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KS | That is an awful prospectus, unless there is a lot more to it. Doesn’t indicate target zones, or any sort of plan. No geological mapping or seismic indicators. Numbers are meaningless.
What you have to watch out for are guys who raise money as a business. They structure a well so they are carried an 1/8th WI or more on drilling and completion, carried means at no cost. The NRI appears to be a .80. So there is 7.5% of override floating around. In theory the operator could be bringing in over 18% of the income off the well without investing a dime. Since he has no money in it does it really matter if the investors get a good return? No. Pick investors who don’t understand declines and he could drill 10-20 wells that appear to be good initially but may never pay for themselves over the life of the well, but enough hype and they keep writing the checks.
I know of operators who have upcharged as much as 30% on most or all of the work that is done, if they structure it right it is tough to prove and will cost a lot in legal fees, for smaller investors it isn’t worth legal action.
If you don’t know the operator or know someone you trust that in turn trusts the operator the safe bet is to stay away.
It is easy to make money if you don’t care about who you step on to make it. Most crooks know the legal cost is going to be more than what they stole from someone and it will go nowhere. I have been there, nothing worse than hearing my lawyer tell me repeatedly, yes, he is stealing from you, but the cost to recover is more than what was stolen. And it is really common for them to go to church every Sunday. My LEO friends are instantly suspicious of anyone who flaunts religion, too often it is a cover. I have joined them in this regard. | |
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Texas oil investment
