Comments on: The Structure of an Oil Interest http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/ An entrepreneurs thoughts on business, personal finance and investing. Thu, 09 Jun 2011 19:02:59 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: Grant http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-865 Grant Mon, 09 Oct 2006 02:10:31 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-865 Thanks MDCD, there is a lot to learn about investing in oil and gas. There are a lot of people that get their clock cleaned in the oil industry, because quite frankly there are a lot of people that look to scam people trying to make a quick buck. I'll check out your site. -Grant Thanks MDCD, there is a lot to learn about investing in oil and gas. There are a lot of people that get their clock cleaned in the oil industry, because quite frankly there are a lot of people that look to scam people trying to make a quick buck.

I’ll check out your site.

-Grant

]]> By: MillionDollarCountDown http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-861 MillionDollarCountDown Sun, 08 Oct 2006 17:28:57 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-861 Excellent article. I would have to spend some time on your blog to learn this oil stuff. You are going in my blog roll...Cheers. Excellent article. I would have to spend some time on your blog to learn this oil stuff. You are going in my blog roll…Cheers.

]]> By: The Corner Office Blog - An entrepreneurs thoughts on business, personal finance and investing. » Blog Archive » Investing in Drilling Partnerships http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-551 The Corner Office Blog - An entrepreneurs thoughts on business, personal finance and investing. » Blog Archive » Investing in Drilling Partnerships Wed, 23 Aug 2006 02:27:00 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-551 [...] They may offer you a 1% working interest in the well(s) for anywhere between $10,000 and $80,000 up front.  (Remember what a “working interest” means?)  Depending on the program, this is just to drill the hole.  After they log the hole and convince themselves it’s worthwhile to finish, they’ll come in and complete the well.  At that point in time, they’ll ask you for more money.  In this case, 1% of whatever it costs to complete the well. [...] [...] They may offer you a 1% working interest in the well(s) for anywhere between $10,000 and $80,000 up front.  (Remember what a “working interest” means?)  Depending on the program, this is just to drill the hole.  After they log the hole and convince themselves it’s worthwhile to finish, they’ll come in and complete the well.  At that point in time, they’ll ask you for more money.  In this case, 1% of whatever it costs to complete the well. [...]

]]> By: Keno http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-458 Keno Fri, 04 Aug 2006 22:57:37 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-458 Nice write up. I think the most difficult thing is convincing people to give YOU money. While I think oil prices are high and here to stay, I don't think that most people know enough about the indistry to invest money there. Sounds like you're on your way though! Keno Nice write up. I think the most difficult thing is convincing people to give YOU money. While I think oil prices are high and here to stay, I don’t think that most people know enough about the indistry to invest money there.

Sounds like you’re on your way though! Keno

]]> By: Grant http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-455 Grant Thu, 03 Aug 2006 15:34:19 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-455 One way to find land with oil reserves is through public auction. Many times you'll find estates being liquidated or parted out that have royalties associated with it already. The problem is that with current oil prices, these estates are going at a premium. Oil men are seeking these estates for their oil reserves and nothing more. They could care less if the 90 year old house stands or falls, but either way they're paying a premium for the land. Once in a blue moon will you find a land owner that doesn't know what he's sitting on and the land goes for next to nothing. If that's the case, prepare for a shark fight. Those "in the know" will be bidding up the land, and those that are left in the dark will be wondering why anyone would pay a million dollars for Aunt Gertrude's house and 100 acres. Once you find a property for sale, you can look through the local courthouse records for any interests associated with the land. In regards to our margins, they vary widely month to month. Naturally we don't have the production that Exxon does to spread expenses over, so some months we have margins of 50% and others we take losses of 50%. It really depends on how many wells go down and for what reason. Rig rates have increased by 300% due to availability in some areas, so once you've done a workover (or repaired a well) it takes significantly longer to recoup your costs than it did a year ago. We're also spending a lot of money on developing injection wells for salt water. It's costing a fortune up front, but in the end we'll eliminate our water hauling costs. Remember, there is a difference between profit and profit margin. Exxon had a profit margin of 9% that equated to $10 million per quarter. My investment has a profit margin of 50%, but on a few thousand dollars. Grant One way to find land with oil reserves is through public auction. Many times you’ll find estates being liquidated or parted out that have royalties associated with it already.

The problem is that with current oil prices, these estates are going at a premium. Oil men are seeking these estates for their oil reserves and nothing more. They could care less if the 90 year old house stands or falls, but either way they’re paying a premium for the land.

Once in a blue moon will you find a land owner that doesn’t know what he’s sitting on and the land goes for next to nothing. If that’s the case, prepare for a shark fight. Those “in the know” will be bidding up the land, and those that are left in the dark will be wondering why anyone would pay a million dollars for Aunt Gertrude’s house and 100 acres.

Once you find a property for sale, you can look through the local courthouse records for any interests associated with the land.

In regards to our margins, they vary widely month to month. Naturally we don’t have the production that Exxon does to spread expenses over, so some months we have margins of 50% and others we take losses of 50%. It really depends on how many wells go down and for what reason. Rig rates have increased by 300% due to availability in some areas, so once you’ve done a workover (or repaired a well) it takes significantly longer to recoup your costs than it did a year ago.

We’re also spending a lot of money on developing injection wells for salt water. It’s costing a fortune up front, but in the end we’ll eliminate our water hauling costs.

Remember, there is a difference between profit and profit margin. Exxon had a profit margin of 9% that equated to $10 million per quarter. My investment has a profit margin of 50%, but on a few thousand dollars.

Grant

]]> By: Winston http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/comment-page-1/#comment-454 Winston Thu, 03 Aug 2006 15:11:25 +0000 http://www.thecornerofficeblog.com/2006/08/03/the-structure-of-an-oil-interest/#comment-454 Excellent post. How do you go about finding patches of land with hearty oil? What kind of gross revenue can be realized from a typical independent well? Exxon, as you stated in one of your previous posts, posted rather puny margins. What kind of margins are you and your investment team seeing? Excellent post. How do you go about finding patches of land with hearty oil? What kind of gross revenue can be realized from a typical independent well? Exxon, as you stated in one of your previous posts, posted rather puny margins. What kind of margins are you and your investment team seeing?

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