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Oil & Gas Investment Marketing Strategies

WHY NATURAL GAS?

An Interview with James N. Ryan, Chairman of Petroleum Development Corporation

By Jeanne C. Stilwell

I recently had the opportunity to speak with Jim Ryan, Chairman of publicly-traded Petroleum Development Corporation, about the advantages of investing in Natural Gas. I'd like to share Jim's thoughts with you:

Jeanne:

Why invest in energy?

Mr. Ryan:

Every prudent well-diversified portfolio should contain energy-related investments. Energy consumption reflects the overall health of our economy and is considered an indicator of growth. Since energy is a factor in all segments of the economy, it is a perfect diversification tool in financial planning. It's also utilized by many investors for that portion of their portfolio providing an inflation hedge.

Jeanne:

What distinguishes Natural Gas from other energy investment opportunities?

Mr. Ryan:

Natural Gas is increasingly recognized as the energy/fuel source of the millenium -- it is often termed America's transition fuel.

It's flexible -- it can heat your home and run your car.

It's available -- enjoying an existing delivery infrastructure to every U.S. market -- just ask your local utility company.

It's economical -- costing less to use on average than other fuel sources.

And better yet, it's environmentally sensitive -- Nature's ecology fuel -- a cleaner fuel than oil or coal. Plus it's domestically produced, reducing our increasing dependence on foreign energy sources.

Jeanne:

How does the Clinton Administration and Congress view Natural Gas?

Mr. Ryan:

Natural Gas has been singled out by the Clinton Administration as the environmental and economic choice since the Little Rock Economic Summit. And keep in mind that the President's Chief-of-Staff is a former Natural Gas company chief and the head of the Department of Energy drives a Natural Gas-powered car.

In addition, Congress has repeatedly enhanced our tax advantages since 1986.

Jeanne:

Does industry share the Administration's enthusiasm for Natural Gas?

Mr. Ryan:

Most Definitely! We are increasingly aware that industry, driven by economic and environmental forces, is choosing Natural Gas over other energy sources. According to the EIA, by 2020 consumption of natural gas is expected to increase by 50 percent over 1998 levels. Natural gas has become the fuel of choice for most new and planned electric generating units as new gas fired generating technologies offer lower initial costs, higher efficiencies, and less adverse environmental effects compared to generation from other fossil fuels.

Jeanne:

What is the industry's view of Natural Gas prices?

Mr. Ryan:

We are delighted. After a period of flat prices, Natural Gas prices are escalating. For example, our pricing for direct sales to utility companies, which is how PDC markets most of its production, is substantially higher now than it was last year.

Jeanne:

Is the price increase temporary or an indication of a trend?

Mr. Ryan:

Based on increased demand, lower supplies, and the increased attention focused on Natural Gas by American industry and the Clinton administration, we believe higher Natural Gas prices are the trend.

Jeanne:

How can an individual investor participate in the Natural Gas industry?

Mr. Ryan:

Like any other industry, individual investors should pool their resources to diversify their investment. Buy stock or form partnerships. The partnership format is a direct participation sharing in the economic and tax benefits of investing in natural gas.

Jeanne:

What are the tax benefits?

Mr. Ryan:

The IRS encourages the domestic production of Natural Gas by allowing an immediate deduction of many drilling costs. These drilling costs are a tax professional's dream, since they allow him to significantly reduce alternative minimum tax! And, since the benefit is immediate, giving partnership participants an immediate 30% or more return, after tax it is the ultimate planning tool. The effect of these tax benefits will be enhanced at higher tax rates. There are also continuing tax benefits (primarily from a depletion allowance), which will partially shelter the investment's income.

Jeanne:

In reviewing an investment portfolio, what should be asked when considering a Natural Gas investment?

Mr. Ryan:

It's a simple question of prudent financial planning. Is the portfolio positioned to reduce taxes and benefit from the increased demand for clean economical energy for the millenium and beyond? Are the clients looking to qualify for a Roth? Are they trying to reduce their AGI to bring back lost deductions or qualify for any of the new tax credit programs? Are they asking for ways to reduce their AMT?

Jeanne:

Thank you, Mr. Ryan.

A final observation by me: Despite its advantages, Natural Gas investment has its own risks. In addition to these risks, Natural Gas investment is not appropriate for everyone. So, as always: Remember the golden rule:

"In presenting any marketing strategy, strongly urge your clients to check with their financial advisors to see how this marketing concept fits in their current situation."

Also, remind your client to carefully read the Prospectus/Offering Memorandum.

This is neither an offer to sell nor a solicitation of an offer to buy any investment. Any offering is made by prospectus only in states which have authorized the sale of any particular offering and only from securities dealers who may lawfully offer the particular security in such states.

Editor's Note:

Jeanne Stilwell brings to this Newsletter a wealth of knowledge and experience concerning oil and gas investment, its evaluation and marketing, gained over 23 years. For questions, call Jeanne at (800) 362-4590.

James N. Ryan is Chairman of Petroleum Development Corporation, a public company traded on NASDAQ, which Fortune Magazine has ranked as 44^th out of 100 in its "Fastest Growing Companies in America." Mr. Ryan has just been named "Entrepreneur of the Year" for the Energy Division of the State of West Virginia.

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