05 Sep Advise for fishing and Oil and Gas Investing
As a lifelong fisherman from Alaska, I’ve learned 2 basic rules that will help you fill the freezer for the winter.
Rule #1: Go to where the people are
Rule #2: Go to where the people aren’t
Sounds like confusing (if not contradicting) advise, right? Well, here’s how it applies to Oil & Gas Direct Investment…
Rule #1: The reason why this works because in geographical plays, it attracts the most energy and excitement ($$, labor, equipment, etc.). It allows a certain amount of risk reduction (either real or perceived) for the investor knowing that they are not the only ones putting funds into a play. The good thing about this is when the play is “hot”, it benefits all in the space. Once the hedge fund $$ come in and lease prices go up, it becomes more difficult to find programs with solid quick payouts. “Fish” can still be found…you just have to be a little more patient.
Rule #2: There are a few advantages that going outside of the “hot spot” pose for the investor. I mentioned a few of these in a previous article (payzone congruity, better NRI, potentially better payouts and ROI, etc.) but I want to add a little more to it…
Typically, we like to see Operators think beyond a “one and done” program in these areas. We look for them to secure additional adjacent acreage so if the wells are successful, we can go beyond a “Phase I”. The cheapest time to do to that is when there’s not a parade of landmen waiving blank checks in front of landowner’s faces. If the Phase I wells are producing as expected, not only will you have mailbox money, but many mid-majors and other investment groups will come knocking on the Operator’s door for the Big Buy Out. You now have 2 quick options of making your investment back.
Unlike fishing, you can “fish” both rules at the same time and there’s no bag limit!