Energy investments can prove to be a great avenue for high net worth individuals to expand their wealth, provided they know their way around the market or have a trusted investment partner such as FIG Tree Capital Ventures to guide the way. Ever since the industrial revolution, the demand for oil and gas has been on the rise, despite pressure from the public to increase focus on harnessing energy from renewable sources. Though it would be safe to say that oil and gas investments, when channeled right, can deliver great returns. As an investor, you need to avoid certain commonly committed mistakes, four of which we discuss in this blog post. Read on.
Interests not Aligned with the Partner
One of the biggest mistakes HNWIs make when investing in oil and gas is falling victim to bad deals. To avoid being victimized, it is important to avoid partners whose sole motive is to make commission by ripping you off on your money. Your first step should be to find a trusted partner who is genuinely concerned with helping you find the best possible investment opportunities. Spend time understanding the pros and cons of the deal before signing on the dotted line.
Walking Away Due to Low Prices
Don’t walk away when the prices are low. Low oil price doesn’t mean the oil and gas investment is not lucrative. You can still make profits and reap the tax benefits with small operations. As small companies usually acquire assets in a bankruptcy sale, re-work on existing wells, or pay a low cost to acquire leases, they can make a great deal even in a lower price environment.
Putting all your Eggs in One Basket
Putting all your money in one investment and not diversifying your portfolio can put you at risk of losing all your money. As with energy investments, there is the risk of dry holes or less production than desired, you need to diversify your investment portfolio to an extent that one investment acts as a hedge against a poorly performing investment.
Though ongoing drilling projects can be a great investment, that doesn’t imply you should overlook the potential of re-working projects. The wells that have already been worked on can be purchased cheaply and with a little TLC, they could offer a substantial return on investment. It is, however, advisable to do a thorough analysis of the project undertaken on the re-worked well.
When it comes to investment options, not many options come close to offering the kind of certainty promised by oil and gas. While we certainly hope the information we have shared helps you make the most of your energy investments, it is essential to have an expert by your side who can guide you in the right direction and help strengthen your portfolio. If you have not yet found an investment partner or wish to learn more about investment opportunities in the energy sector, feel free to connect with us for a no-obligation consultation. To get the ball rolling, simply call (866) 300-2170 or fill out our contact form and you will hear from us, soon.