Oil Banking was introduced to offer astute investors to participate in the acquisition of Oil Leases of Productive Oil Fields, for the purpose of acquiring an income asset, which will generate a monthly positive cash flow income, through production of crude oil and gas.
How does Oil Banking works?
It works by pooling in the invested pool of money for the development and building of Oil Rigs on top of the founded Oil fields. In which, your pool of money will be used in the development of infrastucture rather than for exploratory purposes. Note that they will use your money to develop oil rigs on top of the oil well/reservoir. These oil fields are usually being confirmed or had previousle being tapped before. Therefore, it will be certainly that there will be oil to be dug out.
Note that they will not pool the money 1st, then build up the oil rig. They will instead used your invested money immediately to build the infrastructure to take the oil out from the ground. Therefore, it'll be certain that you'll get payouts immediately after 6 months.
Mechanics of Oil Banking
When an oil field was confirmed, a certain percentage will be allocated to be sold to the managing company. The company will then break up into managable portions which will be sold. These managable portions will be in quantities. Therefore, these allocated quantities will be sold to small time investors.
Basically, each investor is to buy a certain number of portions, thus allowing to own a part of the oil rigging. Thus, in other words, the investor is buying the mineral rights title, i.e similar to your land title, however in this case, you own the rights for this mineral in a certain area.
Why Oil Banking?
Oil Banking provides the investor a monthly income from the 6th month on the investment date.
For example, if the investor bought the rights on Dec 07, the investor will start to get payout on Jun 08.
The payouts will stretch to a period of XX years or more until the oil rig is deemed uneconomical to produce any more oil. Note tha the period of years varies from oil field to oil field. The stated no. of years is just an example.
Therefore, this meant that:
- Your risk is reduced over time
- You'll recover your initial capital, and
- Enjoying passive income.
What do you meant by the above explanation?
Let's take a look at the table and graphical representation below:
With referance to the above diagram, we can see that a captital sum is being invested up front. Therefore, we can see that a deficit had occured due to the invested amount. After a period of X months, you will start to get a monthly income payout. Over a period of time, you will see that you will have capital recovery. From capital recovery, you will know that your risk is reduced over time.
Thus, when your risk is reduced over time from the capital recovery, you will eventually reached your breakeven point. When the breakeven point had occured, it meant that you had recovered your inital capital. From then on, you'll be getting your profits in the form of monthly payouts.
With monthly payouts after your breakeven point, it can be seen that this will be your passive income. Meaning that you do not need monitor and yet enjoying regular payouts from your investment.
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