Wednesday, April 2, 2008

What to watch out for when considering specific oil and gas investment opportunities.

Be careful of the many oil and gas investment scams presented to accredited investors. There are many oil and gas investment opportunities being offered to accredited investors. Many of these are scams designed to play upon your fear of missing out on big returns on your investment if you don’t invest. You need to be on the lookout for red flags. The Securities and Exchange has posted thoughts on common red flags to look out for to spot these scams. The North American Securities Administrators Association has also published an article on identifying and avoiding these scams. The U.S. Postal Inspection Service also has a good article on these scams as well.

Here are some additional thoughts, based on my personal experiences. 1.) Watch out for unscrupulous groups who take your money and run. 2.) Try to find out if the offering company has marked up the cost of the project by some large amount to assure making money no matter how the well performs. 3.) Find out what research the developer did on the potential oil or gas well site to determine how viable the project will be. Did they use 3-D or 4-D seismic data and “log” data from nearby wells? Some unscrupulous developers take a guess where to drill, put a hole in the ground, and take a chance on it being productive or not. It really doesn’t matter to them since they made money from the markup paid for by investors funding the oil or gas drilling partnership. 4.) Find out how long it took to get full funding for recent wells that they drilled. Ask if you can contact some of the participants in these wells. 5.) Look out for high pressure sales people trying to get you to buy into their wells. They may promise big returns and have some type of hook such as this particular well is next to a big oil producing well and we only have a few shares left that are going very fast. If they have such a great deal, why are they desperate for you? Also, if their shares are almost all gone, why do they still call a few weeks later and tell you “an investor just dropped out for personal reasons and I just happen to have his shares available for you to get in”? 6.) Try to find out how healthy the relationship is between the developer and the drilling rig supplier. If the supplier is not happy with them, they may not be eager to make a rig available. Understand, though, that there are legitimate reasons for rig delays given today’s high demand for them.

Bottom line, it is your money, not theirs. Before handing over hard earned investment funds, be sure to take your time and research as much as possible about the investment opportunity. Don’t let anyone pressure you into making an investment decision without allowing you time to conduct a thorough review of the opportunity before you invest.

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Copyright 2008 Ole Cram. Ole Cram is President of Marcobe Investments, Inc., a corporation that invests in various oil and gas ventures and refers accredited investors, investment managers, financial advisors, investment funds, and others to the associated oil producer of these projects for their consideration to also participate. Feel free to email us at with any questions, thoughts, or requests for information on what projects we are invested in.

This article was posted at Accredited Investor Blog: Past articles can easily be found at This article is provided for educational purposes only and is not meant to be a substitute for tax, legal, financial, or other registered professional advice for your specific situation. Always seek the advice of a professional before making any related decision.

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