Investors should only invest in oil and gas private placements or direct participation projects if they understand or learn how to implement a deliberate plan to minimise risk while clearly understanding a likely and reasonable risk/reward ratio. Investors need to accept the overall risk they must take to get the upside they need to justify taking the risk in the first place.
I think it's best to use a check list when investing in oil and gas projects. Investors should know that almost every step of oil and gas development involves technical problems. Deals take time to develop and come to fruition. In fact, it can take up to two years before investors can see a big return on their money.
Investing in oil and gas isn't for people who don't need the tax benefits or who think they'll get steady, fixed rates of return each month as soon as they start investing. The only time I know of an exception is when you find an oil and gas investment that is already almost fully funded and is starting to do well when you find it.
I think it makes more sense to put your money into multiple well-drilling programmes with people who control or run their own deals than to give your money to a company that wants to test a new drilling site.
If you want to invest in oil and gas, you should start with the stock market, where you can buy and sell public stocks on the bigger exchanges and your money is usually safer.
