The oil and gas industry presents qualified investors with great opportunities to invest in potentially low-risk, high-return portfolios. The trend for energy investing in the United States has seen a spike in recent years. Unfortunately, there has been a commensurate rise in the number of oil and gas investment scams. Although many reputable entities are behind the vast majority of energy investments today, there are also several unscrupulous players in the field. This blog sheds light on some of the scams that investors often come across, and how they can shield themselves from them.
Common Scams in Oil & Gas Investment Projects
General partnerships, limited partnership interests, and ownership of fractional undivided interests in leases are three of the common scams in energy investments. Generally, fraudsters structure their business in such a way that law enforcement agencies and victims find it nearly impossible to fish them out. They do this by registering their companies in one state, locating the headquarters in another, and making the offer for oil and gas investment opportunities in a totally different jurisdiction.
How to Insulate Yourself
- Check If the Offering is Registered
Check the registration with the securities commission to make sure the offering is registered in either your state or the state that the company belongs to. In case of any claims of registration exemption, verify it with the state securities commission. Understand the terms and conditions of the exemption.
- Learn About the Company
Get as much information as permissible on the people who are behind the offer and running the entity. Discover what their experience is in the industry, and get a detailed history of the company. Also find out about the company’s financial position.
- Find out the History and Legal Status of the Lease
Obtain information on the history and legal status of the property on which the drilling is to take place. Know whether the lease was acquired from the principal at an acquisition fee, or there are profits involved. Get hold of the geological report to learn if there are any leasehold burdens such as landowner royalties.
- Verify the Salesperson’s Identity and Background
Inquire the identity and background of the salesperson. A dodgy salesperson who is reluctant to answer key questions or provide written responses raises red flags. Verify everything about the salesperson with the state securities agency, including whether they were awarded sanctions in the past for securities laws violations.
- Get Expert Advice!
As an energy investor, it is essential to have secure oil and gas investment projects. The best way to protect yourself from dubious elements is to get the help of an established oil and gas investment company. They can lower any potential investment risks through their expertise. These energy consulting companies can arrange for a personal advisor to help investors who’re looking for energy investments in the USA, for instance. Talk to an investment specialist today for the best course of action.