During the COVID-19 outbreak, we took the opportunity to record a video conference featuring our senior partners responding to some of the questions below.
We’ve compiled some of our most frequently received questions and concerns below. We at Alpha Seven Energy pride ourselves on ensuring that each of our investor partners has a high level of confidence prior to coming on-board.
If you have any questions or concerns that are not addressed on this page, or if you would like more information, please use either our live chat box in the bottom-right corner of this page, or go to our Contact Us page and fill in your details, and one of our team members will be in touch with you soon.
When investing in direct oil & gas ownership, each investor will receive a portion of the monthly oil and gas net revenue produced from the wells in which they have an investment. This is known as a monthly revenue disbursement or MRD. These revenue disbursements are essentially a monthly residual income stream that is directly paid to you in US dollars.
Each project differs regarding the specific rate of return, the timeframe to start receiving revenue, and the total number of years in which one would receive their monthly residual income. That being said, how many barrels of oil per day a well produces, and the percentage of ownership an investor purchases in a well are the main factors that dictate what one’s monthly ROI would be. We look for projects with the optimum risk-to-reward ratio, which have a short drill-to-production period, and we seek returns of between 500% to 700% on capital. Most wells can produce oil for 20-30 years, yet there are many wells from the 1950s and ’60s which are still producing commercial quantities of oil and gas today.
Over 85% of our non-US resident investors have never invested internationally before. Coming on-board with Alpha Seven Energy and investing in our projects was not only their first time investing overseas, but it was their first time investing in the oil and gas industry. There are major benefits for you when investing in the US, which you simply don’t get in Australia or other countries. For example, the US is very proactive with regards to being energy independent, because of this, there is less bureaucracy, or “red tape,” massively expediting the permitting process so projects can generate revenue dollars for investors much quicker than most other countries. Additionally, in the US, an individual can own mineral rights to all depths. Finally, when it comes to tax-advantaged investments for wealthy or sophisticated investors, one commodity continues to stand alone above all others, oil. With the US government’s backing, domestic energy production has created a litany of tax incentives, which our investors take full advantage of.
Electric cars will contribute to the overall oil demand, however the timing and the magnitude is what economists try to predict. The International Energy Agency (IEA) predicts that the number of electric cars will grow to 125 million by the year 2030. That’s provided the world takes an aggressive approach. If you compare that to the 1 billion cars powered by combustion engines, you can see we still have a long way to go.
Additionally, oil has several other uses beyond fuel for cars. You have other transportation fuels (such as those for planes, jets, shipping), oils for heating and electricity generation, petrochemical products, asphalt, chemicals, plastics, and synthetic materials, etc. Oil plays a role in nearly everything we use, and demand for these products will increase from progress in the developing world and global population growth.
ASE celebrated its fifth anniversary in May 2022. 2019 was a massive year for us having completed our largest project in the heart of the Permian Basin with the Radmila well, which was named in honor our CEO’s mother. That well peaked at over 900 barrels of oil in a single day. We also established ASE Operations which is a fully licensed operator in the state of Texas, and in May 2020, we established ASE Equipment, which will own a wide range of oilfield tools, rigs, and other equipment. 2022 is set to be even bigger as we hit target depth on our first horizontal well on our 23,958-acre project at Mesa Vista Ranch in the Texas Panhandle.
Most of our projects aim to produce more oil than gas, so oil prices will definitely have an effect on your income, but the good news is that because our cost to produce a barrel of oil is significantly lower than companies with much larger overheads, we can still generate very solid returns during times of low oil prices. For example, at our Seminole County project, our breakeven price on WTI is less than $10 dollar per barrel. Most of our wells produce gas too, so you have instant diversification via income from not only oil but gas as well.
We have an environmental responsibility mandate as a company, and have commenced our “New Growth Program,” which means that for every new and current project we will plant new trees. ASE has aligned with Eden Reforestation Projects who is a non-profit organization that not only plants tens of thousands of trees, but also employs local villagers to plant and care for the trees, thus creating employment as well.
This is an interesting topic as most people think that in order to support a cleaner energy initiative, we need to stop investing in fossil fuels. The fact is, it is the complete opposite. The decarbonization transition requires massive amounts of investment in fossil fuels in order to research, innovate, and produce cleaner and more efficient technologies, and methods to reduce emissions in production. Without this investment, the transition will be a lot slower, unfortunately.
In saying that, we at ASE support the energy transition and are always looking at ways to create efficiencies along the supply chain. In addition, we would love to diversify into renewables provided there is an acceptable risk-to-reward ratio for our investor partners.
When hydraulic fracturing is properly regulated, it is safe for the environment and this is proven by over 250,000 fracked wells being safely drilled and operated in the US. We are also under the jurisdiction of the Environmental Protection Agency.
Over 70% of our investors have or are currently investing in property and the stock market, yet only a small handful have invested in direct oil and gas ownership prior to joining ASE, but 100% of our investors all want the same thing. They want to diversify their portfolio, create a residual monthly income stream which is managed on their behalf, they want the potential to massively boost their ROI, and the ability to create multi-generational wealth whilst earning US dollars.
The level of due diligence we undertake before offering investors equity in our projects is extremely high and very detailed. We have a strong team of industry experts and geologists who vet each project and all of the research data. For example, in our past and current projects, we gathered seismic data that clearly shows the presence of hydrocarbons, both oil and gas. We look for multiple stacked opportunities, meaning each oil and gas formation, also known in the industry as a “pay zone,” can be targeted to increase production and of course, to improve the overall ROI. We also focus on PUDs, or proved undeveloped reserves. For example, on our Mesa Vista Ranch project, we have up to 60 locations that we can drill with an estimated 20.6 million barrels of oil equivalent beneath the ground. In our Seminole County project, our new wells are offsets to already producing wells, for example, the Oddfellows A1 has been producing commercial quantities of oil since December 2017.
Oil is a physical market driven by supply and demand. For example, the industry experienced a supply glut, predominately due to the COVID-19 pandemic, however, this isn’t the first time, and it definitely won’t be the last. We expect (at times) to see imbalances with supply and demand, which also means over supply can revert and overcorrect. One interesting observation is seeing the multi-national government interventions that are implemented to support low oil prices. Our position is that this will create significant pricing pressure once oil demand picks-up and we try to unwind the supply cuts. It is important to note the level of reliance on the oil industry from international budgets, as well as millions of jobs. We are seeing and will continue to see major government and international support to the industry.
When an overseas investor is investing in the US, the rate at which they exchange their local currency to USD will have an impact on their investment return, but only when they decide to exchange their USD profits back into their local currency. As of August 2020, the Australian dollar, for example, had been its strongest against the USD since April 2019, hence why so many of our Aussie investors increased their investment size. Throughout most of history, the Australian dollar has been weaker than the US dollar and that’s why an Australian investor receiving profits in USD can be a massive benefit.
We have an open-door policy in both our Dallas and Sydney offices, and we welcome any potential investor to visit us in person. Pre-COVID-19 we would have many investors, especially non-US residents come to Texas to visit our Dallas HQ to meet our team, our attorneys, our geologists, drillers and petroleum engineer, and visit the leases to see the operations in person.
If you can’t make it to Dallas, you can come and meet Pete or Grant at our Sydney office. Additionally, we provide extensive amounts of evidence regarding not only project history and geology, but the legal agreements and permits as well. We have one of the top oil and gas lawyers in the state of Texas to create these agreements and ensure that all of the legal framework is correct and in place. Every project has a lease agreement and each phase has an SPE, or special purpose entity created to hold the individual asset, which in this case, is the wells you are investing in. A private placement memorandum (PPM) is provided as well as a subscription agreement, which is countersigned by our CEO. Each state has its own governing body that oversees the oil and gas industry. For example, the Texas Railroad Commission (RRC) ensures that oil and gas companies are following the correct legal process before drilling and during the on-going management of each oil and gas well. You can go on to the RRC website and cross-check that the operator on the project is fully licensed and is in good standing. Plus every well has a unique API number, similar to a serial number, which is registered with the RCC in Texas, or OCC in Oklahoma, and all of this information is available on their respective websites. Take your time and execute your due diligence, and if after all of that, you still don’t have confidence, then we will be the first to tell you that this is probably not the opportunity for you, and we can go our separate ways amicably.
We want all of our investors to be comfortable with their decision to join ASE and in investing in our oil and gas projects. If you are a very conservative investor who only likes blue-chip shares then this opportunity may not be suitable for you. However, most investors want direct ownership in oil and gas wells because they can receive not only huge tax benefits, which you don’t get with listed companies but also a monthly income and the potential to make 500% to 700% returns. Each of our investor partners receives a full PPM and legal agreements prior to investing. Once on-board, you will receive a project folder with your official share certificate showing your exact unit investment in the project SPE, or special purpose entity.
Each project is different in size, scale and has a different capital requirement. Therefore, the timeframe to raise, drill, complete and produce oil can vary between projects. For example, the Borden County project cost approximately $12 million and took 8 months to complete and start flowing oil. We have found that most of our investors prefer the strategy to focus on smaller projects with shallow wells. These have a smaller turnaround to raise capital, drill, and produce oil. Therefore, these types of projects are revenue producing and reduce the investor’s cost basis much sooner. For example, one of our projects is in Seminole County, Oklahoma. We commence drilling the third well and expect to reach target depth within 14 days. We have an approximate 90-day time horizon from the commencement of drilling to selling the first batch of oil and investors receiving the monthly revenue disbursement.
ASE, and a large portion of our investors, use the Berry & Moro CPA firm. Patrick Berry has worked in the industry for over 55 years, specializing in oil and gas taxation. Fabian Moro has an MBA in international finance and is an Associate Petroleum Accountant. There are two videos on YouTube where we interview Patrick at the Dallas Petroleum Club. This is an absolute must-watch for anyone wanting to know more about the massive tax incentives available with oil and gas ownership through Alpha Seven Energy.
Every investor will receive their personal username and password to access the Investor Partner Portal. Each phase and project has its own designated section where you will receive updates on your project’s progression. Our investors get to see and experience every step of the project’s development, from permitting approval and drilling, all the way to production and beyond. Every time there is an update, you receive an email notification, and every update is timestamped creating a complete project history timeline.
Additionally, after you become an investor partner, you will have open lines of communication with the entire ASE senior partner team in Australia and the USA. You can easily reach us via text, phone call, or email if you ever have any questions. You can also drop into our Dallas or Sydney office to catch up.
Yes, all investors will need a US bank account established. Your monthly revenue disbursements will be paid directly to this account from the oil and gas net revenue. A limited liability company or LLC needs to be formed prior to the bank account setup. This process doesn’t require you to be in the US. Most of our investors use Steve Holmes and Rachael Patman, who are part of our external legal counsel to set-up their US entity. Because of our strong relationship with Prosperity Bank, they allow the accounts to be established remotely. You have full internet banking and a visa debit card posted to you in Australia or most other countries, so you can access your account anywhere in the world 24/7.
ASE is developing leases with an expectation to produce oil and gas in commercial quantities. This is an opportunity to participate in direct ownership of the well bore. This is known as a working interest and 95% of the invested capital is utilized to drill, test, and complete oil and gas wells. What this means is that investors are partners on the project and do not carry company risk which is the case when investing in an energy company on the share market. Investors become the owners who these midstream energy companies buy from, and as a result, investors receive monthly revenue disbursements for the life of the wells and any lump sum payment if the decision is made to sell the asset as part of an exit strategy.
Yes, we most certainly are. Chris Hemsworth and Dylan Knight, who are the founders of the company, both lived in Australia, becoming good friends and then business partners. Chris was born and bred in Sydney then moved to Dallas in 2014. As Alpha Seven Energy evolves, we have more of an internationally-owned business, with shareholders from New Zealand and the United Kingdom as well. Over 80% of our investors are based in Australia, and because of this fact, we have established our first Australian office in the Sydney CBD.
There is a tax treaty between Australia and the US, which means you will not be double-taxed. Investors will pay duties in the US, and most of our investors use our CPA, Patrick Berry, who has been in the oil and gas business for over 55 years. Because there are very attractive tax benefits when investing in oil and gas, it is always a good idea to utilize an accounting firm that specializes in this industry.
There are risks involved with any type of investment. As an investor, it’s important to identify these risks and measure-up the risk-to-return profile. Allocating capital across multiple wells is a good strategy to achieve diversification and manage risk. As part out our business strategy, we engage in a number of mitigation efforts which include a turnkey opportunity, developing-out leases with existing production and strong geological data, and targeting multi-stack pay zones. A private placement memorandum is available outlining some of the risk factors related to an investment in oil and gas exploration. This document is available anytime to all interested investors.
Our exit strategy is to pool our combined assets (meaning our investors and ASE combined), and sell to a major oil & gas company or to float ASE via an IPO. In the meantime we are looking at other forms of energy projects, some potentially in Australia, but until the profit margins improve and we have completely developed our Seminole County lease, our Mesa Vista project and our soon to be secured String of Pearls project, we will continue our focus on oil & gas.
On each phase of a project we update our Partner Portal with a full drilling report, which includes an electric log, or e-log for short. This is a fundamental tool for resistivity logging which gathers important information on what is beneath the ground. For example, when we drilled the ASE 2 well in Seminole County, the e-log showed multiple pay zones, including 58 ft of up-hole, 11 ft of Booch and 46 ft of the Misener formation, which is known as the “Holy Grail” of Oklahoma oil & gas. The drilling reports also contain a geological overview and a daily timeline of the complete drilling process.
Every month there will be an official receipt from the purchaser of the oil & gas. It will state the exact amount of oil picked up, the gas (per MCF) recorded by the meter, and the price at which it was sold.
Environmental and natural events such as adverse weather can play a role. However, in some cases, delays can be a good thing. For example, at our Seminole County project in Oklahoma, the ASE 1 and ASE 2 wells were delayed due to finding additional pay zones and higher than expected oil reserves. As a result, we required a bigger pump jack, tank battery, and other equipment to manage the anticipated increase in oil output. This is obviously a welcome surprise for our investors.
Direct oil & gas well ownership revenue is deposited directly into your US bank account connected to your LLC (limited liability company). Each time a transfer is made, each investor partner will receive an official statement. With regards to investing in the oil & gas wells, a monthly report will be provided with the gross oil & gas revenue, monthly OPEX, and the net revenue.
With regards to investing in direct oil & gas ownership, the term is as long as the production life of the well, which can be up to 30 years or until the asset is sold. Once the wells are online and in production, we pay each investor partner at the end of each calendar month through oil & gas sales. With regards to the 12% asset-backed loan offering, it is a maximum term of 3 years, receiving quarterly principal & interest repayments. More conservative investors like this option, especially when they can have the ability to invest in exclusive ASE oil & gas projects in the future.
Disclaimer: The information and opinions expressed on this page were accurate at the time of writing, but are subject to change. Additionally, any mention or examples of tax information are for general information only and are not intended as individual tax advice. Consult your personal tax advisor concerning the applicability and effect of oil & gas investments on your personal tax situation. Tax laws change from time-to-time and there can be no guarantee of the interpretation of the tax laws.