By Robert N. Perry
If you are searching for a worthwhile investment option, investing in the discovery or development of oil wells may not be such a bad idea. Oil and gas is are one of the only sectors that has a continued market demand all through the year. Moreover, a future shortage in oil and/or gas supplies makes it even more rewarding if oil is actually found.
A number of people tend to avoid this type of investment primarily because they feel it is risky. However, the risk can be significantly minimized through Oil and Gas Limited Partnerships.
Oil and Gas Limited Partnerships are basically a group of investors who form a partnership with the aim to commercially search for and drill oil or gas wells. Oil and Gas Limited Partnerships are very beneficial as they offer limited liability to those involved in the investment. Also, the high cost of developing and drilling the well is spread over a number of investors instead of just one or two.
By being a limited partner, you are ensuring that your liability for the search of oil or gas does not extend beyond your capital contribution. In this way, if a significant loss does occur, you will be liable for amounts not exceeding your capital contribution.
However, though the risk is minimized for those involved, one may still have concerns as to the overall risk of Oil and Gas Limited Partnerships. Everyone wants to see their investments return favorable profits rather than continuous losses. Fortunately, this is very possible if you go with a conservative developmental oil company.
There are two main methods used to search for and drill for oil and/or gas: developmental wells and exploratory wells. The main difference between the two is that the exploratory wells are used in areas where no previous oil beds have been located. A number of wells could be sunk before oil is actually found. On the other hand, developmental wells are those sunk in regions whereby oil beds have already been discovered. At time wells may even be drill down the same hole as an old well if records show there is still oil that can be extracted from it.
The choice of investing with a company who uses developmental wells or exploration wells lies with the individual who is investing and what they feels best suit their financial endeavors. In either event, they will probably be involved in an Oil and Gas Limited Partnerships.
One good plus factor that can reduce losses is that partners in Oil and Gas Limited Partnerships, also receive a number of tax breaks including depreciations on the drilling equipment, as well as oil depletion allowances which is based on the value of the oil extracted from the oil or gas field.
When choosing your type of oil and gas limited partnership, be it a developmental program or a exploration program for the more speculative, research the company and the investment carefully before becoming involved in the venture. Since there are risks involving large sums of capital when drilling oil or gas wells, only accredited investors can legally invest in Oil and Gas Limited Partnerships.
Robert Perry specializes in the building of income producing niche websites and the writing of medical related articles. For $100 he builds a 5 article website that the search engines love. You should visit his site.
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