Oil Well Investments in Joint Ventures

[Posted on February 23rd, 2015 by Michael L. F. Slavin]


Oil is used in a lot of applications: from providing the fuel in vehicles to producing consumer products like plastic containers, additives, and lubricants. And even with growing energy-efficiency awareness, the reliance on oil does not seem like it is slowing down any time soon. So, unsurprisingly investing in oil continues to be very lucrative. And to maximize gains with oil wells, investments are starting to weigh more heavily towards a particular type of business agreement. It is known as joint venture, or JV.

Background on JVs

In a joint venture, the investor and the oil well company agree to share both profit and expenses from an oil well investment. In some industries, the establishment of a joint venture is accomplished with little more than a handshake. However, in a sector as sophisticated as the oil and gas industry, documentation is required to outline essential components, such as the objectives, timeframe, and the amount of investment and debt involved in the JV. There should be at least a joint venture agreement for both parties to sign. After the oil well investment comes the exploration and drilling process.

Benefits of Investing

Perhaps the most obvious benefit of joint ventures is the building of trust between parties. The investor would not feel that the company would not try their very best for success or bail out in the event of a huge loss. Indeed, the financial and emotional benefit is maximized when the parties hit paydirt with an oil well. For the investor in particular, entering into a JV can save lots of money, rather than bear the brunt of a loss. And for less experienced ones, JVs are great opportunities to learn more about the oil industry, particularly when it comes to sales and available markets.

Companies to Partner With

Many oil companies in the United States recognize the benefits of joint ventures. One of the prime adherents of this type of business agreement is U.S. Emerald Energy, which was founded in 1992. Headquartered in Houston, Texas, U.S. Emerald Energy does not restrict oil well investment to businesses; individuals can also directly participate. U.S Emerald Energy touts its tendency to cherry pick oil wells via thorough research as its main selling point.

Relying only on 3D seismology and the most advanced research technology in the sector, the company estimates the Earth’s subsurface properties and picks out between 50 and 100 different oil prospects. The company then cuts down the number to a few dozen, and recruits independent geologists for more in-depth analysis. Finally, the best prospect is presented to the investor. It is a cherry-picking culture that has yielded an 80 percent success rate.

Tips and Trends

When entering into a JV with an oil company, make sure that you are both on the same page in terms of financial goals, and that you approve of the company and its reputation. Also be certain of how much you are willing to risk.

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