Firms that market
investments wouldn’t think of overlooking such areas of opportunity as housing,
transportation, food, finance, high technology, and the like. But frequently such firms do
overlook a major industry - energy! We know that, in addition to the great physical
distance between Europe and the US, many European investment marketing firms do not have
familiarity and a “feel” for the oil and gas industry. Nevertheless, we believe
that a fresh look at the oil and gas industry is timely.
Where else can one find a mature industry that still has many avenues of profit and opportunities with relatively predictable results? And one that offers many tax advantages as well as potentially tax free income. These are the very reasons that American investors have been participating in oil and gas for many decades. And the reasons that we think you should consider developing a presence in this field.
Over many years we have developed a philosophy and a strategy for marketing oil and gas programs. We know the kinds of support you need to effectively market such programs and we know that your investors want a return on their capital without surprises. Here are some key elements of our philosophy:
The project must have basic merit - that is, it must have a likelihood of success and profitability. The cost structure must be reasonable for the area and in line with potential production. Preferably, there should be more than one well, and more than one area, to diversify risk. A multi-operator program is even better. And finally, the operator must have the management/administrative capability and track record to manage the program.
The program must offer the investor a fair deal and maximize the investor’s tax benefits. Assuring that these factors are in place and correctly crafted involves looking at tax, legal and accounting considerations. We coordinate this process, using high quality professionals who have agreed to work with us on a negotiated fee basis, to control costs.
There must be a program of marketing support and broker training already in place before the broker gets involved. We began as a marketing organization, and this is the area where we make a profound impact, by helping assure that the program gets sold and closed out on a timely basis.
Whether you are a small brokerage house with a few clients or a large syndicator, we can help. IEN is located in Dallas, in the heart of the “oil patch,” and we have on staff geologists, finance experts and marketing professionals.
Our services include: (1) providing market-ready programs along with marketing and other vital support functions; (2) “private label” programs for large firms and syndicators to sponsor. We are business development consultants, and with respect to programs that we provide, our fees are paid by our client, the operator; and (3) providing assistance with projects that you are already involved in.
Assistance We Offer to Investment Marketing Firms
MARKET READY PROGRAMS We have programs that will be market ready shortly that can fit
a variety of investment objectives - long term capital gains, current income, and tax
benefits, to name a few. These programs are managed by oil and gas professionals who have
a track record of success and who understand the needs of the investors. These programs
have undergone rigorous due diligence and we are prepared to assist as a conduit between
the oil and gas professionals and your firm.
PRIVATE LABEL PROGRAMS If you have a special category of clientele, or if you wish
to be the prime financial intermediary organizing selling groups of other firms - then you
may be interested in having us create a custom program that you can sponsor. In this case,
we can start from square one, define particular needs, assist in developing a creative
structure that provides the investment criteria you want, and coordinate the process of
packaging and marketing the program.
SPECIAL SUPPORT SERVICES If you already have involvement with an oil and gas
program but would like a higher level of comfort with the industry, we can provide an
expert interface between yourselves and the oil and gas companies and we can perform high
quality, in depth due diligence to give assurance that you are representing programs of
merit to your investors. We can also assist in situations where a program you are already
involved in has developed problems, by providing an objective analysis of the situation
and the courses of action that are available, including specific recommendations.
Types of Programs
IEN can provide a number of types of programs depending upon the needs to the selected
investor group.
Drilling programs
Drilling programs designed for low risk and predictable returns are available. Currently,
such programs focus on the development of natural gas reserves, in such proven areas as
Northwestern Pennsylvania, which has numerous fields with extremely high success rates.
This kind of program is usually referred to as a development program, meaning that it is
designed to further develop an already producing reservoir or geologic formation.
We also have balanced risk drilling programs, which feature a majority of low-risk
projects mixed with a smaller percentage of moderate-risk prospects - giving the investor
the assurance of “downside” protection with the possibility of higher-than
average upside potential.
Non-Drilling Programs
We have programs that do not depend upon drilling for a return on capital invested. These
include programs organized to purchase existing producing properties, some of which have
the potential to be further developed by drilling additional locations on the properties,
or upgraded by improving the existing wells.
Other non-drilling programs include projects for reworking existing wells that are now
marginal. Reworking usually means replacing old equipment, removing the build-up of
paraffin or other matter in the well, or other measures that can be taken by a petroleum
engineer. Such reworking projects can be accomplished for much less money than drilling
a new well and can result in a rapid payback of capital invested.
Lease banks are a little known alternative to drilling program, usually available only to
oil and gas insiders. A lease bank is a program organized to purchase mineral rights to a
particular property and hold them for an operator prior to drilling. A lease bank allows
the operator to conserve working capital while preparing a drilling program; when the
drilling program is funded, by other capital sources, the operator repurchases the lease
from the “bank.” The lease bank receives back its cost plus a premium equal to
an interest payment, and keeps an interest in any oil and gas production that occurs on
the leasehold.
Equipment leasing programs involve leasing such items as well completion equipment and gas
gathering, gas processing and pipelines to operators. The operator purchases or leases
such items only after a well or wells have been completed and are ready for production -
in other words, the risks associated with drilling have already been taken.
Further, we provide valuable support for the broker's selling efforts. We fully recognize
that the broker's most valuable asset is the customer base, and our activities are geared
to fit the broker's comfort level - we support without disrupting relationships in any
way. Additionally, we can assist in setting up the proper reporting mechanism so that all
parties stay adequately informed as to the progress of the investment after funding.
Specific Services
Any projects that we provide have undergone the following steps: Project Identification.
Because of our extensive network of contacts within the US oil and gas industry, patiently
cultivated over many years, IEN can quickly identify and vet oil and gas projects that may
fit the needs of your firm’s clients.
Due Diligence
On behalf of financial intermediaries and investors, we perform extensive due diligence on
a project before it is formally structured and packaged. The project may be one that we
have identified for you, or one that is presented to your firm by a third party. Because
we are in the industry and have extensive contacts with experts around the country, we can
rapidly give a project a preliminary “look” to see if it may have merit and if
the basic elements are in line with industry data. If we go further, we do an in-depth
analysis of the company and the project it is offering. In this phase, we coordinate the
work of financial analysts, tax professionals, geologists, and engineers. This research
will indicate the economic merits of the project and the capability and trustworthiness of
the company that will manage the project. The due diligence folder is available for
financial intermediaries to review prior to undertaking a selling effort.
Structuring the Project for Sale to Investors
Any given project may be structured in a number of ways. Our role is to coordinate tax,
accounting and legal aspects, using high-quality, recognized professionals in these
fields, to create a structure for the offering that meets the objectives of the target
group of investors in an efficient manner. Frequently, we now find that carefully
conceived corporate structures, with the investor owning shares, is a more advantageous
approach than either limited partnerships or direct ownership of oil and gas interests.
Interface Between Operator and Broker
One of the most important elements in marketing an oil and gas program is the flow of
accurate and understandable information between the company managing the project in the
US, which usually has a technical and operating cast of mind, and the marketer of the
project, who of course is financially and marketing oriented. To keep the relationship on
track and to keep information flowing in a productive manner, we act as an interface
between the two parties. This is our natural role, since our background is both marketing
and the oil and gas business.
Financial Safeguards
Although we do not manage the investment program ourselves, nevertheless we can be certain
that appropriate safeguards and procedures are in place so that the integrity of the
investment is maintained. The first such safeguard is a bank escrow account at a major US
bank. This is a specially designated account which receives the investment capital and the
revenues from the oil and gas wells, and which is controlled by an escrow agent who is
both a Certified Public Accountant and a person familiar with the oil and gas industry
from long experience. All disbursements are handled by the escrow agent, on the basis of
an escrow contract. A further important safeguard is the establishment of strict and
regular reporting procedures, so that the operator must provide timely information on a
regular basis to the investors and their representatives.
Sales Assistance
To facilitate the sale of the program to investors, we can assist in the creation of the
basic program documents, in the development of sales literature, in roadshows, in broker
training, and related matters. Our participation in this phase of the marketing effort is
based upon years of experience in working directly with brokers and other financial
intermediaries to market oil and gas programs.
As part of its services to North American oil and gas operators and its outreach to the
European financial community, IEN has held major Conferences in London and Edinburgh.
See Conferences.
If your firm would like to take a fresh look at oil and gas as an investment avenue, or if
you would like to expand your oil and gas involvement, or if you would like assistance
with an existing program, please contact us for a full package of information.
Click here to submit your information.
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