When considering an oil and gas investment, it's important to do your homework. By far, the most important aspect of an oil and gas investment is who you're working with. Here are some tips to help you find out if you're working with a reputable company:
- How long has the company been in business?
- What is their track record, including the amount of money invested and the net amount of cash received by investors per project? Many companies tout the number of wells completed, but it's important to know that many "completed" wells never pay out either because they are dry holes or they fail to provide commercial reserves. A long list of "completed" wells tells you nothing about the company's success rate.
- How does the company select its projects?
- Who does the company rely on for geological/geophysical analysis? Does the company have an on-staff geologist?
- Who operates the wells and what kind of experience do they have?
- Ask to speak to existing and/or past investors to find out what their experience has been with the company. Does the company provide timely information and keep investors informed at every stage of drilling? Do they provide disbursements in a timely manner?
- Are they a member in good standing with the Better Business Bureau?
For more information, check out "Evaluating Oil and Gas Projects," an excerpt from the eBook "Understanding and Investing in Oil and Natural Gas Drilling and Production Projects."
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