It’s a poorly kept secret that I’m a big fan of the oil industry. I believe people’s financial portfolio should have a portion dedicated to oil and gas. However, I also know that not everyone shares my opinion, and some of that may stem from a lack of understanding about what actually makes a good oil investment and what doesn’t.

That makes sense, as some businesses are quite opaque about their own processes and gatekeep the knowledge you need to make a decision.

Transparency is a fundamental part of our company’s core values. We want to ensure that if you invest with us, you’re fully aware of everything you need to know about your purchase, and everyone’s expectations are aligned.

So with that in mind, let’s explore how to find the right oil investment for you.

Make Sure They’re Doing Their Due Diligence

If you’re going to invest your money in an oil drilling operation, you need to make sure they know what they’re doing. Do they know where to look for oil? What are their processes for finding a potential location? What technologies are they using to verify their finds? How do they procure the property with the oil?

My business can give you the answers to all of those questions and more. I can lay out for any potential investor the process of our operations, from geological surveys to 3D seismic imaging, and introduce our staff of geophysicists. The idea here is that we are not spinning a map of Kansas on a table and then randomly pointing to where we’ll dig next. We are drilling strategically and intentionally to achieve the best possible results.

Any oil drilling company that you’re investing in should be able to answer all of those questions and many more.

How Does It Work?

There are many ways for people to invest in a business, but one of the most important things that I do is work with my securities attorney. Together, we establish limited partnerships on our rigs. This gives an investor a working interest in the wells’ drilling, testing, and completion phases, and that provides them with other advantages as well.

For one, when oil is sold from the property, the investor gets some of the income directly. This typically works out to a monthly figure, which is a better scenario than investing in a long-term fund and waiting for it to produce returns.

Let’s put this into context. When we build a well, there are 100 units available for investment, with each unit accounting for one percent working interest and a specific net revenue interest in the well. If that well produces fifty barrels of oil a day at $80 a barrel, then the well sees a gross monthly revenue of $120,000. If you own one unit, you would see a monthly return of approximately $900. Over a year, that’s $10,800, and the well’s lifetime, $60,000. All this for one unit in one well.

I know that whenever I invest in a company, I want to be sure that a plan is in place for me to see a return. Therefore, make sure the ones you’re looking at have a system in place as well.

What Tax Implications are Involved?

As someone with a working interest in an oil well, there are some pretty big advantages. The year you make your investment, you can deduct 85 percent of that amount in the year it’s made. And over the lifespan of the well, you’re eligible for a 100 percent deduction of your investment.

Combining the tax savings and working interest income, investing in an oil operation means you not only get direct revenue but also can create an advantageous tax strategy. That’s a nice combination if you can get it.

Finally, most investors want a diverse portfolio, as well as keeping some of their funds in non-liquid assets. Oil is one of the best investments you can make in that category.

It’s Your Money

All investments have some kind of risk involved, and not every one is going to pay out the way you expect. I speak with many potential investors, and I always ask them if the money they would invest in my company would impact their lifestyle. If it would, then I shake their hands, thank them for their time, and explain that this may not be the investment for them. If not, then let’s move forward on whatever scale feels comfortable. We have lots of options.

I’m obviously a fan of oil investment, and I would like everyone to give it a try. But before you do, make sure to do your research and dig into the specifics. Transparency is key. If they’re not showing you the data, walk away, because who knows what else they’re hiding.