The Various Ways An Investor Can Get Into Oil Investments Business

shares |

By Olive Pate


Oil business is a lucrative venture to some traders as they have made a lot of money from this sector. This commodity is the most demanded commodity as the commercial sector cannot survive without it. Half of the plastic products are made of petroleum and almost half of the worlds industries are driven by oil related by products. So oil investments is an attractive venture to many business men.

Many investors will approach the oil market from different angles, some will want to invest in this sector for just a short period of time, and these are investor with short term goals. This approach does not need heavy initial outlay and it is suitable for traders who are not financially sound and do not like taking risks.

The investors with such goals only need to purchase stock from any oil company, there is no direct participation. Also there are those investors with long term goal in mind. They are risk takers and are not worried of price fluctuations as their ultimate goal is to expand their firms. They require huge capital investment and they go for a period of more than five years.

Many investors choose not commit all of their fortune at once in this market and instead purchase shares bits by bits as the price of stocks stabilize. The investors can use any of the following brokers, the bullish brokers or bearish brokers. There are few techniques an investor should use to evaluate their projects viability.

One of these technique include payback period, which solutions the issue of how long it will take for an investor to get back money invested. Then there is the net present value technique which takes into consideration time value of money. It equates future cash flows to present value and matches it against the initial cash outlay. If the resultant figure is positive and greater than one then an investor can go ahead and invest.

It is advisable for investor to first learn of risks an industry is exposed to before they undertake the venture. There are general risks which a stock is exposed to and such risks include management risk and unfair dealings in stock markets. There exist more serious risks that affect the industry as a whole.

The common entry point to this sector is through acquisition of oil company stocks, acquiring interest in limited partnership companies, acquiring interest in a lease contract, purchasing royalty trust stocks and lastly by acquiring gas and oil royalties from mineral owners directly.

Law interpretation in different countries differs a lot, and their drilling regulation also differs. So when a company is extracting oil abroad political risk increases. These companies will tend to prefer states with political systems that are stable. Though some companies give a blind eye to regulations and laws and go to any state with oil reservoirs. The other risk is geological risk, oil reservoirs are not easy to find as the existing ones are tapped into already, and if not tapped into they are about to be.

.




About the Author:



Related Posts

0 komentar:

Post a Comment