You don't have to be rich businessman, or a wildcatter, to profit off of oil exploration. There are investment opportunities that will give you access to the companies that are on the front lines of oil exploration. Below is a quick guide explaining why investing in frontline oil exploration can be so profitable, as well as where to look for your investments.
Why Oil And Gas Investment Companies
The advantage to investing in these companies is that you have the chance to turn a significant profit. The supermajors (the big companies that are the global leaders in oil production) are not going to skyrocket in price after striking one hot well. They are billion dollars corporations with upstream/downstream concerns, and interests all across the globe. The very reason that they are safe investments (they are diversified) makes them a conservative choice. You are unlikely to see an investment crash, but you are also unlikely to see your investment grow exponentially.
Any small drilling company that is working in an area such as the Permian Basin has a much greater chance to become a hugely profitable investment. The smaller a company (the smaller its market cap), the greater growth it can achieve.
What Areas You Should Look At
As mentioned, the Permian Basin is a great place to invest in. The Basin in located in the United States, so there is little chance of political upheaval (which can be an issue in other oil rich areas such as South America, The Middle East, and Ukraine). This area is ripe for oil exploration even though it has been producing steadily for years. A recent study estimated that there could be 20 billion barrels in the location. The safety of the Texas region, coupled with the belief in the geological community that the area has much more to produce, makes it the perfect place to invest in.
How To Invest
The tricky thing about investing in local oil exploration firms is that the research can be difficult. When you invest in large cap companies, you can be a bit relaxed about the due diligence because they are billion-dollar companies with a long history. However, investing in small drilling companies requires lots of research. The easiest way to deal with this is to choose an oil and gas investment company. They will have done all of the research for you and you can rely on their experts who are knowledgeable about the industry. Otherwise, you would have to spend hours poring over company reports and reading geological findings. It's a much simpler and easier way to invest in these small cap companies.
Share