inancial planners agree that a sophisticated investment portfolio should contain a diversity of
financial instruments which have varying risk and liquidity, including:
While speculative investments have the greatest potential for accumulating wealth, few individuals have sufficient resources to tolerate the risks inherent in a strategy of exclusive speculation. More commonly, prudent investors pursue opportunities in which a tolerable level of risk is balanced with a significant potential for appreciation. The tax implications of the investments should also be considered.
An Emerging
Investment Opportunity
More than five years ago it became increasingly obvious to Petroleum Equities that an oil supply crisis was developing worldwide.
(See the report “The Looming Crisis in Worldwide Oil Supplies” compiled in 2000 and the presentation “Freezing in the Dark” compiled in 2002.)
While the developed world is now beginning to experience the physical inconvenience, economic uncertainty, and political disruption spawned by this crisis, the continuing oil supply-demand imbalance also reduces the threat of severe price downturns in the market for petroleum commodities.
Actual and Projected Worldwide Oil Production
The chart below shows the price history over the past ten years of international oil prices (blue line), U.S. oil prices (black line) and U.S. natural gas prices (red line). Note that since 2002, energy prices have persistently increased as spare production capacity decreased globally. And although the increases have been tested repeatedly in the past four years, prices have consistently reached new highs after each brief downturn.
Price History of Benchmark Crude Oils and Natural Gas
This relative price security provides unparalleled opportunities for investing in petroleum assets. Ownership of interests in crude oil and natural gas production, or the direct participation in oil and gas drilling programs, may now provide — for many investors — the proper balance of risk and appreciation potential that is desirable in a diversified investment portfolio.
But not all oil and gas investments are profitable! For example, several projects evaluated by Petroleum Equities are discussed on our Representative Projects page in which investors were subjected to fraud and unsubstantiated claims of expected return-on-investment. Petroleum Equities recommends a due diligence study by an expert third party of any oil and gas project in which an individual is contemplating acquiring a significant interest.
Tax Implications of
Oil and Gas Investing
Participation in oil and gas drilling programs, to either explore for new reserves or to further develop
existing reserves, is one of the few truly tax-advantaged investments available to the individual
investor. In general, investments should not be made solely for the purpose of reducing taxes. However, the
tax advantages associated with exploration and development programs can make such programs particularly
attractive to investors with high marginal tax rates.
Petroleum Equities identifies oil and gas assets that are compatible with a client’s investment objectives. Alternatively, the company finds appropriate purchasers for assets a client is seeking to divest. These assignments are conducted in strict confidence and accompanied by whatever economic evaluations and level of due diligence the client requests.
Contact us for specific information on investment opportunities in the oil and gas sector.