Why Futura's Pre-Producing Royalty Acreage?
Investors in the oil and gas industry have always played a game of risk as it relates to reward. A high risk with a low reward project is a foolish enterprise. We believe the oil and gas industry provides an opportunity unlike any in the investment world. We have all heard about successful oil and gas men who created a name for themselves by being in the right place at the right time. Yet, being in the right place at the right time is a very expensive proposition. Overhead, marketing, salary and investment risk costs make or break the smaller companies, and the big boys in this business have to look for serious reserves in order to strengthen the bottom line. If an oil and gas investment is so peculiar and unique, why does it take so much money, time, and risk to invest in the industry successfully? Why should all investors put their eggs in just one basket when it comes down to participating in a drilling deal? Why would you want unlimited liability, additional assessments, and the headache of having to trust someone who typically has no vested interest in the great project they are selling you? At the same time, the other extreme of this equation entails purchasing a lower risk/lower reward investment, a safety net of income through a producing property that may affect you in a different way. Unless you find great producing properties with many wells and great operators, you may find yourself having to wait many years for your investment capital to be returned to you, and then you’ll start making a profit. In most cases, producing properties are sold when people want to cash out after the first number of years of virgin production expire. You do not want to end up buying a declining asset that will not beat inflation. To Futura, L.L.C., both of these scenarios, while different in nature and with different levels of risk, do not provide the best possible opportunity to participate in the great profit potential the oil and gas industry has to offer.
Now, let’s take away all the liability, all the additional capital contributions, and let’s add a great operator and driller in a superb field, and you will find more converts. Furthermore, what if your investment amount were to be ten percent of what you typically invest in these oil and gas projects? And what if your one shot became a multiple well project where you are the new royalty owner, who gets paid before expenses? When others put their money where their mouth is, and in the millions, then we start looking much closer.
Now, let’s suppose you did not have to wait five to seven years to recoup your investment, as you do in most producing properties without virgin production, but you had access to initial production from day one? What if your payout time has the possibility of being reduced to under a single year instead of multiple years? We believe that the opportunity to participate in pre-producing royalty acreage offers the best opportunity in the industry to investors both big and small, who believe in diversification and research and don’t want to make one percent a year in money market funds.
What exactly is royalty acreage? First of all, a net royalty acre represents an acre among many in a piece of land for the purposes of oil and gas exploration in unitized fields (the use of land here only applies to exploration and development of hydrocarbons, not hunting or real estate investments). When a unit is in place and a well is permitted at the parish or county courthouse level, all royalty owners participate in a percentage of the revenues of the unitized field for a prescription period. In Louisiana, where we hold our current acreage, there is a long prescription period dating years. While we enter a royalty purchase for the sake of perpetuity, if the best independents drill but do not find commercially producing wells, royalty acreage owners have a ten year period of ownership. If a well is commercial right away and it produces for twelve years, at the end of that period of time the owner’s prescription period starts anew from day one of year one. An overriding royalty expires with the last production of hydrocarbons. Royalty acreage is more advantageous than an override because once production comes to an end, the prescription time begins again. This is what we call serendipity.
For purposes of Lousiana royalty acreage ownership percentages, we must keep in mind the number of surface acres in the unit. If we have a five hundred acre unit, our economics are based on this number being multiplied times eight (for the total number of acres) and then you divide the number of acres purchased into the total number of acres. For example, a purchase of ten acres in a five hundred acre unit would give the investor a percentage participation of .00250000 in the said unitized field (10/500 x 8=10/4000=.00250000). Futura, L.L.C., by keeping ten percent of all royalty acreage, is in the same position to enjoy the benefits of well-researched investment opportunities in what we consider the most streamlined way of participating in the oil and gas industry.
Investors are paid monthly by the operator of the wells, the companies we do business with are experts in their area and are well connected, which gives our investors a very short, usually in days, turnaround period on their conveyance deeds. Because more and more trusts are acquiring producing properties, the market for royalty purchasers keeps on growing. This is a benefit to royalty owners who have the option of either keeping their royalty in the family or selling it to these organizations. We also provide an extensive group of experts who buy royalty acreage for themselves and help us bring our clients the best possible projects. Once all is said and done, risk and reward must come together. This is never as apparent as the kind of estimated reserves to be drained and the strong potential return on capital these projects offer investors who are savvy enough to start paying less and getting a bigger bang for their buck on a project by project basis. Through estimated reserves and research, we typically will not commit to a project lacking a potential many times our invested capital in returns.
Back To Top
|
| 
Latest Industry & Financial News
|
|
