A joint partnership in an oil and gas drilling project in Texas
Friday, February 15, 2008 | Gene Eplett Is this Spam?This was both the worst and best investment I ever made. I invested about $260k in the first well and it proved to be a dry hole. Since the money had come from my IRA, I couldn't even enjoy the tax deduction for the loss, except that I didn't have to PAY taxes on the funds drawn from the IRA, of course. So it was a net zero return on investment. $0 back for $260,000 invested. Can't think of anything worse than that, can you?
The second well I invested $200k in (yeah I did it again right after the first one) struck both oil and gas. Each of the partners had to put up another $40k after the well was 'proven' in order to condition it for production. And not long after that, we had another assessment of $14k to lease the land and lay the pipes for the pipeline to get the 'product' to market.
That well is now producing at a rate of about $20k/mo for each full partner of which I are one. It is projected to continue at approximately that rate over the next 5 years or so, if other wells in the same field are any indication (although production will fall off a bit over time).
So, very likely at least $1 mil return on a fully tax deductible $254k investment! Not too shabby. Not fabulous given the earlier $260k loss, but still.......
