Natural gas can be a unique way to diversify your investing portfolio into an area that offers strong returns. Natural gas can be a by-product of oil investing, or it can be targeted along with oil production in a specific well, but it can also be a stand-alone objective of energy production. In areas like the Eagle Ford shale that are oil rich, there are portions of the field that don’t possess natural gas pipelines. In these areas, natural gas is a wasted by-product of oil production. But, in many regions in the U.S., natural gas pipeline infrastructure is abundant. Natural gas is targeted for investment dollars alongside oil in the same wells, or gas only wells are targeted for capital development using investor dollars.
Like stand-alone oil wells, natural gas investments carry with them a high degree of risk. The goal when seeking to produce natural gas, like when seeking to produce oil, is to reduce risk associated with exploration and production activities while maximizing exposure to revenue generating projects that can potentially generate a very strong return on investment. The EnergyFunders platform provides a wealth of information for investors targeting natural gas. We have a blog and e-book that are designed for beginning and experienced investors alike who wish to invest in natural gas. Natural gas has also been embraced from time to time by environmentalists due to its clean burning nature. Many consider natural gas to be an ethical investment category. It should be noted that petroleum is also an ethical investment due to its use of the products that power our lives and that technology is constantly improving to make oil and gas extraction safer and more environmentally friendly now than it ever has been. That being said, you’re likely ready to get started learning about how to minimize your risk and maximize potential return on investment in the natural gas investment category.
Here are some key points.
Diversify across numerous wells and geological formations
In any drilling project targeting natural gas, there is always a risk of failure. Just like there is always a risk of failure in any venture you can participate in. Just like Hollywood studios mitigate risk by spreading their investments across many scripts and genres, when targeting natural gas you can mitigate risk by diversifying across many wells and across many different targeted geological formations. You’ll also want to diversify across as many different assets in different regions of the country as you can. There is no shortage of conventional oil and natural gas basins across the continental United States.
Get serious by investing in the well
If you don’t allocate your natural gas dollars directly into the oil, you’re not getting the biggest bang for your buck. Investing directly in the well is the most lucrative place for your investment capital. All profit in a natural gas exploration and production company ultimately comes out of the well. By making strategic partnerships put your dollars directly into the well, you can avoid the overhead costs borne by a corporation. If you want the sauce, go straight to the bottle. Invest your natural gas dollars in the well.
Put in the effort to diversify yourself across different natural gas project types
Natural gas projects can include deep wells, shallow wells and re-entering or re-working existing wells. It will take an effort to educate yourself on many project types, but the natural gas section of your investment portfolio will be much healthier as a result of getting serious about diversification.
Don’t pay marked-up prices
Have you ever been to a market and it seems like the longer you haggle and negotiate the price, the closer you can drive it down to costs? By examining actual drilling budgets, you can determine the true cost of participation and negotiate effectively. Don’t feel like negotiating is rude. Know the cost of operations and negotiate a fair share of revenue to justify the investment. Don’t let someone make a lot of money just for letting you into the deal. The value of your natural gas investment is that it lets the operator diversify across more wells, also.
Why pay a middleman? By demanding transparency as to who is receiving equity and payments and as a result of your capital investment, you can obtain more for your money in your natural gas deal.
Don’t go it alone
By joining with the EnergyFunders team, you get aligned with a team of professionals with expertise across multiple disciplines. We strive to present fully vetted deals that will maximize the value of our carried interest in each project. That’s how we make our money, by a carried interest in successful deals. So, we want your natural gas wells pumping for the lowest capital cost as we can possibly negotiate. We believe in giving the investor access to transparent, vetted natural gas projects. We’re right there with you, on the same team.