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Oil & Gas Risk Categories
The various types of Oil & Gas activities in our industry and potential risks involved are shown below.

HIGH RISK: Drilling new exploration wells.
These are also referred to as "wildcats". These are wells that are drilled in unproven areas and have a high degree of risk as many result in being a dry hole. These types of ventures can have substantial returns when successful.

MODERATE RISK: Drilling development wells.
Oil & Gas wells that are drilled in the close proximity of an existing producing well are considered developmental wells. The drilling, of a well, where the operator is attempting to determine in which direction the oil formation is going, is considered a "step-out" well. In the Moderate Risk category there are also "Infield" wells which are wells that are drilled in between two or more oil wells.

MODERATE RISK: Re-entering old wells.
This type investment could yield a large return on investment with lower risk because we can look at the original drilling data, which shows us if there are hydrocarbons at specific depths of the existing well (bore-hole).

LOW TO MODERATE RISK: Reworking existing wells.
The returns and risks of this type investment vary from project to project. A successful re-completion of the well into another shallower pay zone, largely depends on the accuracy of well records and condition of the well and equipment. However, if all the information is correct and the equipment is in working condition, then this investment could yield a substantially large return fairly quickly. Why? Two reasons: First, you get to see what the well holds prior to investing cash into it; and second, someone else paid to drill the well and you are not investing nearly the cost of a new well to enjoy the production from a newly completed pay zone. And it only takes one good pay zone to make a great profit. Some wells produce for more than 20 years!

VERY LOW RISK: Purchasing existing production.
This type of investment carries the lowest risk at a very high cost and the slowest return. This is where an investor is buying into oil and gas wells that are already producing. Consult with a certified petroleum engineer on this type of investment before buying an interest in it to confirm the remaining life of the production. These wells may also require maintenance and occasional repairs.

Historically, Oil & Gas activities have always been considered a risky industry, and rightfully so. Although today's Oil & Gas industry still carries some risks, advances in new technologies has helped mitigate these risks tremendously. The proper management/ balance of your Oil & Gas portfolio can have a positive impact on increasing your returns by lowering the risks.
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