What type of risk is involved in investing in an oil well?
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.