Why You Need Transparency in Oil and Gas Investments

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If this is what your deal looks like, you’re in trouble.

There are many oil and gas promoters out there who promote wells they don’t actually drill.  That’s why there needs to be complete transparency in oil and gas investments..

Many promoters won’t actually tell you they are promoting someone else’s deal.  Behind the slick brochure, you may never know what fees they are taking regardless of whether the project is successful or not.

Get the Facts

When evaluating a potential oil and gas deal, you need to know who owns the oil and gas leases.  If the owner of the oil and gas lease isn’t the person you are dealing with, that’s a sign you are paying an inflated price to a promoter.

You also need to know the record of the company drilling the wells.  Have they successfully drilled wells in the past?  It isn’t enough just to know that the project is being managed by X number of people with “30 years of experience” in the oil and gas industry.  You need to know results.

Dig Deeper

A securities disclosure memorandum needs to go beyond a mere recital of facts.  You should expect this memorandum to dig deeper then just the surface (we’re drilling X wells at X feet and expect to make tons of money) and give a true disclosure of what is going on in the deal.   The company you invest with should demonstrate a dedication to total transparency with the materials they allow you to see.  You need to be inside the deal, not just seeing an optimistic deal overview.

Don’t be afraid to ask questions.  But, remember, if an oil and gas deal isn’t fully transparent after you read the full disclosures and ask any questions you want:  Walk.  No exceptions.  If you feel you are getting overloaded with information on why the industry in general is a good investment but your specific deal is still not completely understandable, walk.   

Finally, without transparency, you can’t identify and mitigate risk.  Next up will be a post on mitigating risk in oil and gas investments.  You can get the information you need here, and in our upcoming e-book which will delve even deeper.  Stay tuned.

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