Are You Satisfied with Your Current Oil Investments?

If you are an accredited investor, you’ve likely seen the pitch decks. They arrive with promises of double-digit returns, massive tax write-offs, and "guaranteed" gushers.

For many, the entry point into oil and gas is purely tax-driven. You have a high-income year, you need a shield for that liability, and the Intangible Drilling Costs (IDCs) of a direct working interest offer a solution that few other asset classes can match.

But once the tax year closes, you are left with the investment itself. And that is where the satisfaction gap often widens.

At Basin Ventures, we believe that tax benefits should be the cherry on top, not the whole sundae. The core of the investment must be sound, transparent, and built on real economics. Unfortunately, the private energy space is crowded with "promoters" who rely on complexity and opacity to sell deals.

To navigate this high-yield, high-risk landscape, you need more than capital; you need a due diligence framework. Here are the red flags to watch for, and the three questions smart investors ask to protect their capital.

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The Landscape: Not All Barrels Are Created Equal

Before diving into the questions, it is critical to understand where you stand. Energy investing typically falls into four channels:

Public Stocks & ETFs: High liquidity, but no direct tax benefits. Your returns are often correlated to the stock market, not just the commodity.
Diversified Energy Funds: Lower risk due to diversification, but your capital is locked up for years with little control.
Royalty & Mineral Interests: The "mailbox money" approach. Stable and lower risk, but you miss out on the massive upfront tax write-offs.
Direct Working Interests (NOWI): The sweet spot for aggressive tax planning and high return potential. You own a piece of the well.

The Danger Zone: It is in that fourth category—Direct Working Interests—where the opportunity is greatest, but where the "bad actors" thrive. Because you are buying directly into a project, you are reliant on the honesty and competence of the people selling it.

The "Red Flag" Report

Unscrupulous firms know that most investors are not petroleum engineers. They rely on that information gap to pad their pockets before a single drill bit turns. Be wary of these common tactics:

The "Gold-Plated" Turnkey Cost: A promoter sells you a unit in a well based on a "$1M turnkey price." In reality, the actual cost to drill (the AFE) is only $400,000. They pocket the $600k spread immediately. You start the project with a massive loss, while they profit regardless of whether the well produces a drop of oil.
The "Guaranteed" Well: You might hear, "Our geologist says this is a can't-miss tip." In this industry, there is no such thing as a guaranteed well. Anyone telling you otherwise is selling a fantasy, not a project.
The "Boiler Room" Rush: "You must invest by Friday," or "Only two units left!" Legitimate energy projects operate on geological and engineering timelines, not high-pressure sales quotas.

The Investor’s Toolkit: 3 Questions to Ask

How do you cut through the noise and find a partner who operates with Integrity, Vision, and Precision? You ask the hard questions.

Next time you review a deal, ask these three questions. If the firm hesitates, walk away.

1. "Where do you source your deals?"

In the oil and gas world, the best deals rarely make it to the open market. They are transacted privately, often through phone calls between long-time industry veterans.

The Red Flag: Be wary of firms that claim to have a "proprietary network of geologists scanning the market." This is often code for "scraping public filings" or buying recycled deals that other operators have already passed on.
What You Want to Hear: You are looking for a firm with relationship-based sourcing. You want a partner who gets the call from top-tier operators before the deal hits the street, ensuring you aren't buying "picked-over" inventory.

2. "Who is actually drilling the well?"

This is the single biggest factor in the success of a project. A great rock formation can be ruined by a bad operator.

The Red Flag: If the answer is "we work with confidential partners" or "we are the operator" (when they are a small investment shop), run. "Confidential" usually means they are acting as a middleman and don't want you to see the real chain of custody. Small, inexperienced operators often lack the scale to handle cost overruns or technical challenges.
What You Want to Hear: Radical transparency. You want to hear the names of industry giants—proven, major operators (e.g., Devon, Continental, etc.) with the balance sheet and track record to execute cleanly.

3. "Who validates your geology/reserve reports?"

Every sponsor thinks their deal is a winner. But optimism isn't a strategy.

The Red Flag: If the answer is "our internal team of experts," they are grading their own homework. Internal teams are incentivized to sell deals, not kill them. Without an independent check, you are relying entirely on the seller's optimism.
What You Want to Hear: Independent validation. You want a firm that utilizes third-party petroleum engineers to audit the risk and reservoir potential. The data should be verified by someone who doesn't get paid a commission to sell you the unit.

The Basin Difference

At Basin Ventures, our process is built to find reasons to say "no." We screen hundreds of projects to find the few that meet our strict land, legal, geological, and financial criteria.

We don't hide the numbers. We believe that success in energy investing is built on transparency and alignment. We want our investors to understand exactly where their capital goes, who is drilling the well, and how the economics work.

So, are you satisfied with your current oil investment? If you aren't sure—or if you simply want to see how a transparent, investor-first model works—let’s start a conversation.

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Adam Butcher

President & Managing Partner

If you are an accredited investor, you’ve likely seen the pitch decks. They arrive with promises of double-digit returns, massive tax write-offs, and "guaranteed" gushers.

But once the tax year closes, you are left with the investment itself. And that is where the satisfaction gap often widens.