We’re celebrating the launch of Yield Fund II by waiving origination fees for any current investor through October 31st!
A big part of investment success requires being in the right place at the right time.
Today, the prospects for direct oil, gas and Bitcoin investing have never looked better.
Long-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed, it’s just grown more compelling.
In a normal commodity market, high prices provide a powerful signal for investors: allocate more capital. But in today’s market, that signaling mechanism is broken. For the first time ever, high energy prices have been met with capital scarcity, creating the best buyer’s market of our lifetime.
Despite oil trading at multi-year highs, capital remains stubbornly sidelined in today’s market. Consider the difference in rig counts between today versus the prior peak in prices, back in October of 2018 at $75 oil:
The unwillingness of operators to deploy rigs becomes even more bullish when you consider the depleting inventory of “drilled but uncompleted” wells (DUCs). As the name implies, DUCs are wells where the majority of capital has been spent drilling, but the well has not been hydraulically stimulated (“completed”) to maximize production yet. DUCs reflect oil supply that can quickly be brought online through completion, but without deploying new drilling rigs.
During the shale boom years, excess cheap capital flowing into the shale patch funded a record accumulation of DUC inventories. But in today’s capital starved market, drillers are now harvesting this inventory. The shale DUC count is now at the lowest level in years:
Today’s depleted DUC count means less future oil supply, without a major increase in drilling rigs.
So, even as the consensus calls for new record highs in crude oil consumption in 2022, all signs indicate U.S. production likely remains below the pre-COVID peak for the foreseeable future. Meanwhile, the major European oil companies are facing similar capital constraints, all while OPEC is maintaining discipline in keeping supply off the market.
This is a recipe for one thing: higher prices.
At least that’s the bet Wall Street is making. The Wall Street Journal recently reported on the flood of options trades betting on $100 oil, captured in the graphic below:
But $100 could be just the beginning, if traders in the options pit are right. The same Journal article noted a recent spike in bets calling for $200 oil by the end of 2022.
Does Wall Street know something we don’t?
But it’s not just oil prices going through the roof…
Similar supply/demand dynamics have driven a global shortage of natural gas and natural gas liquids (NGLs). NGLs include products like ethane, propane and butane – key feedstocks for chemical processing, and fuel sources for heat during the winter.
You may have seen the headlines about $6 natural gas and a potential winter supply crunch. Less fanfare has been made about an already-dire supply situation in the propane market. The chart below shows U.S. propane inventories falling to their lowest seasonal level of the last six years, ahead of the key winter heating season:
The combination of depleted inventories, stalled production growth, and the potential for a cold winter led one UBS analyst to warn of a potential “Armageddon” scenario in the propane market. While that may prove hyperbolic, Mr. Market is telegraphing a potential supply crunch by sending propane prices towards their highest levels in eight years.
The Opportunity of a Lifetime
Put it all together, and we believe today’s energy market offers the opportunity of a lifetime for investors. With large scale capital allocators refusing to put money to work, even at today’s prices, we’re seeing the best buyer’s market ever for deal-making.
This includes proven reserves projects with IRRs exceeding 20% for wells already on-production, and proven development projects with IRRs exceeding 30%.
Given today’s stretched stock market valuations, and near record low bond yields, this type of return/risk proposition is almost unheard of. The only asset offering greater returns than energy in today’s market is Bitcoin:
Thanks to the new Bitcoin mining opportunities we’ve identified, Yield Fund I investors can now tap into each of these top performing asset classes.
Just like oil and gas, the prospects for Bitcoin investors have never looked brighter.
Bitcoin Goes Mainstream
Hardly a week goes by without a major new catalyst moving Bitcoin towards mainstream adoption. This week, history was made with the launch of the first-ever Bitcoin exchange traded fund (ETF). Now, both institutional and retail investors can buy Bitcoin through a regular brokerage account.
With millions of new investors able to invest in Bitcoin with the click of a button, it’s no surprise why Bitcoin reached new record highs above $67,000 per coin this week. At current prices, the economics of our proposed Bitcoin mines look even better than the lucrative oil and gas deals available in today’s market.
Cut Your Tax Bill with Oil and Gas…AND Bitcoin Mines!
Looking beyond the returns available, we know a big reason why many investors chose direct oil and gas investing is to reduce their taxable income. Specifically, the intangible drilling cost deductions, that allows for the opportunity to deduct up to 100% of your investment in year one – providing immediate, upfront tax benefits.
After consulting with tax professionals in recent weeks, we’ve learned that our Bitcoin mine will provide investors with a similar bonus depreciation tax benefit. Timing is everything here. That’s why we’re making an aggressive push to raise capital and put it to work before year-end. This will allow investors the maximum tax benefit for the 2021 tax year.
If you’d like to learn more, click here to schedule a time with someone on our team to learn how you can invest in our Yield Fund I.