From the SEC publication, Oil and Gas Scams: Common Red Flags and Steps you Can Take to Protect Yourself, please see the following SEC Statements and Petroleum Resources of Texas responses (highlighted within the article in blue text).
Oil and Gas Scams: Common Red Flags and Steps You Can Take to Protect Yourself
Henry . . . was a successful business man, married for 30 years, raised a family and had a good life . . . after his wife’s death, he received an [overnight] package of materials with all kinds of reports, and it was offering an oil and gas investment . . . And it was unsolicited . . . he ignored it . . . But the next day, a salesman called him and used high-pressure sales tactics . . . to persuade him to invest $40,000. And here are some examples of what was said to him on the phone: “These gas wells are guaranteed to produce $6,800 a month in income;” “Some of the most successful investors in the country are interested in these wells;” “There are only two units left in this project;” “We drilled a well in Texas that had these same early gas readings, and the investors all made millions.” . . . Over a three year-period, Henry was recontacted 12 times and invested, essentially, his life savings in 4 different gas wells, each time thinking that he had to invest or lose his original investment . . . He ultimately lost over $500,000 to this oil and gas scam investing in wells that always seemed promising at first . . .
- Description of an oil and gas scam victim at the SEC’s first-ever Seniors Summit (July 2006)
If you think you’ve found the right oil or gas investment to “strike it rich,” consider this: it may be a scam. While some oil and gas investment opportunities are legitimate, many oil and gas ventures are frauds. Many of these schemes start in so-called “boiler rooms,” where skilled telemarketers use high pressure sales tactics to convince you to hand over your hard-earned money.
Once they have your money, scam artists pay themselves first, often using funds to pay personal expenses. In the end, only some of your money may be invested in an actual oil or natural gas well, or none at all.
Red Flag Warnings
If you are considering an oil and gas investment, look for these “red flag” warnings of fraud:
Sales Pitches Focused on Highly Publicized News. Scam artists read the headlines, too. Often, they’ll use a highly publicized news item, like volatile gas prices, to lure potential investors and make their “opportunity” sound more legitimate.
Petroleum Resources of Texas does not participate in oil and / or gas prospects in areas of highly publicized news. We consider these “hype” plays to include the Permian Basin, Wolf Camp, Bakken Shale, Eagle Ford Shale, Fayetteville Shale and the Haynesville Shale. We focus on participating in prospects that have substantial technical support, are developed by well-respected industry partners and are in areas of long term proven production. Our geographic focus is to only develop proven oil fields that still have recoverable oil reserves.
Petroleum Resources of Texas works with top proven operators that have verifiable track records. We always prefer to participate along with industry partners on a Working Interest (WI) basis in projects generated, drilled and operated by these proven reputable companies.
“Can’t Miss” Wells. Every investment carries some degree of risk so you should be skeptical of any oil and gas investment opportunity pitched as completely safe. Fraudsters often spend a lot of time trying to convince you that extremely high returns are "guaranteed" or "can't miss." Don't believe it.
The Principles of Petroleum Resources of Texas has participated in many wells since prior to being founded in 2009 and can speak from experience that there is no such thing as a “Can’t Miss” wells. Each and every prospect carries its own degree of geologic or mechanical risk. In fact, we take a strategic approach to prospects in which we participate in.
Unsolicited Materials. Be especially careful if you receive unsolicited materials about an investment. Simply ignoring investment-related “junk” faxes, emails, voice mail messages, and regular mail may be your best strategy. And don’t let a package full of colorful marketing materials impress you, even if it’s sent by certified or overnight mail. If you’re not going to research an opportunity fully, do yourself a favor and put any unsolicited materials in the recycle bin immediately. If someone calls to follow up regarding the materials, tell him or her “thanks, but no thanks” and hang up. [Hanging up is critical because scam artists often use scripted sale pitches to keep you on the phone.]
Petroleum Resources of Texas does not send out unsolicited materials of any type. We send materials only to persons who have requested that materials be sent to them and who have represented that they are financially qualified to participate in our Tax Advantage Joint Venture General Partnerships.
Limited Opportunities. Scam artists often try to give you the impression that the “opportunity” they are promoting is scarce, hoping you will hand over your money hastily before doing any due diligence. Resist the pressure to invest quickly, and take the time you need to investigate before sending money.
Petroleum Resources of Texas participation in each prospect varies and the time period or participation is not within our control, so we do not have the ability to provide unlimited opportunities . However, existing and potential Partners are encouraged to take time to do an evaluation and complete their due diligence investigation prior to making a commitment to participate.
High Rates of Return. Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you'll get substantially more could be highly risky. And that means you might lose money.
Petroleum Resources of Texas provides every existing and potential Partner with a Confidential Information Memorandum (CIM) which contains a full disclosure of all risk related to oil and gas exploration and General Partnerships. We also provide our potential partners with the full range of potential returns on our Joint Venture General Partnerships, including the risk of a person’s entire investment being lost in the case of a dry hole or a marginally productive well.
Tips or Secrets. A promoter may discourage you from talking about the opportunity with someone you trust, like a loved one, attorney or financial professional. If that happens, stop listening, and leave or hang up.
Petroleum Resources of Texas encourages any qualified potential Partner to seek out all necessary advice to make an informed decision. We also offer to provide potential Partners contact information for our attorneys, accountants and technical experts so that no questions goes unanswered.
Steps You Can Take to Protect Yourself
Here are some steps you can take to avoid being scammed:
Ask questions and check out the answers. Fraudsters rely on the sad truth that many people simply don't bother to investigate before they invest. It's not enough to ask a promoter for more information or for references - fraudsters have no incentive to set you straight. Savvy investors take the time to do their own independent research.
Petroleum Resources of Texas encourages potential partners to ask questions and conduct independent research. We will always provide you with answers or reputable sources for answers and or/ research.
Contact state oil and gas regulatory agencies. You may be able to verify information provided in offering materials by contacting the oil and gas regulatory agency in which the wells are allegedly being drilled. For example, these agencies generally have information about a company’s drilling history that could confirm claims of prior success.
Petroleum Resources of Texas will always strive to provide existing or potential Partners with all information necessary to make and informed decision, including the ability to contact oil and gas regulatory agencies in the states in which we participate in wells so that information for drilling, completion, production or plugging activity can be obtained or confirmed.
You might be surprised to learn that the Railroad Commission of Texas oversees the Texas oil and gas industry. Unfortunately, state oil and gas regulatory agencies don’t have uniform names. If you’re having trouble finding the agency that regulates oil and gas in a particular state, enter the State’s name - followed by “oil and gas” - into your favorite Internet search engine. The appropriate agency should be listed near the top of your search results.
Research the company before you invest. You can contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. You also will want to understand the company's business and its products or services before investing. Remember that unsolicited materials should never be used as the sole basis for an investment decision.
Petroleum Resources of Texas is organized in the State of Texas and is a limited liability company in good standing. We are happy to provide you with the contact information for the Texas Secretary of State to confirm this fact. In additional information you may require to help facilitate your research.
Know the company. Spend some time checking out the company touting the investment before you invest - even if you already know the owners or principles socially. Always find out whether they are eligible to conduct business.
Petroleum Resources of Texas does not offer or sell securities; therefore our personnel are not required to be registered securities brokers. Employees are hired based on many characteristics including experience, integrity, communication skills and industry knowledge. Complete background checks are conducted on all employees. Petroleum Resources of Texas has very stringent policies, procedures and guidelines that our employees must adhere to.