Investing in Oil and Gas Royalties
The oil and gas business is one of the most lucrative businesses in the world, and it is also one of the riskiest. There are many reasons why our business is risky. Some of these are: poor projects, lack of diversification, lack of integrity in whom you're doing business with, and, most importantly, lack of an investment strategy. However, we believe there's an opportunity to participate in our business the right way and have increased odds of generating profits and monthly income.
The oil and gas business has evolved, and companies nowadays are technologically savvy and geologically conservative. Risk management and optimal production are priorities for them: if you don't diversify in this business, you may not survive. This business, as many others, relies on figures: it is all a numbers game and diversification indeed is a great part of the strategy.
To hypothetically illustrate our strategy, we have broken down 20 projects on Table 1. 50% of our wells are dry (we may have less dry holes, but we may want to catalogue mediocre ones as dry) and the other 50% are a combination of decent and great wells. There is a possibility of having three or four dry holes in a roll. Committing to a strategy and implementing that strategy is the key to generating profits in the oil and gas business.
| Well Name | Percent Return |
| Well #1 | 15% |
| Well #2 | 0% |
| Well #3 | 0% |
| Well #4 | 15% |
| Well #5 | 5% |
| Well #6 | 15% |
| Well #7 | 0% |
| Well #8 | 0% |
| Well #9 | 0% |
| Well #10 | 10% |
| Well #11 | 15% |
| Well #12 | 0% |
| Well #13 | 0% |
| Well #14 | 5% |
| Well #15 | 10% |
| Well #16 | 0% |
| Well #17 | 35% |
| Well #18 | 0% |
| Well #19 | 5% |
| Well #20 | 0% |
| TABLE 1*
| Pool of Wells for 2004 |
| 15% | 0% | 0% | 15% |
| 5% | 15% | 0% | 0% |
| 0% | 10% | 15% | 0% |
| 0% | 5% | 10% | 0% |
| 35% | 0% | 5% | 0% |
6.50 % Total Return of Investment Each Month
X 12 Months
78.00% Total Yearly Return of Investment
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*These are hypothetical results. Actual results may vary. There is a substantial risk of loss in oil and gas investing.
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Table 2 shows a hypothetical year-over-year development of our strategy. Table 3 presents the difference compounding makes if such results come to fruition. Our main goal, after successfully implementing a multi-well strategy, is to allow clients to reinvest their gains and play with the proverbial house money. This strategy limits out of pocket expenses and gives the client a prospective finish line. Once the client has enough monthly income to reinvest, return on investment increases and so does the underlying value of the asset. Regular reinvestment of capital is required to offset price and production declines in existing wells.
TABLE 2* - Yearly Return By Income Per $1 Invested
| |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Return Total |
| 2004 Portfolio | $.78 | $0.62 | $0.50 | $0.40 | $0.32 | $2.62 |
| 2005 Portfolio | - | $0.78 | $0.62 | $0.50 | $0.40 | $2.30 |
| 2006 Portfolio | - | - | $0.78 | $0.62 | $0.50 | $1.90 |
| 2007 Portfolio | - | - | - | $0.78 | $0.62 | $1.40 |
| 2008 Portfolio | - | - | - | - | $0.78 | $0.78 |
| Total Money Made Each Year | $.78 | $1.40 | $1.90 | $2.30 | $2.62 | $9.00 |
TABLE 3* - Yearly Return By Income Compounded Each Year Per $1 Invested
| |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Return Total |
| 2004 Portfolio | $.78 | $0.62 | $0.50 | $0.40 | $0.32 | $2.62 |
| 2005 Portfolio | - | $0.61 | $0.49 | $0.39 | $0.31 | $1.80 |
| 2006 Portfolio | - | - | $0.96 | $0.77 | $0.62 | $2.35 |
| 2007 Portfolio | - | - | - | $1.52 | $1.22 | $2.74 |
| 2008 Portfolio | - | - | - | - | $2.40 | $2.40 |
| Total Money Made Each Year | $.78 | $1.23 | $1.95 | $3.08 | $4.87 | $11.91 |
*These are hypothetical results. Actual results may vary. There is a substantial risk of loss in oil and gas investing.
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We believe clients should understand the two investment phases we outline in our strategy.
PHASE 1: Follow a strategy of investing your money in as many projects as possible. Understand that you are implementing the plan. Know this is necessary for us to get to PHASE 2. It is not prudent to choose projects at will or whim, nor is it wise to invest too much in one particular project. We believe that you should allocate the same amount of funds to every project.
PHASE 2: Follow a strategy of reinvesting your monthly income from previous projects. Understand that you are implementing the compounding part of the plan. Diversification is a major key to success.
Futura, L.L.C. buys out landowners of their mineral rights. We become royalty owners in properties where the successful E & P companies are either drilling or about to drill wells. We don't drill wells. We invest in wells. The following are some of the top reasons why we believe owning pre-producing royalties is a superior investment to other oil and gas investment alternatives.
1. Absolutely no liability, no additional capital contributions or assessments
2. Attraction of discounted pre-producing pricing of royalty acreage, producing properties are typically divested for at least 36 months cash flow. Existence of growing secondary market for producing royalties as a possible exit strategy
3. Participation in initial virgin production, with a multi-year prescription period
4. Direct ownership of mineral royalty acreage. Transferability of assignments and a very quick turnaround on conveyances
5. Access to the best possible royalty acreage at the best possible price
6. Risk/reward ratios are well within conservative investing principles
7. Access to the best possible operators. Professional expertise and ground floor entry into generally considered industry projects
8. Royalty owners are paid first from pre-expensed revenue, directly by the operator, much like preferred stock owners
9. Opportunity to diversify holdings due to extremely low initial investments
10. When it comes to production, everyone is on the same side of the fence
We believe anyone should be able to participate in our business the right way. Having affordable investments allows investors to diversify. Futura, L.L.C. is probably the only company that encourages its clients to purchase a project in the $1,750-$4,000 range, compared to those whose minimum investments are $25,000-$50,000+ at a time. If a client is committed to this strategy he will realize he is participating in as many as 20 projects for cents on the dollar. Typically all the money required to participate in these 20 hypothetical projects will just about cover one with any other company in the business. Why? The answer is simple. Companies would rather deal with bigger sums of money and a smaller number of clients. We couldn't disagree more.
The oil and gas business is experiencing steady price increases as a result of unprecedented global demand for energy. China, India, and many other undeveloped nations with billions of people are now buying cars and other goods, clamoring for what we've enjoyed in the west. These economies are now importing large amounts of oil and gas.
We base our business decisions in the long-term performance of ALL our projects as an overall investment, and not just any one of them. We screen, select, and own all of our projects. We hope this brief summary sheds light on our strategy and why we believe those who pride themselves in risk and budget management will find our projects to be a suitable vehicle to enhance the performance of their alternative investments.
This essay is for information purposes only and is not an offer to sell an interest in any program of Futura, LLC, nor is it a solicitation for such an offer. An offer to purchase an interest in any program of Futura LLC can only be made pursuant to delivery of an applicable private placement memorandum. This is not a private placement memorandum. Before one purchases an interest in any program of Futura, LLC one is encouraged to read the entire applicable private placement memorandum.
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