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You Too Can Be A Texas Wildcatter With Crowdfunding
With the high yield market starting to show signs of becoming less favorable as investors learn the hard way that there’s a reason why the coupon is 11% and with equity issuance already running at 10X last year’s total through March, struggling oil producers may have to get more creative when it comes to raising money if prices remain subdued (which, as we’ve explained at length, they likely will). Fortunately there’s the JOBS act which will not only help you become an angel investor in the next billion dollar app, but will now also let you fulfill your dream of becoming a wildcatter in Texas. Here’s more from Reuters:
Equity crowdfunding, or raising capital directly from a large group of investors, is widely used for projects from technology to fashion. Now, at least two small Texas firms are testing the concept in the oil and gas industry.
Potential prospectors, hoping to tap into smaller projects that big banks would normally pass over, are taking advantage of recent federal legislation that allows crowdfunding by for-profit companies.
EnergyFunders, a tiny 6-person firm in Houston, has signed up 800 investors since its unofficial launch in July, around the time crude prices started a 50 percent slide over the next six months.
So just as you can chip in a few months’ paychecks to fund an indy film, you can now buy into possibly-real oil and gas exploration companies and while the fact that the 6 people who dreamed this up picked the exact moment when prices started to collapse to start the venture might lead some prospective investors to question how deeply their expertise in the field truly runs, EnergyFunders explains that they’re simply helping struggling producers tap into the last available source of funds now that everyone who knows what they’re doing is running for the hills:
"This allows small oil and gas operators to get funds when large institutional investors are turning away from the industry," said Philip Racusin, chief executive officer of EnergyFunders.
CrudeFunders, a similar firm, reminds us that small investors have been throwing their money away for centuries, so really this is just par for the course, only with a hip, modern twist:
"Capital has been raised and invested directly into oil and gas projects for over 100 years, we're just taking it into the 21st Century," Racusin said.
Just as there those who think putting America’s retirement funds into overvalued, private tech startups may be a bad idea, some so-called “experts” caution that drilling for oil and gas is actually quite complicated and without the proper background, it would be very easy for “investors” to dig themselves a hole (no pun intended):
Christopher Ross, a former BP Plc executive and today finance professor at the University of Houston's C.T. Bauer College of Business, cautioned that directly investing in oil and gas can be tricky for investors unfamiliar with geology, drilling technology, and the arcane world of mineral leases and royalties.
"I don't want to pour cold water on what might be a valid new source of funding, but from the investor's point of view I would say a very strong caveat emptor (buyer beware)," he said.
Not so says Austin-based web marketer Scott Morris. It’s all about buying the dip:
Scott Morris, a 57-year-old Web marketer based in Austin, Texas, invested $5,000 in the project.
"With oil at $50 (a barrel) or below, it's the perfect environment to get our hands on these."
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Enough said.
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"Says he's a 'Wildcatter', eh? Well he won't find no wildcats down in the swamp. Too much oil!"
- Jed Clampett
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/ezLA00
Who knew you could make that much money blowing guys in the alley behind the gay bar?
They might consider this, then:
FYI-The Bakken Boom is over. At less than $70 crude only the middle pocket (Williams, Mountrail,McKenzie,Dunn) counties can make money and then only down to $44 oil. Nearly half the lease acres in this pocket have already been drilled. All currently operating drilling rigs are in the pocket (around 100) with an average of 130 total bores a month. At this rate all profitable lease acres will have been drilled in the next 36 months. At a 75% first year depletion rate you're looking at an overall play depletion in less than 4 years, max. Anything outside the pocket is running a 75% + produced water cut (salt water), ie, for every 10 barrels of fluid 7 1/2 is salt water, and the logistics in terms of transport costs and well maintenance are murderous for these kinds of wells.
Add in the railroads strangle on crude transport and additional peripheral costs like recent Bureau of Land Management fracking rules (1/3 of the Bakken is on tribal land !) and the entire Williston basin is now on an (quickening) downward slope.
I suspect that this can be added to ever-increasing list of ways to lose money on something the investor knows nothing about.
Haven't you heard, though, that leveraged FOREX trading is a surefire way to make money? LOL
WOW! Just, WOW! Fools and their money? A "web marketer" investing in oil in the down slide? Looks like a fleecing to cover losses from funding pinched from undeucated and ignorant "investors", but the "group".
Talk about "captives"???
Phone bank broker-dealers have been tapping into (and bending over) the public for a long time. I guess crowd funding just makes the pulling the wool over the publix eyes that much easier. I sure no unscrupulous behaivior will come from this...
....pssst, wanna buy an oil well for cheap?
I have a software investment program that requires $50,000 initial funding. I charge 10% management fees. I still owe investors from the last time I managed it. Not my fault. My partner had a stroke and his sons and daughters were lawyers. Maybe I'll crowd fund it and get it going again.
One of everything should about cover it.
http://www.bulletproofbodyarmorhq.com/
In a business where the professionals lie to the other professionals (oil & gas biz mean) imagine the shit they will say to some dumbass in Cleveland with $841 to invest.
I had a front row seat to watching a group of...uh...they call themselves investors put over $150 mil. into a gas drilling company. People put in money from their IRAs, etc.... $25K here 150K there. It added up over $150Mill. The investors lost every penny. I did the tax return for three years. It was interesting watching it go from that much money to zero. All they had to do to get some money back was to stop running the business. But they ran it into the ground.
There are very few people you can trust with "YOUR" money.
You know Tylers, I could have used this perfect contrarian indicator oh, say, LAST JULY.