is responsible for any and all third-party fees related to payment via Bitcoin. Revenue, if any, paid to the investor, will be paid in U.S. dollars, not Bitcoin.
Simply sign up as an operator. Once you are approved, you may submit projects for review on the proprietary project upload platform. Please feel free to contact EnergyFunders with any questions at info@EnergyFunders.com or contact us using the blue bar or button at the bottom of the window.
Prior to approval and execution of the purchase and sale agreement (PSA), only EnergyFunders and its affiliates will have access to your proposal. After the PSA is executed, the project will go live on the website to seek investor funding. Only verified investors who sign a CA can see the details and the due diligence materials.
What will be requested in the due diligence package, and what is the form of the purchase and sale agreement?
Our agreement with an operator is typically in the following format: Simply register as an operator and when you are approved, you will be able to upload your project on EnergyFunders’ proprietary project upload platform. Generally, the due diligence packet requires a proposal similar to what you would submit to any potential non-operating working interest partner. It will also require land documents such as title opinions, leases and permits. You will need a qualified petroleum landman or oil and gas attorney to prepare the land due diligence materials and complete the due diligence checklist.
- A clear drilling or reworking plan and an honest assessment of risk
- Drilling locations including standard legal descriptions
- Revenue projections in a easy-to-read format, accounting for different production scenarios and taxes. Remember, the plan has to be profitable in a low-price
- How much you are trying to raise and what working interest and net revenue interest EnergyFunders will get in return
- AFE (drilling budget)
- Title work/title opinion(s). (Preference goes to title opinions, which are typically required.)
- Drilling units, if applicable
- Permits (We understand if you don’t have them prior to proposing the project.)
Make us a fair offer in which the purchase price aligns as closely as possible with the drilling and completion cost for the working interest you wish to sell. We do understand that work and costs go into putting together a well that is ready to go. You will have incentive to offer competitive terms due to competition for investor dollars on the website, just like in a traditional capital raise. When appropriate, please allow for a percentage of the cost to be paid at completion only after a well is determined to be a commercial producer. Investors will be refunded any money left over for wells not completed.
EnergyFunders will work with you to determine a staged funding process that works with your project AFE. Once all money has been collected, the LP will release the agreed to amount to begin work. There is very little red tape in order to receive the additional money.
No. You will only ever be required to deal with one working interest owner: EnergyFunders. Once we research and approve a project, we strive to be a no-hassle business partner. EnergyFunders will buy your working interest as a block and manage it for the investors. You only deal with one working interest partner. Investors may not contact you without permission. Doing so may result in loss of site privileges.
An EnergyFunders venture capital fund and the operator sign a leasehold purchase and sale agreement contingent on raising funds in the specified time frame (30, 60, 90 or 120 days). If the funds are raised, the well is drilled. If not, no further obligations are owed. The fund’s assignment for working interest is due after payment and after the well is completed as a producer. No assignment is due if the well is P&A as a non-producer.
If you’ve raised money from investors before, you know there are quite few things you’d need to do on your own to raise capital legally and effectively:
- Determine, draft and file the appropriate regulatory filings at the federal and state level.
- Determine and pay the appropriate fees required by each state.
- Determine and comply with federal and individual states’ legal requirements.
- Write and generate marketing literature.
- Obtain and pay for legal services to draft the subscription agreement, management agreement and other required contracts.
- Pay a legal services firm or communication firm to generate a legally-compliant private disclosure memorandum.
- Possibly pay a promoter or broker-dealer to assist you with fundraising efforts.
- Meet with individual investors, perhaps several times with each, and travel constantly to do so.
- Receive and process payments.
- After you fund the project, maintain ongoing communications with each investor and calculate the amount owed to each investor and timely pay each investor.
EnergyFunders manages all of this on behalf of our venture capital funds instead of you doing this for your investors.
This largely depends on how quickly you submit the right information and the initial review process can begin. However, most projects take 14 days to complete the diligence phase and less than 30 days to fund on the platform.
EnergyFunders recognizes that sometimes multiple individuals at a company have the decision-making ability to drill wells in different assets or even the same asset. Multiple accounts are welcome in those circumstances. However, only the account used to create a project may be used to work on that project on an ongoing basis.
Multi-well projects are favorable as they have the ability to spread risk. In some circumstances, we will accept single-well projects.
EnergyFunders is interested in funding single-well exploration, multi-well drilling, recompletion and rework projects in core oil and gas producing states – Texas, Louisiana, Oklahoma, and New Mexico. We are constantly looking for new products that yield the best returns for our investors and in the future hope to extend our funding to additional states. We manage and curate the project to our network of thousands of accredited investors. We utilize equity crowdfunding to raise the money necessary to purchase working interest in a lease or project. EnergyFunders manages the partnership and the many investors who purchase units in it.
Any operator who is looking to spend more time on exploration and production and less time on fundraising would be well advised to try crowdfunding. Raising capital for exploitation of oil and gas has historically been a time-consuming task, with many projects not receiving funding in time. EnergyFunders simplifies the fund-raising process for operators, by acting as an investor relations team. Crowdfunding is already a multibillion dollar industry. It makes sense for oil and gas operators to seek funding using this avenue. To find out what partnering with EnergyFunders can do for your business, learn more about raising capital on the EnergyFunders crowdfunding platform.
Typically, funds are disbursed to the operator through a series of negotiated phases, sometimes just prior to a well being drilled at a time determined in EnergyFunders’ contract with the operator. Some agreements with operators will specify that “completion” funds will be paid only after the well is drilled to total depth and the well is determined to be commercially viable. In those cases, unused funds will be returned to investors.