Given the ever-increasing energy demand, it would be safe to say that investing in oil and gas is a highly profitable option for investors, provided you have a reputable investment partner to guide the way. FIG Tree Capital Ventures is one such name. We are committed to providing high-return direct investment opportunities for qualified investors in Texas, Oklahoma and other parts of the U.S. Although investing in oil can be a fairly safe proposition, just like any other investment option, it involves certain risks, too. The post discusses five such risks you must discuss with your investment consultant, before investing in oil and gas. Take a look.
1. Political Risks
Any major change in the political landscape can transform the regulatory environment, impacting both domestic and international companies operating in the country. Changes can result in tax reforms, impact currency valuations, and changes in labor laws and trade tariffs, all of which can impact oil investments. To lower risks, most investment firms purchase political risk insurance that covers certain risks. To protect your interests, make sure the company has local partners that can help the provider abide by regulatory and other guidelines.
2. Supply and Demand Shocks
Oil and gas recovery projects take some time to kick off, as companies have to perform various calculations to determine the feasibility of projects, and raise capital. In some cases, it could be months before a new well starts yielding oil. By that time, the supply and demand dynamics may have changed drastically, impacting the return proposition on the investments. At FIG Tree Capital, we have a team of industry experts who bring a range of management and technical skills to ensure projects are executed without delays, helping clients realize their ROI goals.
3. Geological Factors
Even with the latest technology, oil exploration projects can involve substantial risks. For a simple example, it can be difficult to predict the presence of oil. The fact that many oil wells across the globe have been tapped doesn’t help an investor’s’ cause either, further creating a need for an industry professional with the connections to make successful projects happen. At FIG Tree Capital, we don’t leave anything to chance and conduct exhaustive geological tests to ensure the presence of oil before investing in a well. Our experts rank the reserves as “proven”, “probable” and “possible” and take investment decisions based on those findings.
4. Cybersecurity Threats
Cybersecurity threats, as is the case with many industries, also loom large in the oil exploration and investment industry. Compromised cybersecurity can have a grave impact on a company’s operations, resulting in downtimes, unreported or undetected spills, and in the worst cases, plant shutdowns. To tackle the risks, it is important to follow Homeland Presidential Directive 7 that includes directives to strengthen company infrastructure against cyber attacks. Companies also need to comply with NERC CIP guidelines that set cybersecurity standards.
5. Fluctuating Oil Prices
Operating costs have a major impact on the viability of a project. These costs can increase in case of unforeseen issues or troubles during the drilling and/or fracking process. Apart from operational costs, global production and payroll costs also impact oil prices, making it a highly capital intensive industry. Diversifying your investment portfolio can be one of the best strategies to mitigate the risks. At FIG Tree Capital Ventures, we manage different projects that combine multiple wells to provide a range of options to hedge against fluctuating oil prices as well as unforeseen issues in the drilling/recovery process.
Despite the risks, investing in oil is a lucrative option for qualified investors, as it can generate a steady stream of income for years. However, to better mitigate the risks and achieve your ROI goals, you need a reputable partner. That’s where we can help. FIG Tree Capital Ventures has extensive experience identifying lucrative energy investment projects and helping qualified investors achieve their financial and ROI objectives. To learn how we can help you invest in Texas and Oklahoma oil and gas projects, fill out our contact form or call us at (866) 300-2170.