5 Fast Facts About The Current State of U.S. Exported Oil

5 Fast Facts About The Current State of U.S. Exported Oil

The U.S. shale boom has proved immensely successful as America continues to grow in the oil and gas market. However, as the trade war between China and the United States heats up, many are worried about whether or not the disputes will affect crude oil, especially oil exported from the United States.

Here are the 5 fast facts you need to know:

  • This Year Alone, China Imported 20% of American Crude Oil

China imported a total of 1.76 million barrels per day of crude oil through June. In fact, U.S. crude exports to China had risen to 15 million barrels in June, which was the highest volume since 1996.  In addition to importing a record-breaking amount of U.S. crude oil this year, China also bought 2.4 billion cubic feet per day of the 2.77 billion cubic feet per day of liquefied natural gas exported by the US.

  • America is Seeking to Force Iranian Oil Importers to End Purchases Completely

In June of this year, the U.S. said it would impose sanctions against all importers of Iranian oil by November. This was seen by some as a tough stance, and the trump administration has since softened, choosing to work with countries on a case-by-case basis. However, despite the leniency offered, the U.S. is still seeking to eventually end purchases of imported Iranian oil.

  • Although China Threatened to Impose Tariffs on U.S. Crude Goods, the Asian Country Ultimately Decided to Only Include Fuels on Their Tariff List

In response to the $50 billion in U.S. tariffs on Chinese imports (delivered June of this year), China had threatened to impose tariffs on the import of U.S. crude oil. This news shook the oil markets as China has been a principal recipient of American oil. Two months after the initial threat, though, China removed U.S. crude from its tariff list of goods.

  • Despite the Growing Tension Between China and the U.S., the U.S. Export Business Is Growing Rapidly

According to analysts, oil exports could grow by 1 million barrels a day annually over the next five years. And, liquified natural gas exports could more than double by 2020.

  • The U.S. is Gaining Momentum Despite Spats with China

In the next five years, the U.S. is expected to grow substantially into an energy exporting powerhouse. The country is estimated to rival oil exports from Saudi Arabia and become one of the world’s largest exporters of gas. And, these projections hold up regardless of the tension between the U.S. and China.

So, what does this new information mean for you?

With the revolution of shale oil production and its massive increase in domestic production, now is the perfect time to invest in U.S. oil and gas! Investing in U.S. oil is quickly gaining popularity as more people are paying attention to the amazing growth in the U.S. oil export business.

Contact Cannon Operating to learn more about the endless benefits of investing in current opportunities.  

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5 Things to Know Before Investing in an Oil Well

5 Things to Know Before Investing in an Oil Well

Oil is a money-making machine, and believe us when we say it’s never too late to diversify your portfolio and invest in a productive oil well. But before you take the plunge and dip into the oil industry, here are 5 things you should know.

Investing in an Oil Well Instead of Big Oil Can be More Profitable for the Investor: For those who are interested in investing in oil, big oil companies seem to be the safest and most profitable route. They have a reputation for doing well for themselves and for their stockholders, so you should invest in their company, right?

Not necessarily. When investing in big oil companies, so much of your money goes into the upkeep and overhead of the company itself, not into the oil. By investing in oil wells instead, your money is going toward very little overhead and a whole lot of black gold.

Being an Investor Doesn’t Make You Liable: Investing in an oil well gives you some sort of ownership over the operation, but you don’t have the accountability the supervisors of the well have. The only thing you are liable for is the money you lose or the money you earn — not any potential accidents that happen at the drill site.

So if this was a reason that made you apprehensive to invest in oil wells, you’ve got nothing to worry about.

Oil is a Commodity, So it’s Priced the Same Everywhere: The price of a barrel of oil is the same everywhere you go, but the amount of oil isn’t. Some wells will be full of oil, while others will only produce oil for a handful of years. For that reason, it’s important to know how reliable and successful the operator is at exploring for and finding oil.

Your profits rely heavily on how much and how long oil can be extracted from the well you invested in.

Investing in Oil Has Huge Tax Benefits: About 65-85% of your investment dollars will go straight to what is known as “intangible drilling costs.” These costs include things such as chemicals, mud, labor and grease, all of which are necessary to run a well-oiled machine.

Such a high percentage going to things that aren’t oil may seem a little risky, but you’re in luck: every dime spent on the intangibles is tax deductible.

Oil Investments Are a Great Way to Diversify: High oil prices are typically a huge reason for economic slowdowns, which could cause some volatility in the stocks you’ve invested in. However, at the same time your stocks may be underperforming, your oil investment will be well served.

On the other hand, when oil prices are low, the economic climate tends to pick up. Either way, you’ll be somewhat protected against either a rise or drop in oil prices.

Introduction to oil and gas (E-Book Version)

Introduction to oil and gas (E-Book Version)

Intro To Drilling For Oil

And Gas

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The Details Of Drilling

How do we choose where to drill in the first place?

The drilling capabilities of the present

Find out what is possible now that was not in the past?

The history of drilling: A journey to the yester years

Learn about the history of oil and gas

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SHOULD I GET RID OF MY STOCKS TO INVEST IN OIL

SHOULD I GET RID OF MY STOCKS TO INVEST IN OIL

The first thing to understand about investing in oil and gas is that it is a lot more volatile than investing in stocks. Stocks and low-yield, low -risks bonds are the most conservative way to invest. Stocks are equity investments that represents part ownership in a corporation and entitles you to proportionate part of that corporation’s earnings and assets. While Oil on the other hand is the most traded commodity in the world and has become an indicator of wealth for many countries.

Like every other investment opportunities out there, investment in oil as against investment in stocks and bonds has its pros and cons.

The stock market is one of the most conservative places to invest your money, though investing in stock can often become risky, ability to manage and mitigate against these risks, can help you take advantage of the stock market to secure your financial position and make money. Investment in the stock market as an asset class has an overall advantage for your investment portfolio.

An investment in stocks comes with a lot of benefits in the form of investment gains – the rise in the value of your stocks as a result of positive growth of the economy or market sector wherein you hold the stocks. Another benefit is income in the form of a dividend. This is an annual payment to investors and it represents profit earned in the fiscal year. These payments arrive even if the stock has lost value. Stocks can be easily liquidated in the event of cash crunch or the need to cut losses in a bearish trend.

The high demand for petrol and petroleum-based commodities backed by tax incentives offers a great investment opportunity for investors in oil. With advancements in crowdfunding technology and regulations. Investment in oil through crowdfunding platform can start for as low as $1,000 and some platforms have created a structure to pass through unique oil and gas tax benefits to the investor.

Investment in the oil and gas industry for individuals and small companies take different forms and risk/reward components. Investment portfolio in the oil and gas industry for small companies and individuals includes; mutual funds or ETFs, partnerships, royalty interest and working interest.

Mutual Funds or ETFs: This investment method poses the least amount of risk for the investor but it does not offer any of the tax benefits. Investors will pay tax on all dividends and capital gains, just as they would with other funds.

Partnerships: Partnerships in oil and gas investments can take several forms with limited partnership being the most common, this sort of partnership limits the liability of the entire producing project to the amount of the partner’s investment. They are sold as securities and must be registered with the Securities and Exchange Commission (SEC). Tax incentives are available on a pass-through basis. The partner will receive a Form K-1 each year detailing his or her share of the revenue and expenses. This sort of investment is direct and provides a stable base for investors looking at a minimal risk portfolio.

Royalty Interest: Refers to ownership of a portion of the resource or revenue that is produced. A company or person that owns a royalty interest does not bear any of the costs of the operations needed to produce the resource, yet the person or company still owns a portion of resource or revenue produced. Holders of royalty interest are not eligible for tax benefits enjoyed by holders of partnership and working interests.

Working Interests: This is the investment with the most risk and is the most involved way to participate in the oil and gas Industry. This sort of investment allows investors own a percentage ownership of the drilling operation, functioning as a form of lease, providing the investor a right to take part in drilling activities and a right to the resources produced from that activity. Along with deriving an income from the production of the resource, the investors are also responsible for a percentage of the expenses related to its acquisition. Investors with working interests are often eligible for certain tax deductions based on the operating costs associated with the business. This can include business expenses of a tangible or intangible nature, such as equipment costs, wages or utility payments.

Whatever your choice, a well-diversified portfolio will provide most of the benefits and fewer disadvantages than stock ownership or oil investment alone. This means you should have a mix of stocks, bonds and commodities. Research has shown that, over time, it’s the best way to gain the highest return at the lowest risk.

 

OIL COMMODITIES VS DIRECT OIL AND GAS INVESTMENTS, WHICH IS BEST FOR YOU?

OIL COMMODITIES VS DIRECT OIL AND GAS INVESTMENTS, WHICH IS BEST FOR YOU?

Investment in the Oil and gas sector is by no means a high risk/ high yield venture. Having the right information and knowing the right investment portfolio for you is the key to maximizing your investment and in some dire cases, the difference between making a killing profit and bankruptcy.

Investors have many options when getting involved with oil. These methods come with varying degrees of risk and range from direct investment in the oil and gas industry, to indirect exposure in oil commodities through the ownership of energy-related equities, futures and options.

Direct investment in Oil and gas involves the purchase of equity in any of the various physical businesses involved in the process of drilling through to bringing to market of refined crude Oil. There are distinct advantages of direct investment in oil and gas industry as opposed to the purchase of stocks of oil companies. Direct Oil and gas investments provide investors with an opportunity to diversify their portfolio and generate monthly cash flows while taking advantage of substantial tax benefits allowed by the US government. Each investor receives a share of the profits generated by the wells they own. In worst case scenarios where exploration hits a dry well, investors can recuperate their investment in a 100% total write off in losses.

There are several factors that encourages the direct investment in oil and gas: one of such factors is that the investor is more engaged directly in management of his funds and will get commiserate compensations in the event of success in the project unlike investment with public oil companies, where significant drilling successes tends to be highly diluted at the individual shareholder level.

In direct investment also, profit potential as a result of increase in the price of oil and gas is significantly higher due to fewer administrative layers. Even more so as the prospect of profit, so is the increase in associated risk. Many private oil and gas projects encounter mechanical and geophysical risk. To mitigate this risk, some investors may choose to build a portfolio of companies to spread their risk across a number of companies.

Indirect investment in oil commodities in the oil and gas sector refers to the purchase of energy-related equities on the stock market, through mutual funds / ETFs or a slightly direct method of investing in oil futures and futures option. All of these investments have their own risk/reward profiles. For instance an investor who doesn’t want to get into the complexities of directly investing in oil and gas companies but can’t resist the lure of the black gold or even if the purpose for investing is diversification, can purchase stocks of publicly quoted companies involved in exploration of oil.

Another way an investor can allocate a portion of his investment portfolio in the energy sector is through mutual funds or ETFs (Exchanged-Traded Funds). This allows the investor to buy into a basket of companies of energy companies and spread his investment in the entire energy sector, from the oil exploration, drilling, refinement, transportation and storage. The key is to find the low-cost and diversified energy sectors for your money worth. ETFs trade on a stock exchange and they can be purchased and sold in a manner similar to stocks. For example, buying one share of the U.S. Oil Fund (USO) would give you exposure to roughly one barrel of oil. ETFs, like the iShares Global Energy Sector Index Fund (IXC), and energy-sector mutual funds, like the T. Rowe Price New Era Fund (PRNEX) invest solely in the stocks of oil and oil services companies and these investments come with lower risk.

The purchase of Oil futures and Oil futures option is another way through which investors can invest in the oil commodities. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. Futures are highly volatile and involve a high degree of risk. Additionally, investing in futures may require the investor to do a lot of homework as well as invest a large amount of capital.

Deciding on what best suits you, will require you consult with financial services professionals in the energy investment industry. They can offer investment advise when they understand your expectation’s including your investment objectives, tax considerations, risk tolerance, liquidity and time horizons. Understanding your financial circumstances enables them to advise a strategy that would reduce the risks associated with investment in the oil and gas industry, while increasing your chances for success.

SHOULD I USE MY REAL ESTATE PROFIT TO INVEST IN OIL

SHOULD I USE MY REAL ESTATE PROFIT TO INVEST IN OIL

A good real estate investor understands the necessity for diversification of investment and one of the many investment prospects that holds good value and can serve as an inflationary hedge for your portfolio is an investment in oil. There has never been a better time to invest in oil with many experts advising that opportunities for investment in oil and gas today through 2018 are better than the opportunities in the real estate market bubble of 2008.  With an estimated, over $1 trillion in large project cancellations, the future demand for oil and gas consumption which continues to see a steady growth rate, are sure to be unmet, thus forecasting a rise in future prices.

For the savvy real estate investor, now presents an opportunity to branch out and hedge your investments by adding to your portfolio an investment in oil. Adding oil to your investment portfolio has been made easy through advancements in crowdfunding technology and regulations. Investment in oil through crowdfunding platform can start for as low as $1,000 and some platforms have created a structure to pass through unique oil and gas tax benefits to the investor.

These tax benefits are backed by an Act of Congress. The purpose is to provide incentives for investors who elect to commit private equity in the high risk/high reward nature of oil and gas production. It authorizes a binding, one-time election to expense intangible drilling and development costs, which permits an immediate write-off of expenditures that would otherwise be capitalized and amortized. In essence, there is waiver to cushion the effect of any loss that maybe incurred.

Direct investments in oil and gas projects provides for the investor outstanding tax benefits, steady stream of profits generated by the wells they own on a monthly basis and a strong hedge against inflation. Not only do investors in oil take advantage of short-term tax benefits, Investors may also see a near-immediate return on investment, whereas it could take decades to get the full tax benefit on real estate investments. For Instance, if an investor commits $100,000 in a property, he gets to deduct $3,636 per year. Receiving the full tax benefit would take nearly 30 years but that investment of $100,000 is in an oil and gas project with “intangible drilling costs” (IDCs), he can deduct up to 80% of his investment, or about $80,000 in the first year.  At a 35% or 39.6% tax bracket, this is equivalent to a 28% – 32% return in year one, even before the project produces oil and/or gas. He would also receive additional tax reduction benefits based on production values and depletion of the reserves.

Intangible drilling costs (IDCs) is the term used to describe all cost associated with the exploration of crude oil. Cost includes items like labor, drilling mud, fuel, wages, structures necessary to perform labor, and supplies, whether it is performed on the well, to drill the well, or on the ground surrounding the well. Think of it as all costs incurred that have no salvage value.

Benefits outside of tax breaks that an investment in oil will derive for the investor includes but are not limited to the following :

Quick Turnaround Time of Investment : An investment in real estate can take several years to determine if the investment is a success.  In contrast, an investment in a small oil and gas project like those proposed by crowdfunding platforms, will provide for the investor a time frame of between six months to a year to determine the success or failure of the project.

Diversification: Investment in oil and gas projects, serves as a good vehicle for diversification as it provides an inflationary hedge for your investment portfolio. It is most times independent of the bulls and bears of the stock market and returns from these projects are not dependent on the economy, as is the case for the housing market.

High Rewards: Direct investments in oil and gas projects can pay off big and has the capacity to break even several times over if the well is productive. This result of this is steady cash flow from distributions for many years.

Ownership of crude oil at the point of extraction can be a very lucrative addition to your investment portfolio, going by current prices and forecast of increased demands backed by the promise of Tax benefits, investment of profits from real estate in Oil is a very good bet.