Should You Put Your Family Finances in Oil? – Parenting Prattle

As with any investment opportunity, putting your money into oil and gas can be fraught with risk, if you are unaware of some of the common and uncommon tactics that are used by dishonest promoters. Regardless, the interest in oil and gas investments is legitimate, given the high rates of return that are possible. It’s important to be apprised of the current state of speculation and energy investments before you risk your family’s finances in oil. There are plenty of resources out there to get you started.

The Various Types of Oil Investments to Consider

According to GulfLand Structures, the present-day volatility of oil and gas is what makes it possible to effectively “strike it rich” with sound investments. To this end, there are a multitude of options for the investor, from partnerships to limited partnerships to ownership of fractional interests in leases and more. For you, the most pertinent practical distinctions between these are in how much liability you hold, as well as the tax set-ups.

Partnership Investments Breakdown

An especially popular kind of limited partnership involves direct oil well drilling. In this one, as the investor, you can purchase so-called partnership units from an oil company. From this purchase fee, the selling company takes a percentage to use explicitly toward oil well drilling expenditures, which also includes buying the property on which the wells will drill. In return for paying this cost upfront, you’re awarded tax write-offs for the first year of revenue, as well as dividend equivalents called quarterly cash distributions. These payments continue until there is no more profitable oil to be drilled from the wells.

Keeping Your Family Finances Safe from Oil Industry Scammers

Since oil and gas are big business, of course there are people who wade into the industry to take advantage of honest investors. There are general signs to watch out for if you get unsolicited calls regarding speculative investments. More often than not, the callers don’t even know much about the energy sector, which is a reason why you should know a good amount since you’re investing in it, after all. They will likely be sales people who employ hurried, over-the-top promotional language to try and get you to spend right then and there on an investment of their choosing.

Identify the Caller

Real investors always take the time to study their potential investment, or at least check out the holding company for a proven track record of excellence. Make sure the registration requirements have been fulfilled in the relevant state, first of all. Stick hard to this, and hang up on anyone who tells you otherwise, no matter how good the excuse for not filing sounds. Ask the caller about commissions and compensation, name, educational background, etc. A legitimate promoter won’t hesitate or hedge on any of these questions.

Now comes the part about the actual oil well in which you’re investing. Question the caller about the lease agreement, cost, description, and status of the property and project. You have every right to view the actual contract between the relevant companies, since it’s your money that will aid the oil-drilling process until it becomes profitable.

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