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I know a guy in the financial newsletter business who sells his subscribers’ names to an oil investment boiler room for something in the neighborhood of $800 a name (and he’s not a very famous newsletter guy, so stop guessing).

The boiler room has been shut down by regulators in two states, but it thrives today.

Why wouldn’t it? Oil investing has to be easy as pie today right?

Not a chance. The big guys are way too expensive and you have to tie up a ton of money to cash their so-so dividends.

So, I thought I’d run a few tips buy you about how to avoid getting scammed by the slick con men who are pitching mini oil deals today.

These tips are right from the SEC, which has likely seen every investment scam in the world.

FRAUDULENT SALES TECHNIQUES

Fraudulent oil and gas deals are frequently structured with the limited partnership (or other legal entity) in one state, the operation and physical presence of the field in a second state, and the offerings made to prospective investors in states other than the initial two states. Thus there is less chance of an investor dropping by a well site or a nonexistent company headquarters. Such a structure also makes it difficult for law enforcement officials and victims to identify and expose the fraud.

BOILER ROOMS & INTERNET PITCHES

In order to attract the interest of potential investors, unprincipled promoters frequently use the Internet and “boiler room” offices with banks of phones manned by salespeople with little or no background in energy exploration, but plenty of experience in high-pressure sales.

Their techniques include repeated unsolicited phone calls to members of the public, hyping the profitability of the deal. Some swindlers use professionally designed brochures.

Beware of unsolicited oil and gas promotions on the Internet and through e-mail. State securities regulators caution potential investors to beware of the following claims in a typical high-pressure sales pitch, whether through unsolicited telephone calls or e-mail messages:

• You will have an interest in a well that cannot miss;
• The risks are minimal;
• A geologist has given the salesperson a tip;
• The salesperson has personally invested in the venture;
• The promoter has “hit” on every well drilled so far;
• There has been a tremendous “discovery” in an adjacent field;
• A large, reputable oil company is operating or planning to operate in the area;
• Only a few interests remain to be sold and you should immediately send in your money in order to assure the purchase of an interest;
• This is a special private deal open only to a lucky chosen few investors.

Finally, let’s close today with a quote I pulled from a Forbes piece that was penned by Donald H. Straszheim, vice chairman of Roth Capital Partners in Los Angeles

“It has been almost 35 years since the first oil shock in October 1973. At that time, OPEC raised oil prices from $2.71 per barrel to roughly $8 per barrel…”

And, yup, this one is a fresh quote. It’s from the May 28, 2008 Forbes.

The line that finishes Straszheim’s quote is

“and we still don’t have an energy policy. What’s the hurry?”

Have a great weekend.

Andy

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

Source: Have I Got an Oil Well For You

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