How to Pursue With an Oil and Gas Investment



If you are looking forward for oil and gas investments, then surely now is the right time to do so. The prices of oil are expected to escalate higher so it is the safest and best bet for investment. You can approach oil and gas investments in a multitude of ways, but how to determine that which one fits the bill perfectly?

Guideline to Pursue With Oil and Gas Investment

• Oil and gas investors should first decide that they should invest in a UIT or a mutual fund that is meant for investment in energy rather that a direct form of investment. The former route is less risky but also offers returns that are significantly lower. The latter is actually riskier; with greater returns as well as a whole range of unique tax incentives that are not available any where else.

• If while making oil and gas investments direct participation is preferred, then you have to decide whether you want to follow a working interest, royalty arrangement else partnership. Obviously! Royalties are payable to landowners-and in case you desire to go by this, consult a real estate agent to buy land which has oil wells there.

• In case you choose to make oil and gas investments directly that too without owning any land, then one thing that you have to decide for sure is that if you would buy shares in partnership else acquire part or complete interest of that oil project.

• Now if you have decided to make an investment on a partnership based investment opportunity, you may be required to prove that you actually are an accredited investor. This means that you have a net worth which is close to $1 million or your income should be close to $250,000 a year. At the year's end you will be sent a K-1 form that details your share as partner in the expenses and income.

• If you plan to invest in a project's working interest, you should know that any payment received becomes your earned pay. Thus, you are required to shell out self-employment tax.

• Working interest investment basically encompasses of partnering with geologist who can drill or rework on a project to make it profitable investment.

• One thing that you must be cautious about when planning oil and gas investments via working interest arrangement is that such investments are not regulated by SEC directly.

• You should also know many projects related to oil and gas investments are not advertised. So, you may consult a petroleum engineer for knowing if something can be done or not.

• There are many risks involved in oil and gas investments. Hence, it becomes requisite to be aware of frauds before making an investment.

Follow this pattern while making oil and gas investments. And, you can surely generate high profits with your investment.