Mosburg 1-30-99-2b

THE WHYS AND HOWS OF OIL AND GAS INVESTMENT IN THE NEW MILLENIUM

By Lewis G. Mosburg, Jr.

Editor's Note:

In 1986, I authored a book entitled The Whys and Hows of Oil and Gas Investment. While many factors influencing oil & gas investment have changed since that time – the Tax Reform Act of 1986 being only one – today I find that the basic thrust of that book – the excellent return potential of an intelligently planned oil & gas investment program – is just as true (though even less recognized) as it was in 1986.

Foreword

For years, whether in favor or not, oil & gas investment has been looked at primarily as a "tax shelter." And certainly, there are many tax advantages (as well as some frequently-overlooked tax disadvantages) associated with participating in the oil & gas search. However, properly understood, oil & gas is an exciting investment opportunity that blends true economic potential with some nice tax "overtones." In other words, oil & gas investment offers you the opportunity to make money!

But what about the well-publicized "risks" of the oil & gas search. Those risks are certainly there and they are very real. However, did you realize:

That the impact of those downside risks traditionally associated with the "speculative" oil and gas search can be significantly reduced by an intelligent investment strategy?
Investor misconceptions which overemphasize those risks force the oilman to offer you a much better deal in order to compensate for these "perceived" (or misperceived!) dangers?

Add the following to the brew:

Today is a "buyers market" for oil & gas investment;
The oil & gas industry is strapped for capital – particularly capital for domestic drilling.

The result? At the present time, oil & gas investment can offer returns that few passive investment opportunities can match.

However, oil & gas investment offers this potential only when properly understood. To realize its benefits requires that you develop and follow an intelligent investment strategy.

This series seeks to help you develop that intelligent investment strategy. To do that, we'll consider:

The "Basics" of Oil & Gas Investment: What are the objectives of oil & gas investment; what are its benefits and risks; what types of oil & gas investment are available to you; and what are the advantages and disadvantages of each.
Oil & Taxes: How to use current tax laws to your advantage; how to avoid (or lessen the impact of) various tax "pitfalls."
Measuring Oil & Gas Investment Economics: How to compare "oilman's return" with the potential return of other investment areas; the importance of diversification; understanding leverage.
Reaching an Intelligent Investment Decision: Putting it all together, from determining whether any oil & gas investment is appropriate for you to a look at preliminary investment considerations; analyzing program structure, management and "track records;" and "quick and dirty" tests to eliminate questionable "opportunities." (We'll even show you how to "Analyze Your Analyst.")
Getting Out of Oil: How to realize on your returns from successful ventures and "cut your losses" on those which have gone sour, plus an outlining of your Investor's Bill of Rights.
Finally, we'll close with an Investor's Glossary and an Investment Decision Checklist.
Coming Next: "The Purpose of Oil & Gas Investment"

If you are having problems printing this article, click on a portion of the text of the document. Clicking on any portion of the text will make the "frame" active and printable.

"Lewis Mosburg's OIL & GAS NEWSLETTER"™ and "Lewis Mosburg's OIL & GAS PRIMERS"™ are trademarks of Lewis G. Mosburg, Jr.