Energy Opportunities

The US is going through a energy renaissance that will provide a leadership role in energy production and target energy independence and a thriving export trade in the immediate future.  Investors may have the ability to participate in this opportunity depending on their investment profile.

Many investors do not realize that they can diversify their holdings into oil and gas royalty and working interest rights as well as drilling programs. This is the direct ownership of interest in mineral rights on known producing wells.


Royalty interests and drilling programs are predominately a cash-flow investment with returns fluctuating with oil and gas prices.

Risk is managed in both cases through broad diversification.  

Here are the many benefits of oil and gas:

  • Tax Deferral. Investors can potentially defer up to 100% of their long-term capital gains.
  • Cash Flow. Because an oil and gas lease comprises hundreds of producing wells on hundreds of acres of land in multiple oil and gas regions, the investor generally receives a stable cash flow. The cash is tax-sheltered via the the depletion allowance.
  • Affordability and Flexibility. The required minimum equity requirements of oil and gas leases are typically less than the required minimum equity requirements of TICs. Thus the investor is able to afford a percentage of high-quality, diverse assets that he could not possibly afford to buy outright. In addition, the investor has the flexibility to name his investment level.
  • Risk. Royalty-interest holders are not subject to capital calls or liability. (However, working-interest holders are subject to capital calls and liability.)
  • Diversification. (1) Low minimum-equity requirements enable the investor to better diversify his investments. (2) The typical oil and gas lease comprises hundreds of producing wells on hundreds of acres of land in multiple oil and gas regions. (3) Income from oil and gas assets has historically been weakly correlated to the income from real estate.
  • Expertise and Ease. National oil and gas companies identify, acquire, and manage these assets. The investor is relieved of all burdens and headaches.
  • Liquidity and Exit Strategy. An investor may act alone to sell his oil and gas leases at any time. He may cash-out and pay taxes, or he may 1031-Exchange into another TIC property and defer all capital gains taxes. Oil and gas lease liquidity is far better than TIC or DST liquidity, thanks to online auctions, third-party divestment companies, and private sales. Because oil and gas leases are divisible, each heir may inherit individual title to oil and gas leases.

There are also associated risks in oil and gas programs. This can include:

  • There are no public markets for the units, and as a result an investor partner may not be able to sell their units.
  • Through their involvement in partnership and other non-partnership activities, the Managing General Partner and its affiliates have interests that may conflict with those of the investor partners. These conflicts should be carefully spelled out in the offering.
  • The partnership may drill exploratory wells, which involves a greater risk of financial loss than drilling developments wells.
  • There can be delays or changes in plans.
  • Reduced availability of drilling rigs, due in part to intense competition on drilling, may delay the drilling of partnership wells and cash distributions to investors.
  • Fluctuating market conditions, intense competition for leases, drilling services and markets, and government regulations may make drilling and producing wells more expensive and less profitable. Environmental hazards involved in drilling gas wells may result in substantial liabilities, which could result in reduced profitability and possible liability to additional general partners.
  • An investor who subscribes for Units cannot revoke the subscription.
  • Increases in drilling costs would make partnership operations less profitable. 

This does not constitute an offer to sell or a solicitation of an offer to buy any security. Such offers can be made only by a Private Placement Memorandum. These investments involve a high degree of risk and are not suitable for all investors. Please refer to the Risk Factors section of any specific Private Placement Memorandum