Oil and gas investments, particularly direct participation investments such as those offered through Redhawk, provide investors with hard-to-beat opportunities for profit within an industry that is currently experiencing a resurgence in productivity and profitability.
Enjoying the profit and other benefits available from oil and gas investments requires investors to make wise choices regarding the companies they invest through and the projects they invest in. What follows is a look at 5 of the most important factors to consider when choosing direct participation oil and gas investments.
When choosing oil and gas investments, follow your own financial and risk preferences.
Most all direct investments in oil and gas come with a certain level of risk as compared to investing in stocks. It is the potential reward, tax benefits, and other advantages that make higher level of risk worthwhile to the investors who choose this path. However, even within direct investments, there are varying levels of risk, and financial commitment, possible.
For example, mineral investments typically have lower risks associated with them than oil and gas drilling investments due to the fact that mineral rights owners incur no operating expenses nor run the risk of dry holes. Other projects, such as oil well investment opportunities, may possess a slightly higher risk profile. Likewise, some projects require more money upfront from investors than others.
Understanding your own financial and risk preferences, and choosing oil and gas investments that are in keeping with those preferences, is a wise first step in making these decisions. Doing so will allow you to enjoy the benefits of these investments within an environment in which you are financially and personally comfortable.
Select oil and gas investments that provide reasonable profitability assessments.
When you choose direct participation oil and gas investments, you may encounter some proposed projects that are being touted as remarkably profitable. For example, you may find a project that promises unrealistic yields within just a few years. When evaluating projects for potential investment, the best approach is to view these remarkable projections with a fair amount of skepticism.
Instead, select oil and gas investments that come with reasonable assessments of the project’s profitability. This means that the company overseeing the project should be able to provide you with thorough evaluations of the project’s risks, anticipated profits, and timeline for the realization of these profits. In addition, you should see projections that are realistic, reasoned, and backed by data. If you are investing in a project currently underway, you should also be able to access the project’s past yields and productivity.
Choosing these types of projects can help you to reduce your risk of investing in a project that fails to meet its projected yields, as well as give you insight into a company’s integrity and competence within the oil and gas investments field.
Choose oil and gas investments in high producing areas.
Before committing to specific oil and gas investments, consider the areas where the projects are taking place. For example, if you are taking advantage of oil well investment opportunities, look for ones that are in geographical areas that are most likely to yield producing wells. Does the geography make it probable that your investment will pay off? Be sure to exercise your due diligence.
In particular, consider projects in up and coming areas such as Oklahoma SCOOP and STACK plays. And find out from the company with whom you are investing why they feel that this particular project has a high likelihood of succeeding. They should be able to provide you with information to support their reasoning that this project will meet expected yields.
Selecting projects based in part on where they are taking place can reduce your risk of investing in a project that falls short of its predicted yields. In addition, doing so can allow you to find oil and gas investments that will not only produce expected yields but do so for the long term, maximizing the profitability you receive from your investment.
Select a company for your oil and gas investments that has an established background.
When selecting a company to invest through for your oil and gas investments, it is important to find a business that has a proven track record of success. For example, look at their last several similar projects and evaluate whether these projects met expectations, yielded producing wells, and delivered profitability to investors.
New companies or those who have struggled to deliver high-performing investments in the past may not be the best companies to choose as you move forward with your oil and gas investments. Instead, reliable and proven companies offer a much more stable avenue through which to make your oil and gas investments.
For example, Redhawk has implemented almost $170,000,000 worth of high-quality alternative investment projects since mid-2014, demonstrating an ability to identify and bring to fruition profitable oil and gas investments for participants.
Consider the tax advantages available through oil and gas investments.
Investing in oil and gas in the U.S. often comes with significant tax advantages (and other benefits) that require consideration when you are choosing your oil and gas investments. An oil well investment opportunity, for example, may initially seem to come with high capitalization requirements. However, tax benefits that allow you to deduct certain expenses can reduce the overall amount of money you end up investing, as well as reduce the amount of money you actually stand to lose if the investment does not perform as expected. By taking all of the potential advantages into account, and by consulting a financial professional regarding potential tax benefits, you can more confidently choose oil and gas investments that are right for your risk preference, financial comfort level, and profitability desires.
Choosing oil and gas investments means considering all of the factors that go along with those investment opportunities. By following your financial and risk preferences, choosing investment opportunities that have reasonable profitability assessments, selecting investments in high producing areas, selecting a company with an established track record, and considering the tax advantages of each opportunity, you can select investments that should benefit you in the long run.