Oil and Gas Limited Partnerships and Oil and Gas Offering Fraud, Misrepresentation and Mismanagement – South Florida, including Fort Lauderdale, Pompano Beach, Deerfiled Beach, Boca Raton, Boynton Beach, Delray Beach, Lake Worth and West Palm Beach, Litigation and Arbitration Attorney
An oil and gas limited partnership is legally set up using the same format as any type of limited partnership. It is created by filing articles of limited partnership or its equivalent in the state of its domicile. For example, Florida Statute, Chapter 620 governs the legal requirements that must be followed in the formation, operation and dissolution of the limited partnership, whether it is engaged in the oil and gas business or not. This post is limited to a general discussion of an oil and gas limited partnership.
An oil and gas limited partnership is made up of one or more general partners and one or more limited partners. Generally, it is structured to find, extract, and market commercial quantities of oil and natural gas. These types of investments are usually offered by prospectus, in the case of a public offering, and by a private offering memorandum, in the case of a private offering of securities. In either offering document, it is important to consider, among other things, who is making the offering, which brings to the forefront such items as experience, prior success and financial stability. The next important section of the document relates to the “risk” factor section of the document. Usually, in bold type there is a phrase such as “this offering involves a high degree of risk and should be considered only by those investors who can stand to lose their entire investment.”
In reading and attempting to understand a prospectus or private offering memorandum relative to an oil and gas limited partnership, it is important to bear in mind that there are a number of key words and phrases that are used throughout the document, which are words of art and many times do not mean exactly how the reader would interrupt them. For example, what is an exploratory or wildcat well vs. a development well vs. a development drilling program? Does it make a difference on the risk vs. reward scale how deep the well is going to be drilled and the type of geological formations that the well will have to be drilled through? What is the importance of such phrases of “working interest” or “revenue interest?”
If you are reading this post, you should be getting the idea that these are very complicated investments and that you should seek qualified professional advice before making an investment. Some but not all of risks can be reduced if you know what can be verified and how to go about doing it.
Normally, we don’t include asides with educational posts; however, in the most recent case that we dealt with concerning an oil and gas venture, there were a number of fraudulent statements that were made and documents provided by the promoters to the investors. One of the most glaring was the fact that the investors wanted to see some of the other producing wells that had been drilled by the promoter. The promoter was quick to comply with the request and showed the investors a number of other wells that it had drilled, which were producing oil and gas. Unfortunately, the investors did not know how to verify this representation and later found out that the promoter had no interest in any of the wells.
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of oil, gas and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.
At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.