Anyone know anything about investing in natural gas wells?

[lippy]

My grandfather passed on a few months ago and left my Mom and her siblings some weird investments to deal with.

The one that is giving them a fair amount of trouble is what to do with two Trans Pacific Oil Corporation natural gas wells. He owned a small part of two of them

Trans Pacific has offered $11,500 for them. A friend of grandfather's reviewed the paperwork and put the total minimum value at $16,713. At auction he thinks they could fetch 19k-21k.

The profits over the last months

7 500
8 355
9 343
10 936
11 367
12 335
1 488
2 488
3 0
4 0
5 481
6 556
7 514
8 503

The projections of Net Cash Flop from Trans Pacific (skipping every 3rd year, no aberrations);

07 3854
08 6756
09 5532
10 4425
11 3890
12 3390
13 2949
14 2568
15 2215
16 1888
17 1585
18 1304
19 1044
20 802
21 579

In those numbers, the projected expenses are only moderately affecting the decrease in profit (only changing ~300/yr over the 14 year period).

Now, if you've made it this far, thank you!

My questions;

Would this be a good investment to keep?

Is it risky (could they be out the entire value tomorrow if something bad happens)?

My Mom, who is somewhat financial secure and with a decent retirement, is thinking about offering each of her siblings $5000 for their thirds. They are not very well off financially and getting on in age. My mom is 10 years younger. Would this be mutually beneficial?

If this was your investment, would you sell it right now? Would you keep it?


Thanks for any help you have to offer. I know this is a lot to ask of anyone that can help. I've tried to read up on natural gas but really haven't found anything that gives me any insight into what my Mom should do.

[Tupacia]

Seeing as I know absolutely nothing about the natural gas market, I would attempt to sell them. Keeping the wells without a firm understanding of the basic business of natural gas is a recipe for disaster.

[kimchi]

[ QUOTE ]
Seeing as I know absolutely nothing about the natural gas market, I would attempt to sell them. Keeping the wells without a firm understanding of the basic business of natural gas is a recipe for disaster.

[/ QUOTE ]

This is probably sound advice. Your grandfather's objectives and reasoning for this investment sadly passed with him. If you know nothing about this type of investment, your best bet would be to sell at the best price and invest the proceeds into something you can understand.

[wiseheart]

Natural Gas Exploration is exploding, and price is significantly higher than in the past. I suggest that with enough time and effort put into research/understanding then this could be a very good investment.

There are lots of details that need to know however.

[Your Mom]

hasn't the price of natural gas tanked around 30 percent in the last couple of weeks?

[Tupacia]

I should also add that merely knowing the business or price of natural gas is obviously not enough - you have to understand how natural gas is extracted from wells, a typical shelf-life for natural gas wells, etc.

Seeing as you couldn't attempt to value them without outside guidance (not a dig on you, I would have no idea how to value them either), I would attempt to sell them.

[lambdb]

Trans Pac offered you an deal with a 3 yr payback period for them. I say keep it.

[Your Mom]

[ QUOTE ]
I should also add that merely knowing the business or price of natural gas is obviously not enough - you have to understand how natural gas is extracted from wells, a typical shelf-life for natural gas wells, etc.

Seeing as you couldn't attempt to value them without outside guidance (not a dig on you, I would have no idea how to value them either), I would attempt to sell them.

[/ QUOTE ]

I'd attempt to value them before I would attempt to sell them. Did your grandfather have any info on them? Any research anywhere in the house?

[MarkD]

You should find a reservoir engineer to do an assesment of the reservoir and potential lifespan of well. Natural gas prices are quite low right now, but should rise significantly over the next few years. A few hundred a month now could easily be a few thousand in a couple of years. Do not bother keeping it if you don't want to worry about it in 3-5 years as I would suspect that is the time frame where it will really pay off. The reason you need to get a reservoir engineer to take a look is that well's have a lifespan and will eventually die off. The lifespan may be a long time, or it may be quite short.

Take everything I say with a huge grain of salt. I am not an investment expert, but do work in Oil & Gas industry as an electrical consultant.

[lippy]

Alright, well, looks like I have some research to do. Thanks for the insight.