Over the years, almost every investor we have worked with has asked how much money they need to invest directly in drilling oil wells. The answer depends. There are a few upfront requirements, then there are a couple of different levels of investment.
Of course, much of this depends on the firm or company you are investing with, so these are just some basic guidelines we have worked with over the years. Don’t take it as set-in-stone advice.
Are You an Accredited Investor?
Rule 501 of Regulation D
Rule 501 of Regulation D, defined by the federal securities laws, states that an individual is an accredited investor if they are “a natural person with income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year,” or are “a natural person who has individual net worth, or joint net worth with that person’s spouse, that exceeds $1,000,000.” The latter excludes the value of the investor’s primary residence.
As a quick note: Since this is not legal advice, we do recommend reading the regulations for additional information. If you are not acting as an individual, there are other regulations that apply.
Only accredited investors can invest in the types of direct oil and gas drilling opportunities we are discussing.
Do You Have What It Takes?
So you’re an accredited investor, and you’re ready to know how much you need to invest. Well, first, make sure you have what it takes to invest directly in oil and gas wells. Before risking any amount of money, we want to make sure that you know exactly what you’re getting yourself into. If you’re not willing to make the commitment to succeed, set realistic goals, and get the right industry education, you might be making a gamble you can’t win.
Show Me The Money
OK – What’s it going to cost me?
Down to business. How much are you going to have to invest to get started in the direct oil well investment game?
The minimum a company is going to ask you for is around $15,000 to $30,000. If you’re new to the whole thing, and that is a reasonable risk level you are comfortable taking, great. If you are more experienced and have more money to invest, there are many companies that will work with you for a $30,000 to $60,000 investment. These might be up and coming operators that need a little more cash for larger projects or they may just not want to spread their investors too thin. Then, of course, you can always invest $60,000 to $90,000, or more. Depending on the size of the project, this may get you a larger portion of ownership, etc.
As always, make sure you know what you’re going into when you make an investment. Understand your risk, set goals, and do your due diligence. And always ask questions.