State securities and regulators across the country have been warning about oil well investments scams. The rising prices of oil have heightened the interest of many investors to invest in energy-related investments and business ventures. Such as investing in oil and investing in oil well production. Most oil investment opportunities are legitimate in their operations and responsible for their marketing even if they involve various risks for investors.
However, similar to many investment opportunities, it is common for promoters to try taking advantage of the investors by committing fraudulent practices which are the main causes of oil well investments scams. There are con artists who move to lucrative places but continue to stay in the oil industry.
Now that oil prices continue to fluctuate, most of these con artists have been making their way back into oil well investments scams. Oil well investments scams usually happen when economic circumstances are highly publicized. Money is made legitimately during these times and scammers take advantage of this situation.
What Are Oil Well Investments?
Oil well investments take various forms which include limited interest partnerships, fractional undivided interest ownerships in leases, and general partnerships. Investor liability and tax consequences do vary according to program types. Genuine general partnerships where investors are actively participating in the business operations are not secured. General partners are personally liable for any partnership debt.
In limited drilling partnerships, oil companies sell partnership units to their investors and use the money that it raises to drill wells and lease properties. As a return for managing the drilling project, sponsor companies normally take upfront fees of about 16% of the investment and share in the percentage of generated revenue.
Promoters also offer investors an outlook of the substantial 1st-year write-off of tax and cash distributions (quarterly) from the sales that the oil partnership finds. A drilling partnership is a gamble and proven to be somewhat riskier. This is an investment that is highly speculative, illiquid and has longing holding period.
Oil Well Investments Scams Techniques
When money is on the line, there is always a higher risk to be scammed. This also holds true in the oil and gas well investments. Oil well investment has the capacity to generate significant returns. However, with the promise of riches from con artists and scammers can blind investors. This is why it is very critical for investors to be knowledgeable when it comes to investing in oil wells from legit channels.
If you are a future investor in the oil well industry, you should watch out for red flags. Before entering in any oil well investment, make sure that you are involved in a legitimate investment to avoid being a victim of oil well investments scams. Here are the common signs that you are being scammed:
- Limited opportunities
- A sales pitch that is based on highly publicized news
- Guaranteed results and promises of “cannot wait” wells
- High and incredible returns on your investment
- Unsolicited materials or offers
- Promises of secrets and tips on how you can invest in oil and gas
Do not risk yourself and be a victim of scams by being careful and mindful. Do your research to protect yourself from oil well investments scams. Ask as many questions as you please and do not take anything because of face value.
To help you avoid oil well investment scams we have created 2 free resources to help potential investors. Visit our main page to download our ebook and also a guide to avoiding oil scams. These are a great place to get started but if you want to talk directly to an oil well investment expert you can request a free consultation to get more details.