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(EMAILWIRE.COM, May 22, 2010 ) New York, NY - We go back a decade and look at the late 1990s, worldwide production increases led to a glut of oil and natural gas on the market, which resulted in price declines.
Consequently, many wells were idled. In the early 2000s, with demand once again pushing supply, drilling companies were undertaking new drilling opportunities as well as refurbishing idled drills to get them running again.
Drilling is an inherently volatile business that follows trends in the overall worldwide oil and natural gas markets. For example, rising oil and gas prices in 2001 2001 led to nearly 1,300 active wells, the highest count since 1986. Within the following nine months, well activity plummeted 43 percent, to 743 active wells in April 2002. By mid-2006, active well totals approached 2850. Because 80 percent of all U.S. drilling is related to natural gas, natural gas prices will likely dictate drilling activity, which is primarily inland based.
According to the U.S. Energy Information Administration, Earth Energy Exploration, Earth Energy Business Review, and the Department of Energy (DOE), the demand for oil and gas (energy in general) is on an upward climb that eyes no ceiling. Where supplies are dwindling and most of the world's oil reserves have been identified, so there is a cap.
IJR wants to join the efforts of Earth Energy Exploration Beyond and participate in highlighting efforts and thinking beyond our known alternative energy sources. By moving forward with alternative energy discovery, we point out that our world's current oil fields and properties are diamonds in the rough until we can replace the industry ingredient that we live by.
There are pros and cons of oil and gas investments, that should always be considered and pointed out.
Benefits of course are the Potential Returns. Projected returns of five to 10 times the initial investment are common. Although risky, oil and gas can be highly profitable and public reports verify theses numbers.
Many people never realize the tax deductions available but there are plenty. IJR found up to 65 percent of costs can be written off in the first year. For high earning investors, this can provide significant current tax savings and partial investment protection in the ability to write off losses. IJR also found that investors can get rapid results checks from most investment companies. These can begin within 60 to 90 days of a well hitting, a rapid pace for an investment offering such high projected returns.
The risks are prevalent as well, perhaps the biggest fear to all investors would be drilling a dry hole. In oil drilling, as in real estate, itÂ’s all about location, location, location. If the hole comes up dry, the investor will lose their entire investment (but can write off 100 percent of costs).
Even though IJR concurs with the government's Department of Energy that world demand is going up and supply is going down or has a cap, prices can still be volatile. Price volatility will affect the profitability of oil and gas projects. This depends almost exclusively on the market prices of oil and gas. Volatile price swings are common and can dramatically impact the profitability of a project.
IJR also warns of scams or bad company management. Scams and schemes to take advantage of investors abound, so investors must ensure they fully understand any contracts or agreements. Success relies greatly on the management of the company, so in depth due diligence on the companies involved is a must.
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