- Aim to return initial investment in 12-18 months
- Target 15%-25% IRR before tax
- Target 30%-40% IRR after tax
- Low-moderate risk
- Up to 90% deductible (Intangible, Tangible and depletion)
Yield Fund is modeled after the DrillCo transactions that large Private Equity participates in. The investor has no start-up cost or promotes. Start-up costs typically are things like lease cost, seismic, geologic, or geophysical cost. The promote is carried interest that the operator receives for putting the prospect together. The Partnerships dollar goes into drilling, completion, and sometimes infrastructure cost. All of these costs can be expensed in the year the investment is made or within the first two years.
The timeline from investment to the investor’s first payments is in the 3 to 6 months range depending on the Partnership closing, capital deployed, wells drilled and completed and oil and gas sold.
The investor will receive distributions less landholder cost, taxes, and operating expenses on a monthly basis. The first few years are a well most profitable time, as the well’s production is declining.
The first 6 to 18 months should payout the investor’s initial capital investment with a 15% IRR based on the time from the Partnership closing to the time the investor is paid out in full plus the return.
At the point the 15% hurdle is met, the Partnership receives a reversionary interest typically 90% of the working interest and the Partnership retains 10% for the life of the well.
We execute a DrillCo oriented oil and gas private equity strategy on your behalf.
Step 1: Drilling Proved Undeveloped (PUD) Wells
We invest in drilling Proved Undeveloped (PUD) wells. This category, determined by third party engineers, has a 90% or higher likelihood the quantities actually recovered will meet or exceed the estimates. Proper engineering evaluation is conducted and modeled and reviewed to determine a minimum 4 to 1 coverage of estimated production to the total amount invested.
Step 2: Unique investment structure modeled after DrillCo’s
A preferred rate of return, similar to Senior Secured debt. An investor pays no start-up cost, no promote, no Geology, Geophysics, and Reservoir Engineering cost. When the wells are drilled and completed, the investor receives those costs in the form of a loss on a K1 year-end (typically 80-90%). As the well produces, the net revenue is paid to the Fund until 100% of the invested capital is returned plus a 15% IRR*. Once this IRR hurdle is met, the Fund receives a smaller interest in the well for the life of the production (5 to 10 years).
*IRR calculated monthly based on the outstanding balance owed to investors multiplied by 1.25%
Step 3: Take advantage of all the tax benefits, but with a lower risk profile.
The Yield Fund provides investors all the benefits of direct oil and gas investing, without the risk of losing the entire investment. Why would the operator use the Yield Fund structure? In the current oil and gas priced environment, banks are not lending to E&P companies. The Yield Fund mirrors debt but isn’t. The operator benefits by paying out the investors quicker, as the IRR calculates monthly. The investor benefits by receiving the IDC’s and TDC’s deductions in the first year while recouping their initial investment from production in the following year, before the operator makes a dime from that interest. Aligning everyone’s interest.
You are investing in a limited partnership that participates in a drilling program with vetted operators in the United States that our team identifies, acquires, and manages on your behalf. However, you should expect it to grow and change over time as we acquire more projects, and others are sold or pay off.
You earn returns via monthly dividends from the sale of oil and gas plus the IRR for the time the initial investment is repaid. Actual results may vary and there can be no guarantee of enhanced returns due to investing in EnergyFunders or the use of EnergyFunders services.
Distributions are typically distributed in the middle of the month following the end of each production month., e.g. mid-April for distributions earned during May.. The value of your shares is also typically re-calculated on a quarterly or semi-annual basis.
Oil and gas is inherently a long-term, illiquid investment. EnergyFunders is intended for investors who have a minimum time horizon of approximately five years. However, many of our Yield Funds can payout the initial investment with returns in under 24 months.
Projected return and dividend figures displayed on this page are net of fees. The offerings in this plan pay a 2% net profit fees. In addition, investors pay a 15% Net Profit Interest after the Fund received is stated payout and return.
Yield Funds are limited partnerships that invest in working interest projects from E&P Companies that are vetted by our expert team. When you invest, you are actually buying units of these partnerships, allowing you to diversify into many properties efficiently and at a low cost.
Investors will receive a K1 from each partnership / Fund they invest in each year until that entity is dissolved. The K1 includes the drilling losses, income generated, and any amortization based on the investor's % in the partnership.
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