How To Invest In Oil - The Benefits Of Putting Your Money Into Crude Oil
6 Pages
English
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How To Invest In Oil - The Benefits Of Putting Your Money Into Crude Oil

Downloading requires you to have access to the YouScribe library
Learn all about the services we offer
6 Pages
English

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The opportunity to invest in oil has never been better. In fact we may never see an opportunity like this again in our lifetime that offers this huge of an opportunity for those that would like to invest in energy. Learn how to invest in oil and what risks are involved with this massive opportunity.

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Published 31 July 2017
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Language English

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How To Invest In Oil - The Benefits Of Putting Your Money Into Crude Oil By:Alpha Seven Energy 2909 Cole Ave #115,Dallas, TX 75204
Surges in oil prices continue to swell according to analysts who suggest the price per barrel which currently trades at $49 is going to shoot up even further with the rapid increase in demand from new markets such as India and China. This has lost of investors trying to figure outhow to invest in oil reserves. This unique scenario presents a gap and opportunity that   has not been exploited before. Most investors are known to shy away from this lucrative, Multi-billion dollar enterprise due to its intimidating high-risk nature, lack of transparency and of course high buy-ins. Here is what they might not know about oil and gas investingTax Incentives For Oil Investments In order for the economic system to run seamlessly, a nation has to pride itself in providing cheap and affordable energy to its fellow countrymen, labor force and most certainly its industrial sector. To do this the federal government had to elbow throughtax incentives that would encourage investors to pull together vast resources and capital that would help small oil
and gas producersremain afloat and run their operations without major hiccups. In return, these tremendous efforts would ensure constant and adequate supply of localcrude oil and natural gas.
This is where it gets interesting, the tax code is programmed in such a way that the investor can get a tax credit surpassing the 80 % mark of all the investment made in oil and gas production, during the 1st year. To break it down a little further, the 80% deduction is onIntangible Drilling Costwhich might include cement, casing, Geologist, basically what you cannot sell at a later date. Well, such generous tax credits are what gives oil investment the edge over other major investment schemes. And that is not all, on all those assets that can be sold later on, called Tangible Drilling Cost, you get a 14.3% tax deduction. Case and study let’s assume that an investor invested $100,000 into an oil and gas project. With some basic math, we realize a sum of $80,000 and $2,860 from the 80% and the $14.3% tax deduction respectively. A total tax deduction of $82,860 in the 1st year alone. The standard Tangible Drilling Cost depreciates at the same amount each year over a period of 7 years, which is similar to the standard depreciation rules. Investing in oil and gas production can be very rewarding and to sum it all you get an extra tax-free depletion allowance of 15% from revenues gained in production that year. For example a mining company generated $86,158 in the 1st production year. This results in $86,158 * 15%= $12,924 additional tax-reduction benefit.
How To Invest In Oil ProductionThere are multiple ways to approach when dealing with oil and gas investment. The first thing to note is that the oil industry is a vast pool of companies with similar interests that engage in providing consumers with product and services.
Secondly, you have to appreciate the oil industry as a commodity or good that you can profit from, with the regular changes in crude oil prices, gasoline, and diesel. With this knowledge, we can be able to wrap our heads around various key ways to invest in oil. Mutual Funds Buying shares of multipleoil and gas oriented mutual fundor ETFs is a safe way to gain exposure and experience without putting too much in the line with a single company. This approach cushions one from incurring huge losses that might come along with risking all your fortunes based on prospects of one company. Large Cap stock or American Depositary Receipts You can gain direct exposure to the oil and gas markets by buying either shares or ADRs from publicly traded companies such asExxon-Mobile(NYSE: XOM),British Petroleum, Petro China,
Marathon Oil, and many others through your broker. It is critical to point out that each of these world re-known companies is adamantly involved in oil exploration. Limited Partnerships and Micro-cap stock You can also look for a Micro-cap stock or Limited Partnership that is oil and gas oriented. A specialized broker in the oil industry is also needed for this kind of investment if the business is
not publicly traded. You can also directly deal with the management for a private placement if you are ready to invest a significant amount. Types of oil and gas investments - Categorically, there are four kinds of oil and gas investments Exploration Exploration can be highly speculative and if not careful can end up in considerable losses if not entirely. The process is simple, these companies will buy or lease land and then invest in drilling. In the event that oil is struck, the venture can be handsomely rewarding especially if the money used to finance the operations was borrowed, with a pay 10 times over or so much more.
Developing These projects are generally less speculative and will drill almost sure proven reserves. However, there are no guarantees that profits are to be reaped.Income Something to underline here is that this is the safest way to engage in oil mining and extraction process. It is most certainly more income oriented than just speculative play. These companies either lease or purchase land in areas proven to be oil reserves and aim to generate a steady income flow. This kind of investment can be categorized as a passive income stream. However, there are risks involved too, like the oil might run out faster than earlier speculated. Services and support These companies are similar in characteristics with companies that offer B2B services such as transportation, construction, pipeline companies and many others. Most of these companies rarely make profits from a surge in oil prices. Benefits of oil investment There are obvious benefits in oil investment and these cannot go unnoticed 1. Profit potential is high when oil is struck and can pay many times its cost. 2. Tax advantages. 3. Diversification of overall economy. When the rest of the world is hit by oil shocks, and exposure to oil and gas stocks can insulate you against economic slowdowns. In every business dealing, due diligence can never be over emphasized. It’s critical to have someone overly experienced or rather a professional in the oil industry who guards your interests and well being.