Oil and Gas Investing
This article shows the problem (for investors) with the oil and gas industry. Money flows in when prices are high, like the fall of 2005, and investors still can't make money. This is due to high fees, mutiple revenue sharing partners and the general risk of the business. The risk is why all the sponsors ask for other people's money in the first place. Investors in oil and gas deals bear all the financial risk, because the sponsors put little to no money of their own into their deals.
A successful deal in the oil and gas world is one that returns investor money (oh, and forget that crap about adding tax write-offs to the return). Investors dream of hitting the oil and gas lotto, but it never happens. They receive decent income in the first few years, but this falls quickly, and investors are lucky to receive small amounts in later years (twenty-year time horizons are not uncommon). Sponsors limit their risk becuase they receive a percentage of revenue, 30% is not uncommon, for their role in the offerings, plus fixed fees for other services. Their cash flow is assured because the fixed fees are paid to them no matter the price of oil or gas or what the wells are generating. To put it bluntly, oil and gas deals stink for investors but are good for the promotors. Buyer beware!