Why Investing Directly in Oil Wells Can Make Sense

Clark Weeks Recommends Investments in Oil Wells for Certain Qualified Investors

Clark Weeks recommends investing in oil wells

There is no denying that industry experts, such as Clark Weeks, recommend investments directly in oil wells. As an industry that has been in existence since the 1850s, investing in the oil well business can add that required amount of diversity in your portfolio leading to higher returns and revenues. This is primarily because oil has become an essential part of human civilization today. And, we certainly can’t do without this commodity. Considering this, petroleum is bound to stay in high demand making oil wells a good investment for the future.

While direct investment in oil well can be fraught with risks, the returns and upside of this venture are tremendous. The following are the advantages that an oil well investment has over others.

Tax Benefits

Investing directly in oil wells can help you write off nearly 80% of your investment in the very first year itself. This is primarily because the oil & gas industry enjoys better tax deductions than most other sectors. The tax benefits continue well beyond the first year of investment. These massive tax deductions are designed to cover the innate risk that is involved when you invest in an oil well.

Better Control Over The Investment

When you invest directly in an oil well you are safe from any risks that might arise due to a boardroom decision. Unlike the oil and gas companies that are publicly traded and can expose you to unfavorable corporate decisions over which you may have no control. Additionally, investing directly in an oil well also allows you to pick and choose the projects that are in line with your investment goals and make more financial sense.  

Data Transparency

Data is very important. You can’t bet on a project without studying the data involved. Even if you don’t have a financial or legal background, you can hire these services and get reports that can help you assess a deal structure. This is not the case when you invest in the oil and gas sector as an indirect investment. Not all data is available in the market. Additionally, most of the available data is derived by financial analysts rather than engineers on the ground. Therefore, oil well investment covers this risk and provides you with excellent data transparency.

Risk Clarity

All of these benefits culminate in providing the investor with a better understanding of the proposed investment. Although publicly traded companies offer better diversification, it is not easy to evaluate the risks attached. On the other hand, with an oil well, you are just concerned about a single drilling project.

No doubt investing directly in oil wells can be a risky affair. However, you can easily avoid these risks by keeping abreast of the latest news, employing services of investment experts, and beginning with an investment amount that you are comfortable with. Even small oil wells carry the potential for large payoffs making the oil well investment one of the highly lucrative investment avenues.

Clark Weeks Suggests Looking at Oil Wells

Clark Weeks would like to help you make better returns assuming the risk is right for your portfolio. For more info

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Investing in Oil

Clark Weeks suggest you invest in oil - picture of an oil well

In this article, we look on the different ways to invest in oil. We got input from Clark Weeks and others who invest in oil.

Oil has many uses in our lives today. It fuels our vehicles. It is used in the production of chemicals and plastics. It is also used in making waxes, lubricants, asphalts, and tars. Many fertilizers and pesticides are made from oil or its by-products. The uses for oil are endless and the demand is high so it’s not surprising if people choose to capitalize in oil

For Clark Weeks, Not All Ways to Invest in Oil are Good

There are a number of ways to invest in the oil market. You can look at the industry as a group of companies that provide different kinds of products and services to consumers. On the other hand, you can look at the industry as a commodity, and profit from the price changes of crude oil, diesel, gasoline and others.

Investing in Oil Company Stocks

This is a simple way to invest in oil. I’m pretty sure you are very familiar with the names of several large oil companies such as Chevron, ExxonMobil, British Petroleum, and Royal Dutch Shell. When you purchase oil stocks, you’re more aligned with the company’s performance than the commodity’s price.

However, before buying, research the financial performance of each company. You can look at their revenues, net income, earnings per share, and debt level. Then you can buy a stock through a broker. You can immediately buy the stock and pay the best market price available or you may want to buy a stock when prices decline.

Investing into a Master Limited Partnership

This a more direct approach when investing in oil wells. Master Limited Partnership or MLP is a tax-advantaged corporate entity. It’s like a stock that is publicly traded. It gives you the tax benefits of a private partnership, meaning you only pay taxes on distributions. Investing in MLPs make you a limited partner who gains shares in the profits but are passive in how the venture is being run. 

Before diving into MLPs, research their financial performance to help you decide which one to invest in. Your broker or investment advisor might have information about this or you may want to check online. Check the charging fees of MLPs and be careful of scammers.

MLPs are publicly traded. Because of this, they are easy to purchase. You can buy them online or buy a mutual fund that also invests in MLPs. This also means they are easy to get out of if you need to divest.

Investing in Mutual Funds or ETFs

This is another direct method in investing in oil. ETFs, or exchange traded funds are traded on a stock exchange. They can be sold and bought in a similar manner to that of stocks. The U.S. Oil Fund or USO is a popular ETF. You can also google other ETFs.

Do your research before investing into an ETF. Look at what the mutual fund is investing in. Most mutual funds purchase futures contracts. These are contracts where you would purchase oil at a price at a future date, hence the name. On the other hand, some ETFs invest in oil stocks. You can invest in oil ETFs through an investment advisor or an online broker.

Whatever your choice of investment, keep in mind that investing in these types of ventures, or any kind of ventures for that matter, have potential risks. Be aware of your own risk tolerance and investment horizon.

Clark Weeks Suggests You Invest in Oil Wells Themselves

For people who can handle the risk, Clark Weeks feels investing directly in the oil wells can have a much higher return. However, there is risk and it is only appropriate for some people. See our related post on this.

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Why Not Drill in Northern Canada?

Well, first because it is cold, damn cold as they say. We are actually talking about drilling in Canadian Arctic waters. It is hard enough to drill in warm water but drilling in Arctic water is that much tougher because of the remoteness and the weather.

Drilling Ban

However, right now, the even bigger reason is that is is forbidden. Justin Trudeau, the Canadian prime minister let it be know in December 2016 that oil companies could not drill in Arctic offshore water. Because of this, the Canadian government has been returning the deposits they received from major oil companies to the tune of hundreds of millions of dollars.

The ban extends through the end of 2021 and then will be reviewed. The review will be based on the latest science in terms of the potential environmental hazards and whether the drilling can be done safely with minimal risk to the environment. This review process is to take place every five years.

Little Demand if Ban Lifted

Even, if the next review decides to allow drilling to move forward, it is quite likely that none of the oil companies will have any interest. Currently, with new drilling technologies, there is enough oil in other parts of the world that is much easier to access. So, cheaper oil with less risk.

Drilling Problems

There are a number of problems with drilling in the Arctic. One is noise. That may seem odd since there is nothing nearby to hear anything. But when you consider marine animals as well as humans that changes. Between seismic exploration and drilling there is a lot of noise that can impact the various animals from whales to seals and walruses among others.

Next is remoteness. Getting supplies and equipment there is daunting. But also, if there is a spill, getting equipment there for the cleanup will be very difficult.

Sea ice is another issue. Not only in taking it into account when constructing oil rigs but once again in terms of clean up. There aren’t good methods of cleaning up oil in icy water and impossible if it flows under ice.

Ecologic recovery time is extremely slow in the Arctic so any problems could decades or longer for the environment to recover unlike in warmer climates.

Finally, there is natural gas and flaring. Because it is unlikely that an LNG facility will be created, the natural gas is likely to be flared off. That is better than letting it vent into the atmosphere because it can be a potent greenhouse gas. However, it can produce black carbon which absorbs heat and will melt snow and ice much faster when it lands on it. It also creates respiratory problems for the people who do work or live in the area.

With all these issues and risks, it is unlikely that we will ever see oil drilling in Canadian Arctic waters.

Invest in US Oil Wells

Only large companies can even think about drilling in the Canadian Arctic. However, for qualified investors, there are possibilities for investing in smaller oil wells in the US. See this post about it.

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