Last Updated on May 17, 2017 by John Fischer
Securities for oil and gas ventures can reap high rewards for investors, but history has recorded high losses and serious charges leveled against brokers and promoters of fraudulent offerings. The SEC has documented a number of cases in which benefactors have lost whole investments due to faulty information or dishonest business practices. Thus, investor confidence in this arena can be difficult to come by. However, there are investors in the field today who are interested in these types of investments and ready to part with capital in order to participate.
How to Effectively Present Your Offering To Investors
What follows are a series of recommended guidelines to consider before making your offering and some due diligence you can accomplish in order to inspire confidence in your potential investors.
Oil and gas ventures depend upon accurate scientific evaluations, scrupulous work practices, and painstaking investigation and speculation. Savvy investors are aware of this. A broker or adviser in this field is expected to provide a well-developed profile that demonstrates experience and dependability. This kind of experience should be demonstrated by the broker, investment agent, and the company behind the venture. The SEC can provide numerous cases in point of investment agents and prospecting companies who made dishonest disclosures to their investors and ended up in court. Investors worth their salt will be aware of these cases (either directly or through their personal financial advisers). Set investors’ apprehensions at ease by providing a proven track record of honest practices and factual information.
Credentials
Whether you’re a broker, investment adviser, or independent agent working for the company making the offering, it would be wise to provide investors with some credentials from official organizations. Registration with the SEC is a good start. Similarly, official documentation from the Financial Industry Regulatory Authority bears testimony in your favor. A shrewd investor will seek this kind of information, and if you can provide accurate documentation, then you gain the advantage. Remind your prospect that these credits can offer certain legal protections for them. These official protections, along with your track record, go a long way toward getting to the final goal: reliable funding for future projects.
Due Diligence
If your investor follows the SEC Investor Alert documentation available on the Internet, then they may ask to see your “due diligence report”. This important document shows your potential investor that you personally investigated the information about this offering or the data provided by engineers or geologists concerning the presence of natural resources. Moreover, you have researched (or dealt personally) with the company that is making the offering. Make sure your report is organized and comprehensive. Provide your investors with enough information to satisfy their curiosity. (Be aware that your potential investor may have their own financial adviser who will be assigned to review and verify your claims.)
Full Disclosure
Always make certain that your potential investor is aware of the risks associated with oil and gas speculation. Oil and gas prospects are based on scientific inquiry, comparative data, and prior experience with the extraction of natural resources. Like any investment, there is no absolute certainty. Even the best data can go wrong. An investor may be more likely to trust you if you’re honest about the potential risks to balance out the possibility of high reward.
If you’re a broker or investment agent in the employ of a private company then your investor might be hesitant to part with capital. Any experienced investor is well aware that you’ll get paid regardless of whether or not the venture should fail. Let your investor know you have a personal stake in the situation. Your reputation as a trustworthy agent can be put in jeopardy if you provide incomplete data or withhold important details.
Furthermore, your personal stake should depend upon the success of your investors. If your primary interests are receiving funds on the front-end alone, then your reputation may already be shattered. Wise investors know to look out for such deals.
Despite all this, oil and gas deals continue to gain traction. While there is a fair amount of fraud, there’s also a great return on investment to be had, and investors know this. If you’ve put together a solid oil and gas offering that follows these guidelines, give us a call or fill out a form on our website. We can provide you with experienced oil and gas investor leads who know a strong oil and gas investment when they see it.