Oil Investments

I know money can be made in oil and gas.  After all, I watched the Beverly Hillbillies as a kid – you know bubbling crude, black gold, Texas Tea?  Well the first thing you know Uncle Jed’s a millionaire!  Unfortunately, oil investments are a little more complicated and care should be taken when evaluating this investment for your portfolio.

Many oil investments are not any more risky than various other investment alternatives.  All investments have a risk/reward profile.  Your job as an investor is to be sure that you are compensated with a reward for whatever risk you take.  An oil investment strategy that focuses on large, publicly-traded oil and gas companies or on oil indexes or oil mutual funds, may be a an acceptable risk for many investors.

However, if you feel like taking a bigger risk for the potential for a greater reward, there are several oil investment vehicles that offer opportunities to speculate. 

Here is a list of various oil investments:

• Major Oil Company Stock--publicly–traded oil companies that own significant oil reserves throughout the world.  One of the safest investments in oil and gas.
• Medium-sized Oil and Gas Companies--publicly-traded oil companies listed on the New York Stock Exchange as well as the NASDAQ and other exchanges that are acquiring assets and going through a growth phase.
• Mutual Funds--funds focused on the energy industry that may own stock in the majors, stock in independents or stock in companies that provided a variety of services for the oil and gas industry.
• Independent Oil and Gas Companies--over 4,000 independent oil and gas companies located in the United States, many that offer the opportunity to invest in industry development projects as well as exploration through private placements.  Ninety percent of wells drilled on an annual basis in the United States are drilled by an independent oil company.
• Drilling Funds--funds that specifically targeted drilling projects, typically exploration drilling (the search for oil or gas more than a mile away from any existing or proven economic oil or gas wells) and developmental drilling (wells designed to define or extend a proven field or existing production).
• Commodities Trading--oil investments can be found in different commodity exchanges throughout the world. The most common oil investment is West Texas Intermediate. Crude oil prices are commonly reported through the financial press and online.
• Royalty Funds--funds that can be traded and that provide a revenue stream from different producing fields.  A royalty fund does not pay a percentage of operating or developmental costs associated with the production of the oil or gas and may last for many years.
• Lease Acquisition Funds--used for acquiring acreage in developing exploration fields.

Financial Guide Links

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