Oil Investing Risks and Disclosures
We provide following oil investing risks and disclosures as part of our commitment to transparency and our "investor first" philosophy.
Types of Oil Investing Risks
There’s no way to remove all risks in oil investing; however, we try to mitigate risks as much as possible.
|Type of risk||Risk explanation||How we mitigate risk|
|Geologic risk||There is a risk of finding hydrocarbons in the ground.||We collect as much data as possible, work with many types of professionals to evaluate projects, look at offsets and drill test wells.|
|Operator risk||Operators aren’t always accountable.||We only work with top-tier operators with long track records of success, typically in one area.|
|Operation risk||Many things can go wrong, causing overspend or failure.||We raise contingency funds, communicate with investors, and follow our operators closely.|
|Reserve/production risk||There are risks in the accumulation of hydrocarbons, and we can’t know the exact pressure until we drill.||We assess geophysical data, log data and analogs. We calculate a range of potential production outputs with low and high cases.|
|Price risk||Oil, natural gas and NGLs are global commodities, and prices can fluctuate.||We run economics on flat price and low commodity price cases.|
|Regulation risks||Local, state and federal government intervention can occur and regulations can change.||We comply with all regulations and avoid international deals with high governmental risks (because we drill in the U.S.).|
Watch Reed clearly explain these risks in more detail:
- Cyclical and seasonal fluctuations in the economy and in oil and gas prices in particular may have an effect on the company or investments. The oil and gas industry is cyclical, which can result in shortages of drilling rigs, equipment, raw materials, supplies and personnel. When shortages occur, the costs and delivery times of rigs, equipment and supplies increase. In addition, when demand for oil and gas increases, the demand for, and wage rates of, qualified drilling rig crews also rise.
- Our online crowdfunding distribution model could be subject to cyber-attacks aiming to breach our security protocols.We take reasonable and commercial precautions to make our systems as secure as possible, including but not limited to daily back-ups, banking grade hosting solutions, divisions between systems to ensure, for example, that our banking backend cannot be reached via our online distribution network, and continuous monitoring of the systems as well as sequential system checks. However, we cannot fully exclude the possibility of cyber-attacks, third party breaches, software bugs or other forms of internet malfeasance.
- Some of the company’s projects are delayed, under-performing or failed.
- We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of public companies.We do not have the internal infrastructure necessary, and are not required, to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurance that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect to incur additional expenses and diversion of management’s time if and when it becomes necessary to perform the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.