Oil and gas investment is usually classified into two types: exploratory wells and development wells. Development wells are those in which oil and gas has already been discovered and are currently producing reserves. When making an oil exploration investment, this is the safer route. However, where the risk is greater so are the rewards, and that will also be true of your oil exploration investment.
Oil exploration investment allows for the opportunity to discover a large new reservoir that can yield short term and long term profits. Making oil exploration investment is investing in a budding project rather than joining something that is already underway. Oil exploration investment is a great strategy to diversify a portfolio, and the revenue can be extensive.
Choosing a Company for Oil Exploration Investment
It is imperative that the drilling program of an oil and gas company is considered when making oil exploration investment. The method of drilling predicts where the proceeds and earnings come from, and the overall drilling success rate is good indicator of future success. The company’s working interest and combination of wells is also something to keep in mind. There is a risk to exploratory drilling, and a company that is also supported by developmental wells has a better chance at increasing production.
Once you have decided to invest in the lucrative venture of oil exploration investments, it is also important to look at the reserve growth over time of an oil company. The net asset value (NAV) and the net asset value per share (NAVPS) for the company offer investors a clear price that is likely to be earned per shareholder. The NAV takes into account present value as well as future exploration and drilling prospects, as well as debts and securities. It is the best definition of what an investor can expect regarding oil exploration investments.
Oil exploration investments are an incredible opportunity to be a part of. It is expected that eventually a well will be fully depleted. The following course of action is to discover another well that can meet the high demand of oil and gas. Oil exploration investment is the frontier of oil and gas investing, and there is nothing more thrilling than striking black gold.