Has anyone participated in any direct investing in oil & gas drilling? There are several partnerships you can invest through and I've wondered whether or not it would be worth doing.
I had a friend who participated in one of Atlas Energy's partnerships a few years back in the Marcellus and it has worked out well.
I know the overhead can be an issue with the small partnership, but are there any other things I should think about?
Dave, we have invested in EEP Enbridge Energy LP for a couple years and have done very well. Great dividend, however, doing the taxes for LP’s is less than fun, and different from how other investments are taxed.
Although LP means you are loss limited to the amount you have invested, you may not apply the tax write offs toward ordinary income...only passive income. However, you still have the same liability as the General Partner.
You may want to check out JV's where you are an actual owner of a business enterprise and enjoy all the risks, but also the rewards such as tax advantages on all income not just passive.
Dave, it really depends on the prospect and its financials.
I invested 10% WI position on a well package in the Barnett with a very realistic 2 year ROI. The drill package was $750k with a 20 day timeline and 8 day extension. The operator was bonded, credible and prudent, yet ran into unforeseen engineering issues and ended up overextending and burdening working interest partners an additional 2.5% each. At the 10% point, whats another 2.5% right?
Without knowing what kind of deal or structure you're looking to get involved in, it's difficult to say...but bottom line, be sure your technical data is sound and your drillers know what they're doing. It's very easy to get off budget.
I always prescribe to investors the "5 P's" process I use before any project.
Property, People, Performance, Procedure, Payout/ If one of the P's isn't satisfied, Pass on it. The other thing to look for is a turnkey price. That way if there is cost over run, the Operator eats it.
DaveE said:
Dave, it really depends on the prospect and its financials.
I invested 10% WI position on a well package in the Barnett with a very realistic 2 year ROI. The drill package was $750k with a 20 day timeline and 8 day extension. The operator was bonded, credible and prudent, yet ran into unforeseen engineering issues and ended up overextending and burdening working interest partners an additional 2.5% each. At the 10% point, whats another 2.5% right?
Without knowing what kind of deal or structure you're looking to get involved in, it's difficult to say...but bottom line, be sure your technical data is sound and your drillers know what they're doing. It's very easy to get off budget.
In general, partnerships are not designed to make much money for the limited partners unless something unexpected is found.
I agree to a point with Nick. If the limited partnership comes to you from a non-operating sponsor, you would be best to look for joint ventures with operating sponsors.
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Be sure you speak with the actual operator who is in the field doing the work, not someone in a high rise office with a phone room.
I am the owner of the surface, and minerals of apox. 150 acres in an extremely active location near the Ky. , Va., West VA Lines. We are trying to put together a partnership to drill several wells. The area has been extremely successful. Any one with experience in setting these deals up that would be interested in helping on this project?
Would be willing to give someone a percentage of the deal to help get things going.
Dave, it is definitely worth it! I know a company from Kuwait, Aref Energy, they do those partnerships - joint ventures, they acquire shares etc. They focus on small and medium size companies in oil and gas sector (in MENA)... Try to look at their profile at www.marcopolis.net/aref-energy-investment-partner-in-oil-gas-services-sectors.htm
I've been looking at a few promoters lately.
Wondering if some of the more experienced folks on this thread can offer some insight:
Also...
* What's your biggest frustration specifically?
* What's the specific outcome you want when investing in this sort of thing, in detail?
*What have you tried so far that didn't work? Either returns came back poorly, or you had challenges on timetable, etc.
* What do you think the solution is, or what would you like it to be? Better / more information? Good counsel?