Fusion Oil Reduces America's Dependence on Foreign Oil
by Malcolm Katt
June 2008
This is a sponsored article. Investor Concepts is not responsible for the claims made by this article. Please seek the advice of financial professionals before making any investment.
As the world's largest economy, the United States is naturally the world's largest consumer of oil. Currently, the U.S. imports almost 60% of its oil from foreign countries. Most of these imports come from OPEC countries, six of which are in the volatile Middle East. For forty years our energy demand has grown at a sustainable rate of 2 percent annually to a current estimated usage of 18 billion barrels of oil per day. According to the U.S. Department of Energy, our energy demand will be 30 percent higher by 2020. As startling as that reality may seem, it is always the here and now the hurts the most especially with gas prices nearing $5.00 per gallon. As of this writing, oil and financial analysts expect oil prices to exceed $200, even $300 per barrel in the near future. Our dangerous reliance on foreign oil can be diminished by increasing our domestic production as much as possible, and the easiest, most effective means of executing this strategy is to explore oil reserves in our own backyard.
When discussing crude oil and gasoline prices in the U.S., the public needs to be reminded of these facts: Political upheavals (not just war), weather (such as hurricanes shutting down production in the Gulf of Mexico), supply and demand factors, and refinery and pipeline outages all can greatly influence what goes on at the trading floors.
As any astute investor knows, it is extremely difficult during these times to find financial opportunities which provide both security and a solid return on your hard-earned money. Conventional investments in CD's, savings accounts, money markets, mutual funds, stocks and bonds, etc. are currently bringing very unsatisfactory returns and, according to the Wall Street Journal and other well-known financial publications, prospects for performance improvements in the near future are not good. With even the best performers projected to provide an annual return of 8 percent or less, the average investor will realize much smaller returns than this.
One key to better returns is to diversify your portfolio to take advantage of opportunities which have excellent risk-to-reward ratios while still maintaining your personal and/or family financial foundation. One should not be satisfied with the meager returns of CD's, passbook savings or money market accounts, and with the thousands of mutual funds available, it takes a financial genius to pick the right fund in the right sector. Crude oil prices are driving up profits to levels never seen before in both large-cap oil companies and small-cap companies. Another group that is reaping the benefits of high oil prices is the individual investor. Prudent investment in sound, well researched oil and gas drilling programs, though still considered high risk, may offer a significant monthly cash flow from the sale of production from oil and gas wells, and very significant tax advantages as well.
Tax Benefits
Each investor is treated as a business partner for tax purposes, generating substantial tax benefits which flow directly to individual investors. Investors may receive tax deductions totaling approximately 75 to 85 percent of capital contributions in the first year, with the remaining balance written off during subsequent years. For most investors, percentage depletion and depreciation of tangible equipment costs are available to shelter ordinary income at rates of up to 50 percent of cash distributions in the first seven years and 30 percent thereafter. The drilling program also shelters passive income.
In other words, tax deductions obtained from intangible drilling and development costs (as well as depreciation of tangible costs) may be used to offset the investor's taxable income from other sources. Also, a portion of the investor's taxable income generated by the drilling program may be reduced by deductions from depreciations and percentage depletion allowances.
Drilling Partnerships
There is nothing more lucrative right now than holding an oil and gas interest, and independent drilling companies are taking advantage of the individual investment capital floating around in the market. Drilling partnerships are being advertised on the radio and have become prolific across the Internet.
"All that is required is an initial investment of $52,000 and you could see returns of $6,000 per month for the next 20 years."
The risk lies in your business partner. Namely, your drilling partners. Some companies offer partnerships in what they call low risk wells. They'll go drill new offset wells in fields that are already producing, thereby lowering the chances that they'll end up with a dry hole.
They may offer you a 1% working interest in the well(s) for anywhere between $10,000 and $80,000 up front. Depending on the program, this is just to drill the hole. After they log the hole and convince themselves it's worthwhile to finish, they'll come in and complete the well. At that point in time, they'll ask you for more money. In this case, 1% of whatever it costs to complete the well.
Some things you want to look at when considering a drilling partnership are the fee allocations for the partnership. One partnership I looked at allocated 15% of the initial capital to cover finders fees, initial management fees, organizational fees, etc. In short, you'll never see a return on that 15%, resulting in a longer payout period.
On top of that, one prospectus I looked at offered a 1% working interest, but the NRI (net revenue interest) was only 56%. This means that you only receive 1% of 56% (or a net of just over 0.5%) of the production, but pay a full 1% for the operational costs and expenses. Conveniently, several other "industry partners" were taking an overriding NRI right off the top, not to mention the land owners take. This means that the said "industry partners" are not required to pay expenses, even though they take 44% of the production.
Some tips:
1. Always know who you're partnering with. It's a business venture after all.
2. Make sure the game is played on a level playing field. Would you want your business partner to get a hefty chunk of the proceeds yet pay no expenses?
3. Get a history synopsis from the driller. How many wells have they drilled in the last 10 years? How many were dry, and how many are still in production? Which ones are close to the proposed drilling site for the partnership?
4. Get a list of all the players involved. Do they contribute to the partnership?
5. Have an oil and gas attorney, as well as your financial planner look over the offering. Is there some fine print you're missing?
Be picky, and educate yourself before mailing in your check. Talk to some clients and see what their payout time frame has been. And only participate with business partners who have a vested interest in succeeding!
America's First Gusher
North America’s first oil gusher blew at the Spindletop field near Beaumont in southeastern Texas, spraying more than 800,000 barrels of crude into the air before an ambitious wildcatter by the name of Michel T. Halbouty captured the black gold. The strike boosed s the yearly oil output in the United States from 2,000 barrels in 1859 to more than 65 million barrels by 1901. Mr. Halbouty became a millionaire many times over and has since gone down in oil industry history.
Fusion Energy Group
Over one hundred years later, Texas continues to boast astounding crude oil and natural gas reserves. One such business partner capitalizing on the America’s Southwest oil reserves is Fusion Energy Group, LLC of Dallas, Texas. With over 50 years of experience in the oil and gas industry Fusion has five major projects online, ranging from production wells such as the Triple-7 and the Double Diamond 1A, to others nearing completion or waiting to be drilled. One current project (Kurtz 1) is even accepting a small amount of new partner participation. With a primary focus on America’s historically plump oil fields in Texas, Oklahoma and Kansas, Fusion’s five active projects are today taking rigs to reservoirs that not long ago were considered too difficult and too expensive to extract from.
Today’s oil wells are drilled two miles down and sometimes farther. Fusion drills deep, but never more than two miles out horizontally from known reservoirs, a policy that significantly lightens risk. And while the company drills discovery wells, that is not the same as wildcatting, which is the practice of drilling in uncharted territory, i.e., far from known deposits. With geologic expertise, Fusion only takes a direct participation in drilling wells in proven locations thereby reducing risk and increasing accuracy of its oil discoveries.
The successful oilman of today must smell oil through a combination of geological technology and instinct. The kind of science Fusion does is truly cutting-edge. It includes revolutionary sub-surface geology, airborne gravity surveys, magnetic satellite imaging and high-resolution 3D seismic surveys. While such technology helps put the drill on target to a rich strike, there is never a guarantee. Nevertheless, Fusion’s client list is growing fast, and ranges from groups of investors to individuals.
Fusion Energy Group LLC is among the elite class of Texas oil firms. The company has been blessed with a history of success and satisfying partnership holders. As it rides the wave of increased demand and shrinking supplies for oil, Fusion Energy is a Texas oil outfit in the right place at the right time.
For more information about Fusion Oil please visit www.fusionoilllc.com.