Oil and Gas Well Drilling

 

I have invested in about 10 wells with four different companies over the last 5 years.  I was originally contacted by phone.  First company was a scam, took my money and did not drill.  They went to jail, but I have yet to see any money back.

Second company had poor production and after a year gave back partial credit towards a new well project.  I accepted and the new wells are producing ok but it took two years before I began receiving returns.

Last company is doing a water flood project and I have 6 2-well projects.  I receive returns within 4 months of sign up.  They have not reached full water flood potential yet but production is slowly improving.

I get oil and other investor solicitations multiple times a week.  More than I want or can afford.  The risk is will the well be any good but the bigger risk is how to know who is telling the truth and are they a legitimate company.

Can anyone relate to this?

Jack

  

 

 

 

 

 

 

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I've only invested in two, both in the same area of Louisiana, and after all the hype around that first well, which cost way more to drill and complete than expected, it looks like about a 10-year payout period. Of course the drop in the oil price didn't help over the last 5 years. Oh, and the second well which was supposed to prove up even greater reserves, was a duster. 

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Making phone solicitations for raising drill capital has been around for a long time.  I suspect the primary reason is that a driller who would go to "Wall Street" would have to hand over far more equity than he can stomach.  The individual investor is more malleable, probably more patient, and can be enticed to sign contracts that obligate him to put up additional funds on a "funds call" for further costs including connecting to some pipeline. The Street is not going to do that type of deal, the Street will only fund a finite amount and then if the developer runs out of money the Street will take over the project and the developer's own investment is smoked.

Then layered on top of the legit developers you have this Remora-fish collection of hangers-on that are running actual scams.  One I know of involved a promoter who showed investors photos of pipes on the surface, the suggestion that these were take-off pipes.  In actuality, they were irrigation pipes on existing irrigated farmland!  Yup, that group took a ton of money from small investors and disappeared. 

If I were to guess, probably 25% of all "investment" proposals are hustles, stealing from small investors.  The lure of the oil-well is eternal. 

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I'd want to make sure payback is very quick in this industry. Probably best off going down the local casino.

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     I worked in the oil and gas business for nearly 20 years as an exploration geologist, starting in the early 80’s with Hunt Energy.

     Nearly every prospect  I saw coming from telephone and mail solicitations was suspect, with outrageous leasing, drilling and production costs.  The most profitable prospects were drilled with “in house” money or money from long term investors.

     If you choose to invest, do yourself a favor and talk with other operators in the area about lease, drilling and average monthly operating expenses.  

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