HOUSTON – The oil and gas industry fuels our cars, homes and, here in Houston, our economy. Hitting it big in the oil and gas industry is a dream for most Texans, and now there's a new offer for you to inch into the business. Crowdfunding for the oil and gas industry has now come to the Lone Star state.
For every Texan who has ever wanted to dabble in the oil and gas industry without a big commitment, David Taylor says he has just the thing -- crowdfunding meets the oil and gas industry.
Taylor co-founded Crudefunders.com, one of the first on the scene for this very new venture. He said the concept is simple.
"It's a crowdfunding mechanism for those wanting to get into the oil and gas fields," Taylor said.
Here's how it works: Research projects on Crudefunders.com to find where you'd like to invest.
Taylor said, "You can invest into a drilling project, you can invest into a producing company already, you can invest into a water company or royalties or productions."
You can choose an amount to invest between $1,000 to $5,000. Crudefunders pools your investment with other investors' money to fund a project. You get returns based on the success of that venture.
"Every oil and gas project is different, so I can't give an expected return, but it's typically much higher than any kind of stock market investment," Taylor said.
You have to be a Texas resident and Crudefunders invests in Texas-based oil and gas companies. Taylor said you could see returns in as little as 90 days. Crudefunders gets paid a success fee once the project is successful.
The company just launched but already several thousand people have registered on the site and are ready to invest. Taylor pointed out they have a highly qualified staff and deal with good companies.
"We invest mainly with experienced driller/operators, but they are more on the independent side," he said.
Crudefunders encourages its investors to get to know each other. There are events, parties, grand-prix trips and they even have an RV for investors to use to tailgate or to take to events.
Ed Hirs said oil and gas investing isn't all fun and games -- there are some things you need to know.
"You're estimating what the resource availability under the ground is," he said.
Hird has been in the oil and gas industry for more than 30 years. He's an energy economist at the University of Houston and the managing director of Hillhouse Resources, an independent oil and gas company.
Hird said the risks are the same with any other oil and gas investment.
"It is also going to depend on the quality of the underlying assets and quality of the management team," Hird said.
To minimize risks in investing in oil and gas, look for experience in the team running the project.
"They want to see a clear path to a return on their investment," Hird said. "They want to see straight-up accounting, they want to see a competent management team and a known basin that is productive."
Taylor said with oil prices down, it's a good time invest in oil. He said when the prices are low, production costs are lower.