I saw this forum for mineral rights that included a lot of information about oil wells. So, I joined the forum. We're new at this. I'm thinking we could ask some of our questions in the forum such as: 1. Are you people for real? :) Do real people actually invest in direct participation joint ventures for oil well leases? 2. If this returns so much money then why isn't everyone doing it? 3. Is the direct participation in oil well joint ventures really risky so we should avoid it or can we invest a little bit and watch it with little risk? 4. We're looking at the US Emerald Energy offer for some wells in Galveston county Texas. Any idea if this is a legitimate company with a good reputation? This is part of the brief description: The Franks Field Joint Venture (FFJV) consists of two wells that are located 2 miles north-northwest of the town of Hitchcock in Galveston County, Texas. One well, the #1 Bofysil, is a low risk recompletion of a well drilled in 2009. The other well in the FFJV is a low risk, high potential offset development well in Franks Field.
Participation is a great deal sometimes. I wish I had the cash to participate in the wells on my own property. Participation should be on a case by case basis. When you say low risk, are you saying low risk of finding something to produce that will actually turn a profit or just low risk in which you may find something in commercially producable quantity so you would at least get part of your money back? There is a difference. Beware offers to invest directly in a well, if the prospects were that good they could probably find the money from someone in the industry, old friends and partners and not need the new blood. While gas wells may be a good deal, and gas isn't totally in the tank at the moment and has a bright future, I would be looking to invest in primarily oil wells for the next few years, if I had the cash. Lastly, I would stay out of investing until it was myself making the determination that an investment was low risk, if you aren't qualified to make that determination, you could burn a lot of money taking someone's word for it. Those are my thoughts, for what it's worth.
Dear Gib,
"4. We're looking at the US Emerald Energy offer for some wells in Galveston county Texas.
Any idea if this is a legitimate company with a good reputation?"
Not to be disparaging on US Emerald Energy, but I might hazard a guess on a few things. US Emerald Energy called you on the phone at night, letting you know of this wonderful oil and gas opportunity in TEXAS.
They told you how great the returns could be and how people have made lots of money investing with them.
They also told you that nothing in life is certain and they could drill a dry hole.
If ANY of this sounds familiar, this is an old scheme. What someone has is a dog of a prospect that does pass industry scrutiny. Which means, people in the business take a pass on the wonderful opportunity. With research, you will find that you are paying expenses that are way out of position with the percentage interest that you are earning. A very typical industry participation deal is to pay 1/3 of the costs for a 1/4th interest. The promotion ends at either casing point or carried through to the tanks (generally). You might find out that their promotion is 50% of the costs for a 20% interest. You will have to dig in the fine print and ask the right questions.
Galveston County is not and has not been proved a good place for shale oil or gas. The bedding is highly fractured and steeply dipping along the salt domes with lots and horsts and grabbens between. Very tough technically to play the so-called low risk drilling of shale wells in Galveston.
If it is so good, why is not everybody doing it? Well everybody is not doing it, because it is not so good.
If you have big dollars to invest, invest in a drilling fund, or better yet, invest in the energy sector of the stock market.
Oil and Gas is a very high risk business that can make or lose millionaires on one well.
Gib, great answers from Buddy and R.W.
1. Are you people for real?
Yes we are. There are professionals like Buddy Cotton above that are invaluable in counseling the rest of us and I'm sure there are some investors and speculators but probably the majority of the folks on these forums are like me. People who had mineral rights handed down in the family and after many years have started getting offers to sell or lease and some of us have actually started making some real money. Most of us have little if any invested in our minerals and we didn't get them from the inside coat pocket of some guy on the street. In other words it has been the luck of the draw, definitely not shrewd investing on my part!
The minerals business is very much a Risk to Reward business. If you want to be in the business you must assess your personal risk. If you are very risk averse, buy Exxon/Mobil or Halliburton stock. At the other end of the spectrum, invest in or with established grass roots exploration companies with a track record of finding oil and gas. If you are very knowledgeable on how the business works like RW and Buddy Cotten, you can invest in derivatives of the business such as mineral ownership,leases, production, futures, etc. But the last thing anyone needs is to buy into a half baked idea where the risk is all yours and the rewards go to the promoters. That's not investing, that is throwing money away.
Yes, we are real people, experienced, educated, and knowledgeable risk takers. I've been investing both time and money in minerals for over 35 years, educated 3 successful sons, all with master's degrees, lived a very good life, and have plenty of minerals in the bank that will educate grandchildren when they need it. Stick with what you know because there no free lunch in this risky business unless you want to provide it.
In your specific example, get an expert to tell you why those wells failed and there is a good reason why the big boys aren't doing it. Risk to Reward.
I guess I'm a real person. I grew up around Landmen and the oil business in general. All of my income comes from the oil business, the majority from working as a Field Landman, hiring out my services to other companies that are putting up the money for drilling programs.
Over the last few years i have also moved into buying and selling leases and minerals on my own and participating in wells when possible. I am not wealthy enough to participate with large chunks of acreage, so I am somewhat limited. I also have the advantage of having a father that has participated in many wells to pester with questions non stop.
I have worked with many Field Landmen who have been in the business for 15-30 years and never invested one dime of their own money to buy a lease, minerals , or participate. The only thing I can figure is that these people are very risk averse people.
I once asked my Dad why he never played poker, he laughed at me and said "what I do every day is a hell of a lot more risky than playing poker." I think that's probably the answer to why everyone isn't doing it.
I am a real person who inherited a 25% working interest from my grandfather -in-law, from 4 gas wells drilled in the fifties. He was not in the business. For the last 20 years, since I’ve been involved, we have had to write a check every month for expenses. The largest item every time is ‘operational overhead’ which is not costs directly attributed to the wells, just the operators’ monthly expenses divided by all the wells they operate. To stop this monthly drain, I have to cough up the money to cap the well, which has been estimated to me as $30,000-60,000.00. And no one will give me the Joint operating agreement, which would spell out whether or not they can charge the operational overhead, not the operator, not the bank trust department who managed it for 40 years, or the other WI partner.
As a curious aside, US Emerald Energy showed up with a banner ad on this site a day or so after you posted your questions.
Some things are just too coincidental to be a coincidence.
Am I wasting my time being a cynic?
PS. Gary, I am personally risk adverse, which is why I will never be Daddy Warbucks. I much prefer to play with OPM, meaning Other People's Money. I do take a cut in pay for a percentage all the time. So, if you have your monthly nut covered, you can play a little. 4 kids through college, 3 daughters = 3 weddings, 5 grandsons, huge, really huge medial bills with a real sick wife. Yes, it can be good. Play it smart if you are risk adverse.
The easiest way to see if its crap is to see how much they are charging. A recompletion doesn't typically require a drill rig, just a workover rig to bust through the plugs then complete. so the costs usually are a lot lower than drilling a new well. For a conventional, anything over 65 dollars a foot should be a red flag. Horizontal drilling is different and varies depending on the completion design as well as the cost per acre. A lot of these so called oil companies make 1 million plus before a well is ever drilled, then when drilling will find any and every reason to p and a it because there isn't anything to look forward to as far as production for them. From time to time I have partners on projects with me but is industry style and funds are held in escrow and released as vendor invoices come in. If it isn't structured that way you could be in for an expensive heart break. Oil drilling is as risky as it gets, if you are messing with a bad company you are all but guaranteed to lose every time.
also let me add, I despise the so called oil companies that are more brokers than operators. I have no problem looking over the projects for you guys to expose them. If you felt you got ripped off send me a message and I will look at it for you, you may be entitled to sue if there was gross negligence and it was never structured properly to ensure you had best opportunity. I would love to put these punks out of business who give the rest of us honest guys a bad name