Purchase Proven / Producing Gas Reserves in the Ground — #9024

 

The Energy Exchange is an association of independent petroleum engineering, geological, and financial consultants.  Dozens of projects are available directly from their clients at participation amounts ranging from $10,000 to $10,000,000,000.  Here is one of their selected projects in various levels of risk: 

 The distribution to these natural gas purchasers so far this year has ranged from 22% to 37% annualized return cash-on-cash invested.  Investors may purchase a specified quantity of natural gas in the ground at a substantial discount price (i.e., you buy 50,000 MCF at $2 per MCF) and sell it at market price when it is produced.  The company is obligated to produce, deliver, and sell your gas to market to meet the required deliver schedule, regardless of the outcome of any specific gas well re-connection activities.  

This specific quantity of gas belong to you.  Your gas will be placed in an LLC that you completely control.  Any time after the first year, the Company will buy-back your unsold gas at your original purchase price.  This policy not only gives you liquidity, it also protects you against loss of your capital.   Payout is about 4 years at current gas price level.   Call 281-770-6639 to get participation criteria.

We will be outlining further selected projects in future posts, so watch this space, or contact ENEX for a full listing.

Big Oil Companies May Buy Out Small Producers

 

 

Crude Oil Production 2005

Now here’s an interesting dilemma. Everybody is all fired up to “drill, baby, drill” so that we don’t have to spend so much money buying the foreign stuff; prices are high so there is lots of incentive to invest in new production; there’s lots of diversity in terms of large and small producers; and the lifting of restrictions of offshore drilling means new territory to be explored. And then the the price falls. . . 

“Altogether, the nation’s roughly 5,000 independent operators account for 68 percent of oil and 82 percent of the natural gas produced in the U.S., according to the Independent Petroleum Association of America”, to quote an article by CNN on Friday (see full report here).  But, the report goes on to highlight, with the price of crude falling to below $50 a barrel, and combined with the difficulties of obtaining credit because of the financial crisis, and suddenly all that drilling doesn’t look quite as attractive as it did a few weeks ago. An interesting potential side effect is that the combination of falling prices and tight credit could lead to many of the smaller operators being swallowed up by the big boys.

We are all aware of the record profits made by the big oil companies in recent months and this means that they have fairly hefty cash reserves on hand. There are also a lot of small producers who have readily exploitable land-based properties but who are struggling to find the finance to work their claims. Now, for the large, cash-rich companies these small land-based properties might become quite an investment bargain when compared to something like the costs of exploring new territories offshore. Even Chesapeake, America’s biggest gas producer has been cited by CNN as a potential BP target. It will at least mean that those territories will be worked whereas under the small producers they may not have been, the article concludes, but much is going to depend on how long those prices stay that low, and how quickly the big boys act in the meantime.

Falling Gas Prices Feel Good But Are Stifling Small Operators and Innovation.

T. Boone Pickens has certainly been doing the rounds of the talks shows this past week. Not only was he on Meet The Press on Sunday but he was also talking to Jon Stewart on The Daily Show only a couple of days earlier, no less. One point he made very succinctly was that although the current low prices at the pumps are making us all feel good about filling up our SUVs it is having a damaging effect when it comes to innovation in renewable energies, and also making many of the small independent operations in the U.S. economically inviable.

In a very interesting article by Andy Vuong for the DenverPost.com,  Andy highlighted the plight of the nations ‘stripper’ wells. A ‘stripper’ well, whether it be drilling for oil or gas, is defined by the federal government as producing not more than 15 barrels a day. What I hadn’t realised is that these small stripper operations account for as much as 18% of U.S. domestic oil production and 9% of natural-gas production, whilst supporting as many as fifty thousand jobs nationwide. Many of these small operations are supported by small, non-operating investors and while oil prices were high they were a worthwhile investment. The problem for many of them now is that with prices falling once again, while costs and environmental regulatory requirements are increasing, they very soon become economically inviable.

The other problem falling prices create, as T. Boone Pickens highlighted on Sunday, is that they stifle both the determination and the investment needed to stimulate the progress towards renewable energy. One example is Picken’s plan for the world’s largest wind farm. While natural gas prices were high ($12 per million BTU in July), replacing the money the U.S. spends on foreign oil with wind power was feasible. But with prices now down to $6 per million BTU the returns are not high enough to warrant the investment. Mr. Pickens thinks that crude oil prices will be back to $100 within a year. Ironically, higher oil prices will not only be be better for the small domestic oil and gas operations, it will be better for the country as a whole. As Picken’s keeps reminding us, dependence on foreign oil is a security issue. Whatever the short term economics, the U.S. has to move towards replacing its dependence on foreign oil with its own supplies of clean renewable energies. We will always need oil as well, even if it is not to run our cars or heat our homes. Hopefully prices will recover quickly enough to retain a good mix of small to medium-sized oil and gas operations across the U.S. One thing we don’t need is another 50,000 people out of a job at this time!

Pelosi Invests in Natural Gas

Nany Pelosi was interviewed by Tom Brokaw on MSNBC’s ‘Meet The Press’ on Sunday and made some comments regarding future energy plans for the US which have caused some interest in the blogosphere.

She has been in the press recently because of perceived change in stance over the offshore drilling issue. I don’t actually think her position has changed – she just wants to make it look like the Democrats are willing to think about it because of the knee-jerk public support for it.

“As speaker, I have to put everything on the table,” Pelosi told Brokaw. “I don’t think it’s a good alternative, but if they can prove that it is, and they want to pay royalties to the taxpayer, let us use those royalties to invest in renewable energy resources, then we have something to talk about.”

The more controversial aspect was when she moved on to the subject of the benefits of US sourced natural gas as a transition renewable, non-fossil fuel energy resources. Brokaw bought up an article from the Wall Street Jouranal that stated that Nqancy Pelosi and her husband had invested between $50 – 100k in T. Boone Pickens’ plan which includes natural gas. “Its part of an entrepreneurial package, a package we signed up for … its something she believes in” Pelosi said.

Personally, I immediately become suspicious of any politician in this country who pushes for something that they personally stand to gain from. To me there is an immediate conflict in interest. But I come from Britain and am used to a system where a Member of Parliament would be forced to resign for such behaviour. Here it seems to be the system of government.

But that aside, the point here is that if someone with the sort of inside knowledge that someone like Nancy Pelosi has is investing her personal money into something then, to my mind, that something is well worth taking a look at. Anyone with an eye on energy investment would be wise to do the same.