Why oil and gas?
Oil and gas are set to remain vital components of future transportation and electricity needs. The impressive energy density and functionality of carbon-chained molecules ensure their continued importance. Even as the world shifts toward renewable sources, hydrocarbons will still play a significant role. A few examples include:
- Natural gas for electrical grid reliability
- Oil for aviation and shipping fuels
- Petrochemicals for plastics and polymers
Why invest with U.S. Operators?
To meet ongoing demand, hydrocarbon production must be optimized. This entails minimizing costs and environmental impact. U.S. operators have consistently led the way in these areas.
Why invest directly in wells?
While it might be considered “old school,” some companies continue to drill vertical oil and gas prospects. Investors collaborate WITH oil and gas operators rather than merely investing IN them. After investing, individuals own a portion of the well and retain full control. There are several advantages to investing alongside small operators:
- Tax Benefits, such as immediate expensing of Intangible Drilling Costs (IDC) and a Depletion allowance. IDCs can be expensed in the year they occur, and around 15% of oil and gas gross income is tax-free due to the Depletion allowance.
- Diversification is essential for any portfolio. Owning an oil and gas well offers direct exposure to commodity prices, bypassing the complexities of publicly traded stocks.
- Potential rewards can be substantial. As the adage goes, “high risk, high reward.” However, the downside is limited to the invested amount, while the potential upside is considerable.