Many think of stocks, bonds and real estate when they think of investments. However, its time to open your mind to new methods of investments, as there are many opportunities in every business industry. This includes the Oil & Gas Industry.
A well is not something individual investors think that they can buy, but the truth is that it is very possible to make anywhere from 10%-50% or more by investing in an oil well for the long term.
Where to Start
Starting the process may seem difficult, but it is really quite simple. The best place to start your search is with an online broker. (yes, everything is online now.) We recommend deal stream and bizquest.
Costs
There are two main options from a cost standpoint. If you are looking to buy an entire oil mine, get ready to pull out a pretty large check (millions of dollars), and if you are interested in buying small percentages in oil mines, then a few hundred thousand or less will be an appropriate price range.
Now, there are benefits and risks to both options. When purchasing an entire mine, you will be completely in control as you are the primary owner and will have oversight on all decisions related to the mine. However, the millions you invested are equally at risk all based on the decisions you make. Investing in an equity stake for a $100-200k will be much less risky, while still providing substantial returns in the double digits per year range. (This will be in the form of royalties/dividends, you will be paid out in percentage of your % ownership in the mine). If you own 1% of the mine, you get 1% of the profits, not bad if the mine makes $100 million per year.
Advice
Our main advice here can be covered in four important steps:
1) Ensure that you are purchasing from a trusted source:
We recommend the following as mentioned above: deal stream and bizquest.
2) Do not invest all of your savings into an oil mine:
Oil makes sense as a part of a diversified investment platform, as the value of returns fluctuates with oil prices which fluctuate year over year.
3) Consult a trusted investment broker from a global platform:
For me this would mean discussing the opportunity with Merrill Lynch, who is my investment broker – and determining whether the investment makes sense as part of my financial plan.
4) Do your own complete due diligence process:
Any operator that allows you to invest in their oil mine will have no problem with you visiting the oil site, asking as many detailed questions as you want, seeing their financials, and taking your time regarding your investment decision. If they do not act in this manner, it can be a clear sign they are not someone you should invest your money with.
We also recommend that you take the time to learn more about the industry, so that you can make an informed investment decision.
A great book on buying oil wells is Investing in Oil and Gas Wells by Nick Slavin. It retails for $12.99, but if you are going to drop $5,000 to $200,000 on ownership in a well, $12.99 makes sense as an initial investment to get you started.
Best of Luck!