By Adam Wilmoth
Business Writer
Increased drilling activity and soaring profits over the past three years have led business people, companies and investors back to the oil patch in a way not seen in more than two decades.
The activity has bolstered the Oklahoma economy, poured billions of dollars into state and local coffers, created thousands of jobs and distributed royalty payments to land and mineral owners throughout the state.
It also has led crooks and con artists back to the state.
Oklahoma City author John Orban III recently updated his 20-year-old book "Money in the Ground” to help potential investors, land and mineral rights owners and others related to the oil and gas industry better understand how the industry works and how best to profit without losing it all.
"The idea was to try to make this business understandable for someone who, either because of culture or geographical differences, wouldn't know a lot about it,” Orban said. "Right now the hot areas seem to be investors getting prospects pitched to them left and right and land owners who are all of a sudden getting calls from land men or oil companies wanting to lease their minerals.”
Besides the loss of money, scams and poor investments cost the industry, Orban said.
"I see it as a huge problem,” he said. "Think of what good things could happen with $3 billion skillfully invested in the upstream oil and gas business. But if it is going into little piddly wells or just directly into somebody's pocket, it makes the industry look bad and it hurts legitimate operators' ability to raise money.”
Orban said potential oil and gas investors should be cautious before spending money on a well or project, especially if they have little or no knowledge of the industry.
• Invest only with people you know and trust.
"I knew a lady who invested $30,000 because her daughter's dentist's dental hygienist recommended it to her,” Orban said. "Wouldn't that be a red flag right from the start?”
Another investor lost $2 million to someone in another state whom he had never met.
• If it looks too good to be true, it probably is.
The best prospects will be funded by people already in the oil and gas industry, Orban said. Generally, the prospects with the least likelihood of success are the ones marketed to strangers and the general public.
"If it's not good enough for the industry, it's not good enough for anybody,” Orban said. "The things that are being marketed to guys in Florida or Southern California or someplace else with little or no connection to the oil and gas industry are those that have not met the scrutiny of the marketplace. Geologists talk to geologists, and landmen talk to landmen. If a project is looking for money way, way outside what we would consider to be the oil patch, there must be something wrong with that deal.”
•Get a qualified second opinion.
"When it comes to evaluating a deal, you really need to have consultation with somebody who knows what's going on,” Orban said.
Oklahoma City mineral law attorney
Tim Dowd has said people with little or no direct knowledge of the industry would be better off buying stock in a publicly traded oil and gas company rather than purchasing individual interests in the wells.
Orban agreed with the advice, but pointed out that not all public companies are safe bets. Even legitimate companies carry risk, he said. Commodity price drops, dry holes and various other problems can cause a publicly traded stock to lose value.
[4 hrs ago]
