INVESTOR TIPS & ALERTS
OIL AND GAS INVESTMENT FRAUD
State securities regulators around the country warn that oil and gas investment scams are alive and well. High oil prices have created a heightened interest in investments in energy-related business ventures.
Most oil and gas investment opportunities, while involving varying degrees of risks to the investor, are legitimate in their marketing and responsible in their operations. However, as in many other investment opportunities, it is not unusual for unscrupulous promoters to attempt to take advantage of investors by engaging in fraudulent practices.
Although some of the con artists moved on to more lucrative venues since the oil boom ended in the mid-1980s, many continued to linger on in the oil field. Now with the constant fluctuation of oil prices, some of these people have made their way back to these kinds of scams. When there is a highly publicized economic circumstance, which creates an opportunity for money to be made legitimately, scamsters follow in the shadows to take advantage of the situation.
INVESTOR CHECKLIST: HOW TO AVOID BEING SWINDLED
1. The Registration Requirements. Ask if the offering is filed with the office of the state securities commission in your state or the state in which the promoters are located. If so, contact that agency for any information it may be able to provide. If the promoter claims that the offering is exempt from registration requirements in the particular state in which the offers and sales are made, find out which of the exemptions is claimed and the terms of the exemption.
2. The Salesperson. If it is a legitimate deal, the salesperson will not be reluctant to answer questions or provide written explanations to questions. Ask the name of the person offering you the security, where he is calling from and his background, particularly in other oil or gas ventures. Ask what commission and/or other compensation the salesperson will receive.
3. The Company. Ask the names of the principals of the company or the general partners offering the security, their backgrounds and experience in the oil and gas industry, and how long they have been associated with the company. Find out the history of the company, its capitalization, assets and retained earnings. What contingent liabilities does it have from other ventures? Does it have sufficient funds to cover unexpected costs? Is the tax treatment of the investments, as claimed by the promoters, supported by the Internal Revenue Service?
Find out the company’s or general partners’ history in drilling operations. In particular, ask how long it has been in the oil and gas business, the number of wells drilled, the number of wells completed as producing wells, and whether the company retained its interests in the wells it drilled. Determine if conflicts of interest involving the promoter are disclosed. All the above information should be contained in a prospectus or “offering documents” that the promoter must furnish potential investors before they commit their funds.
4. The Investment. Make sure funds raised are kept in a separate escrow account until used and that they won’t be commingled with other funds. Also, be certain the funds will not be used for purposes other than those specified. Ask how much money is to be raised and the cost per fractional interest. Ask how much of the money will pay for advertising, salaries, sales commissions and any estimated profit to the company. Ask what type of conveyance document will be provided after any investment is made.
Assuming the well is completed, ask what the completion costs will be for each investor, including additional commissions to be paid (the purpose and amount), and whether investors may be obligated to pay in more money in the future. Ask what tax incentive might be available if a dry-hole is encountered and for intangible drilling costs. Finally, evaluate the risk involved in making the investment. Is the well to be drilled a wildcat (drilled in territory not known to be productive) or is the drilling to be done in an area of proven oil reserves?
5. The Lease. Secure a legal description of the property on which the program is to be drilled. How and when was it acquired? Is the principal selling the lease to the venture at the acquisition cost, and if not, how much profit is being made? Ask for a description of surrounding property, including local well completions and a geologist’s report on the area. You will want to know if the lease is already in default and whether there is any overriding royalty or landowner’s royalty or other leasehold burden being paid.
ADDITIONAL QUESTIONS TO ASK BEFORE INVESTING
The checklist of questions to ask and information to obtain is long and it will take time and perhaps even money invested in outside consultation before you feel comfortable risking your money in the investment. It is always advisable to seek the advice of a neutral expert before committing your funds to any investment deal. Be sure to consider the following questions:
Who will be responsible for payment of taxes? Will they be paid out of the investor’s share?
What is the location of available pipelines, or what method will be used to transport and sell any production?
What is the name and address of the operator? What is her/his experience with ventures of this nature? What are the terms of the agreement with the operator, including the compensation terms?
How will the decision be made for completing the well or abandoning it? Who will make that decision? What is to become of funds received from the salvage value of equipment on the lease?
Fossil-Smackover Multi-Oil Well JV
2/4/12 - Precision Drilling Rig #86
Drilling at 8,516' as of This Morning.
To Request Information & Password
On Fossil Oil Company’s 2012 Multi-Oil Well JV
Click Here
If you have received the username and password Click Here.
THIS WEBSITE AND THE CONTENT CONTAINED HEREIN IS NEITHER AN OFFER TO SELL NOR A SOLICITATION TO BUY SECURITIES; NEITHER ARE SECURITIES BEING OFFERED NOR WILL SALES BE EFFECTED WITH PERSONS IN THE STATE OR JURISDICTION IN WHICH YOU (THE VIEWER) RESIDE WITHOUT EXEMPTION.
Terms & Conditions | Privacy Policy | Copyright © 2012 Fossil Oil Company, LLC. All Rights Reserved.
