One of the investments that Clark Weeks likes are small oil wells. There are advantages over investing in the stocks of large oil corporations such as Exxon, Shell, BP and others.
There are also oil support companies like Halliburton, Baker Hughes, Schlumberger and many more but buying their stock has similar issues to the oil producers already mentioned. Because the oil market is fairly volatile, the stock price can be fairly volatile because oil prices can be fairly volatile. Then there is the danger of a major oil spill which increases the investment risk.
If you like risk, you could always trade on the futures market buying options if you feel you have an inside track on where prices are going but that is very risky and not something that most advisors would recommend for their clients.
Clark Weeks Sees Benefits in Small Oil Wells
While someday we may move away from oil to renewable energy, that is a ways in the future. In the meantime oil will still be in demand.
These investments should only be for qualified investors who have the assets and income to handle the risk involved. This is not for the person looking to make a small investment or one looking for a low risk investment. However, there are ways to reduce the risk.
Oil Well Risk Reduction
There are several ways to approach drilling. One is known as exploration which is looking for new oil or gas fields. This is the riskiest strategy but can have a huge payoff. This is not the sort of investment that an expert like Clark Weeks or other advisors would recommend.
Then there is developing fields where you drill near proven reserves with the hope that they extend to where you are drilling. This is less risky but still not for most people.
Then there are income projects. This involves buying or leasing land over known oil or gas reserves. This, in a way, is more like buying a bond or an annuity although riskier. However, the returns are also usually higher and normally produce a steady stream of income.
The other issue is that you don’t have risk spread over many different locations. You are dealing with one or a few locations and can have much better understanding of the risks. For this type of investment there is nothing being done in extreme environments like the Arctic or deep undersea which greatly increases the costs and the risk.
One of the reasons that investing in the oil wells can be quite profitable are all the tax deductions. In some cases you can write off almost 80% of the investment in the first year. The government has set these tax rules up to encourage people to take the risk to drill for oil and gas. The tax code is used to create incentives for a number of activities so the federal government doesn’t have to directly invest itself in things it wants to happen. You could say that the tax breaks are indirect investments. This is also why people who push alternative energy say coal and oil are heavily subsidized.
Information and Data
Because you are dealing with one or a few locations, it is much easier to get data on production and costs and have a good idea of what the returns are likely to be.
Clark Weeks Recommends Small Oil Well Investments
For this reason, for the right investors, Clark Weeks and other advisors and industry experts recommend investments in small oil wells. It can be steady income and an excellent return.
After note: The pandemic has unsettled markets to put it mildly. Do careful research and talk to your advisors about whether to invest at this time and also about your current investments if any.