Author Topic: Investing in oil wells  (Read 4521 times)

Sooner10

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Investing in oil wells
« on: February 16, 2015, 05:22:35 PM »
Hi, I am thinking of investing in oil wells with a partial working interest. I would buy 25% of a lease and would get that percentage of profit but also be responsible for the same percentage of operating costs. I know the owner and he owns several wells and has for years and does well. He would also be the operator of the well so I basically have no actual work to do. I know there are risks involved but also tremendous upside possible. Does anyone out there have experience in this or advice?

gaspony

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Re: Investing in oil wells
« Reply #1 on: February 16, 2015, 06:05:15 PM »
My granddad worked the oil fields all his life and never invested in any independent wells. He never told me the reason but he always used to say it's one thing to be the oil company. It's another thing to INVEST in the oil company.
I'm sure you and your friend probably know more about oil than I do but I wouldn't personally invest in anything like individual oil wells unless it was a 10% shoot the moon portion of my portfolio that I could stand to lose and I'm basically hoping that the oil wells hit it big and I can buy an island and send my great grandchildren to Harvard all expenses paid.

worms

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Re: Investing in oil wells
« Reply #2 on: February 17, 2015, 12:45:06 AM »
Having a minority stake in anything means you have to accept that you have little control of income, expense or reinvestment decisions. Fine if you are one small investor amongst millions, but a different thing if it is a 75:25 ownership.  It may also be very difficult to sell on your stake if you want out or need the money. 

At current oil prices, profit (if any) on small oil wells will be at its lowest, so perhaps good time to invest, but it could drain a lot of cash before you see any return to profitability.  And meanwhile you have no control over how much extra you might need to put in to cover operating costs. 

Too risky for me! But feel free to post back here in ten years to show how good a risk it was!

ShoulderThingThatGoesUp

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Re: Investing in oil wells
« Reply #3 on: February 17, 2015, 04:52:38 AM »
Nope. Nope nope nope nope nope nope nope.

The only people I have heard of doing this are employees of small oil companies who are able to invest a small amount on favorable terms through their employers.

Think about it - one bad well nearly ruined BP. It's a different scale for you, but things can go seriously wrong, especially when it's being operated by "some guy".

Mr.Chipper77

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Re: Investing in oil wells
« Reply #4 on: February 17, 2015, 11:54:27 AM »
Hear way to many of these stories and one hit home as well. Dad was talked into same type of thing with a mine and basically lost it all. If the guy is doing well why would he ask someone else to get involved anyhow no matter how much he liked you. I would advise to stay away from it

Eric

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Re: Investing in oil wells
« Reply #5 on: February 17, 2015, 12:42:55 PM »
You'd get a better return with less risk by just buying and watching There Will Be Blood anytime you had the urge to invest in an oil well.

I DRINK YOUR MILKSHAKE!

mandy_2002

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Re: Investing in oil wells
« Reply #6 on: February 17, 2015, 12:49:07 PM »
I have friends who work for oil exploration companies who invest through that (as mentioned above), but there are dozens of them, and they are investing in 15 wells at a time, so when 6 of them don't produce, the other 9 make up for it.  If the proposition is a single well, no.  That's a horrible gamble with zero return and loss of capital if nothing comes out.

rocksinmyhead

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Re: Investing in oil wells
« Reply #7 on: February 17, 2015, 01:52:53 PM »
You'd get a better return with less risk by just buying and watching There Will Be Blood anytime you had the urge to invest in an oil well.

I DRINK YOUR MILKSHAKE!

Hahaha. I still haven't seen this movie but my boyfriend quotes it to me all the time.

3okirb

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Re: Investing in oil wells
« Reply #8 on: February 17, 2015, 01:56:28 PM »
Hi, I am thinking of investing in oil wells with a partial working interest. I would buy 25% of a lease and would get that percentage of profit but also be responsible for the same percentage of operating costs. I know the owner and he owns several wells and has for years and does well. He would also be the operator of the well so I basically have no actual work to do. I know there are risks involved but also tremendous upside possible. Does anyone out there have experience in this or advice?

If the owner does so well for himself, why is he looking for people to buy part of the leases?  You're probably paying his wages in "operating costs".  Or, maybe he does that for the wells that will need an overhaul soon?  Either way, successful people don't split up their business.

johnstein

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Re: Investing in oil wells
« Reply #9 on: February 17, 2015, 01:59:54 PM »
Unless you have so much $$ to spread around... oil well ownership is illiquid and high risk.  Having said that, it's also very profitable if you hit the good producing area.  Is it just one single well or an interest of a bunch of wells?