We’ve discussed the benefits to investing as an accredited investor, and how it provides an investor with access to wealth-building opportunities not otherwise available. Financial institutions may similarly qualify as institutional accredited investors, although the qualifications to become an accredited institutional investor differ from those for individuals.
What is an Institutional Accredited Investor?
Any investment carries inherent risks. The accredited investor system was implemented by the SEC to qualify people and entities with the assets and expertise to responsibly invest in higher-yielding — but often higher-risk — securities.
To qualify as an accredited investor, an individual or entity must meet certain criteria laid out by Rule 501 of Regulation D. For individual accredited investors, a person must meet one of the following:
Qualifications of certain entities:
What are the benefits of qualifying as an Institutional Accredited Investor?
By qualifying as an accredited investment entity, accredited institutional investors gain access to higher-yielding investment vehicles. Public offerings, or those available to accredited and non-accredited investors alike, are required to disclose certain levels of information and must be registered with the SEC.
Alternatively, a company or private fund offering may be exempt from SEC registration, but only if it is available solely to accredited investors - either individual or institutional. These securities, referred to as private placements, remain subject to the Securities Act of 1933 but are not required to be registered with the SEC.
By opening these placements only to accredited investors, the SEC ensures that higher-yield, higher-risk opportunities are undertaken only by those qualified to do so responsibly.
Why invest in mineral rights as an Institutional Accredited Investor?
The potentially higher yield in private placements or other vehicles open only to accredited investors is at times offset by higher risk. As with any investment, some bear more risk than others.
With the advent of horizontal drilling technologies, mineral rights have become an appealing, comparatively lower-risk investment for many seeking to diversify their portfolios and generate revenue and generational wealth. Unlike other investments in oil and gas, such as those that invest directly in drilling, mineral rights ownership does not carry with it the risk of dry holes or heavy operating costs.
Mineral owners can see revenue in the form of significant lease bonuses, which are upfront lump sums paid by drilling operations for the lease and use of the land for the production of the minerals of commercial value the land contains. In this case, it is oil and gas.
In addition to the lease bonus, operators pay royalties to the mineral owners on everything produced. Because these royalties are paid before any other costs are deducted, the market price of oil would need to drop to effectively $0 before revenue generation for the mineral owner ceases. Investors can anticipate 20 to 30 percent IRR in many cases.
For example, our recent offering - Redhawk Minerals Fund I in the STACK Play - is exceeding our expectations with 50 wells in production and 62 wells beginning or filing pre-drilling activity already in units where the fund owns minerals. In Q4 2017, revenue was 146 percent higher QoQ.
Most importantly, mineral rights never expire. Because they are a real property right, mineral rights and the wealth they generate can be passed down through generations. For investors seeking high-yield opportunities that can build legacies for their families, mineral rights are an excellent portfolio choice.
How do I choose the right Institutional Accredited Investor for mineral rights?
As I am famous for saying, there's a certain amount of risk in any investment, but one of them should not be the company with which you are dealing. When choosing a company like Redhawk to invest alongside, it is essential to conduct due diligence to safeguard your investment. It may be a good idea to go visit the company, if it’s feasible. Should it show any hesitancy (whether you go or not) about allowing a visit, that raises a red flag. Ultimately, the best way to mitigate potentially higher risks and increase yields is to be sure that your investment is managed by a credible, trustworthy organization.
Maximizing investment opportunities in oil and gas
If you are interested in the types of wealth generation available when investing in mineral rights with a company such as Redhawk, reach out to us at any time. Our many years of experience can help you navigate oil and gas investing to maximize your returns and start building a family legacy that will last for generations.
Redhawk Investment Group
Jack Nichols is a founder and Managing Partner of Redhawk Investment Group, a family-owned and operated energy company with offices in Dallas, Texas and Oklahoma City, Oklahoma. The company developed and uses an investor-friendly business model for use in the private placements of mineral rights aggregations and drilling and development projects.
When it comes to oil drilling investments, there have been a few iconic locations. Spindletop, for example, is one of the most famous oil fields in American history, singlehandedly starting the Texas oil boom and contributing to the rise of the United States as a world leader in oil production.
Identifying and taking advantage of areas that promise these kinds of rich productivity can enable accredited investors to enjoy the near-term cash returns and long-term profitability possible through oil and gas investments. It is for this reason that oil companies and investors have been flocking to the Oklahoma STACK Play for the last several years, as the area's rich oil and gas reserves have been unlocked by new oil field technology and the resources it has tapped.
If you have heard about the Oklahoma STACK Play and want to know more, or if you are considering taking advantage of Redhawk's current investment opportunity in the area, what follows is a look at the Play and what it offers to accredited investors.
What is the Oklahoma STACK Play?
The Oklahoma STACK Play and the similar SCOOP Play are large blanket areas of oil-bearing shale zones within the state of Oklahoma that contain reserves of crude oil and condensate (oil that is in a gaseous state underground but which condenses into a liquid form when brought to the surface).
The acronym STACK stands for Sooner Trend Anadarko Canadian and Kingfisher, which are descriptive terms identifying the area as an oil field located primarily in Canadian and Kingfisher Counties (though the Play also encompasses a number of other counties in Oklahoma). The acronym also refers to the multiple layers of pay zones stacked like pancakes one on top of another in the region.
The area, in the last few years, has become a hot spot of alternative or unconventional drilling and a profitable location for numerous oil and gas investments including drilling and mineral rights acquisitions.
What is the history of the oil and gas investments in the Oklahoma STACK Play?
While interest and activity in the Oklahoma STACK Play has increased over the last few years, the area is not new to U.S. oil investments. Instead, the location had earlier been drilled using conventional methods for many prior years.
Driving the current excitement about the area has been the application of new drilling methods (such as horizontal drilling) that enable oil companies to retrieve large amounts of oil from this vastly rich field. For example, some horizontal wells already have produced 50 percent more oil than their vertical counterparts.
Why are oil and gas investments in the Oklahoma STACK Play so popular?
Thanks to these new alternative drilling techniques, the number of rigs and the amount of activity in the area has increased over the last several years. There are now more than 100 rigs in operation and production rates that are at times 70 percent greater than initial rates. It is the renewed productivity within the Oklahoma STACK Play that is making oil and gas investments in this area so popular (and profitable).
The Oklahoma STACK Play is considered a desirable location for investing in U.S. oil, because of the potential of strong returns on investment even while oil prices are lower. This phenomenon is one of the factors that has driven the increase in production within the STACK Play even as other areas of drilling have seen production cease or decrease during seasons of low oil prices.
In part, this strong ROI capability is due to the sheer concentration of oil within the multi-stacked, blanketed shale zones that make up the Play. When tapped, these concentrated reserves produce more oil for longer than many other sites, all for less money than it would have taken to produce the same amount of oil elsewhere. When oil prices fall, oil companies and qualified investors are typically attracted to areas they know contain rich and obtainable reserves of oil (so as to reduce their risk and maximize their return on investment). The STACK Play has proven itself to be one of these areas.
Oil produced in the Play can be transported fairly easily and inexpensively because much of the Play is located near Cushing, OK., a major oil storage facilities and trading hub for crude oil. The combination of easily accessed oil, easy transportation, and relatively low taxes means that those investing in oil assets in this area can help achieve a higher ROI because of lower costs, even when oil prices are low.
How can Redhawk help investors take advantage of the oil and gas investment opportunities available in the Oklahoma STACK Play?
At Redhawk, we are interested in providing accredited investors with direct investment opportunities intended to create near-term cash returns and a strong ROI. For example, direct oil drilling investments and mineral funds can achieve target yields of 20 percent or more while creating a low to moderate risk environment for investors.
One of the areas in which Redhawk offers these kinds of opportunities is the Oklahoma STACK Play. A recently closed offering, for example, allowed investors to participate in a mineral fund, acquiring mineral rights ahead of industry leaders in oil and gas development. These mineral rights allow investors to enjoy earning lucrative lease bonuses and long-term royalty revenues available through the leasing and production of acquired mineral rights, without the risks associated with some oil drilling investments.
If you want to learn more about investing in the Oklahoma STACK Play and learn how to take advantage of other oil and gas investments, consider contacting Redhawk Investment Group. We have decades of experience, and we understand the level of risk and strong ROI potential that our investors are looking for. By carefully considering your oil and gas investments, and the people you invest with, you can enjoy the profitability available in U.S. oil and gas.
Learn how you can make 25%+ in annual returns by investing in mineral rights.
Interested in more information? Please don't hesitate to call our office at 844-952-7363 or comment below and we'll get back to you.