How to Invest In An Oil Or Gas Well & Investing in Oil Exploration

Now that the price of oil is at record levels many people are interested in investing in oil and gas exploration. It is not for the timid investor. Here are some tips.

Instructions

1. As someone who has previously invested in a wildcat oil well here are some things to look for and to watch out for when you are considering this investment.
   First of all, successful oil companies do not usually send out mail outs or place lots of magazine ads searching for investors. The good ones, successful at finding oil usually have a following of loyal investors with deep pockets and don't need to advertise.

2. The fly by night and not so successful companies will usually be the one seeking investors.
   It helps to have a friend in the business and network with oil and gas industry professionals to find out who these companies are and make a contact and convince them to let you in as an investor. Ways to meet such people vary but can include through your church, social clubs or fraternal organizations.
   The minimum investment that you will usually find will be around $30,000 or more for a small share of the oil wells lifetime revenue.
   This would be for a shallow well, say 5000 feet in an area where the drilling is not difficult.
   For deeper exploratory wells it becomes big money investor territory with minimum investments of a hundred thousand or more.

3. Investing in a wildcat oil or gas well is just slightly better than taking your money to Las Vegas and playing the slot machines. It is a gamble.
   The success comes in finding a company that will allow you to invest in a well that is being drilled near other productive wells and in finding a company that has very good seismic information. To buy seismic information is expensive, especially the newer, more accurate 3D type and companies that have had past success in using this technology are the ones you want to find.
   If this type of investment is too risky for you consider buying shares of a successful company that is actively drilling in a newly discovered area. An example would be Chesapeake (CHK) which has large holdings in the newly discovered Barnett Shale and Marcellus Formations. These formations are fairly uniform and in many cases pipelines will be laid to wells as they are being drilled because the success rate of making a good well is so high.
   For the smaller investor individual stocks are a good choice. If however you want to be even more conservative but still invest in oil and gas exploration consider an ETF or exchange traded fund made up of several oil and gas exploration companies. There are a variety on the market from companies such as Invesco Powershares.

Resources

• More Information On the Massive Marcellus Gas Formation
• Information on the Barnett Shale Formation