FREQUENTLY ASKED QUESTIONS ABOUT OUR COMPANY DIRECT PARTICIPATION PROGRAMS
Who is M&W Financial? Where are the program wells located? Who is Guardian Oil & Gas? How are prospects identified and developed? How do I know if M&W Financial is a reputable securities brokerage firm? What sets M&W Financial apart from other securities brokerage firms that offer DPPs in oil and gas investments? The drilling programs we market are with top-notch operators and aren’t available through any other outlet. In most programs, the individuals participating in a limited partnership offered by M&W Financial are the only “non-industry” participants owning a portion of the working interest in the well. Our exclusive relationship with Guardian gives us the resources to answer in-depth technical questions about our prospects, and our top-notch accounting department provides timely and accurate reporting to our investors. M&W Financial’s brokers focus entirely on oil and/or natural gas direct participation programs. This focus gives each broker a unique insight into how the oil and gas industry works. This insight translates into a professional and confident broker who will assist you in making effective investment decisions designed to meet your financial objectives. The firm spends months out of the year making sure all regulatory requirements are met. This tireless effort creates an atmosphere of confidence shared by each broker and the firm’s administrative staff. M&W Financial brings this meticulous attitude to every business relationship thus starting each relationship on solid ground. We believe there are no short-cuts toward doing a great job for our clients. DIRECT PARTICIPATION PROGRAMS What is the business structure of a DPP? The managing general partner, who in the case of a DPP is known as a sponsor, is responsible for managing the business’ assets and running its operations. Limited partners are not liable for losses beyond their own investment and do not participate in the partnership’s management. If you invest with M&W Financial, you may begin as either a general partner or a limited partner. If you invest as a general partner, at the end of the calendar year in which the partnership’s well is drilled and completed, you would automatically be converted into a limited partner. This automatic conversion feature limits your ongoing liability after you have reaped the accelerated tax benefits available to general partners in the first year of a DPP investment. Please discuss this two-step process with a legal or financial adviser before making an investment. What is a private placement? Individual accredited investors have either a net worth of $1 million, net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors. DRILLING PROGRAMS We generally offer only single-well partnerships so that each well stands on its own merit and is not grouped with one or more other wells in which an investing partner may not wish to participate. What is a multiple oil and gas well strategy? We generally recommend investing in at least five partnerships. Under normal circumstances, this would equate to five different wells. Spreading your investment dollars over several wells generally decreases the overall risk associated with investments of this type. Does M&W offer developmental or exploratory drilling programs? We also offer exploratory drilling programs, or those that seek to find oil and gas in new, untapped areas. We engage in exploratory drilling only if the land’s geological characteristics indicate that the risk is warranted and that oil and gas could exist beneath the earth’s surface. Does M&W Financial invest in the drilling programs it sells? What type of cost structure does M&W Financial offer? Guardian offers a “turnkey” cost structure, which means investors pay a fixed cost for the well to be drilled and completed. Turnkey cost structures help limit investors’ liability since drilling and completing a well often costs more than was initially projected. The managing partner and the drilling operators are responsible for any amount that exceeds the projected drilling and completion costs—not the investors. Why does Guardian need investments from individual investors? As an investor, you have the opportunity to participate in a drilling program with some of the country’s most experienced operators, including Anadarko, BBX, Chesapeake, Hunt, and XTO. At M&W Financial, you have access to a variety of drilling programs with reputable and experienced operators so that you can benefit from a diversified oil and gas portfolio. How many partners does M&W Financial work with? INVESTOR INFORMATION Currently, the United States relies on fossil fuels for 85% of its energy. Though the use of alternative sources will increase in the coming years, oil is not an easily replaceable commodity as we rely on it for heat, transportation, and critical products such as plastic. As a consequence, there is political and economic pressure to increase domestic drilling for this natural resource. As an investor in oil and gas, you can help contribute to the nation’s goal of becoming energy independent, while taking advantage of the potentially substantial returns that can result from investing in this significant industry. What impact will oil and gas have on my portfolio? Direct participation in energy investments also provides investors with significant tax advantages. To find out more, see our FAQ section on taxes. How will I receive income from my investment? The amount of your monthly distribution is based on the revenue derived from oil and gas sales, your ownership interest, and the current market value of the natural resources paid by the intermediary at the time of the sale. How will I know how my investment is performing? Is an investment in an oil and gas partnership suitable for all types of investors? You generally must be an accredited investor to be eligible to make a direct investment in oil and gas. Accredited investors have either a net worth of $1 million, net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors. There are also minimum investment requirements and upfront fees. At M&W Financial, the minimum investment amount ranges from $12,500 to $20,000 depending upon the size of the program. In addition to meeting these financial requirements, other critical factors include your risk tolerance, investment objectives, timeframe, experience, and other current investment holdings. One of our registered representatives will work with you to determine if the investment is suitable for you. How long does an investment program last? This illiquidity is especially important to keep in mind because there is no formal secondary market to sell your ownership interests. The long-term nature of oil and gas investments may make them unsuitable for some investors. What happens if the price of oil and/or gas drops? What are your current projects? Once you are determined to be qualified and you have an established relationship with M&W Financial, one of our registered representatives will be happy to discuss the details of our current projects and help you to devise a customized oil and gas investment strategy to best meet your needs. What is the process for making an investment with M&W Financial? TAXES IDCs are expenses related to the costs associated with drilling an oil well, including supplies, fuel, and the price of a drilling rig. These costs may be fully deductible within the first year, which may be appealing to those who have received a lump sum — for instance, proceeds from selling a business or selling stock options — in the same year they join the partnership. IDCs may also be capitalized, or recovered, over time. Depletion allowances are permitted for the duration of the well’s productive life and may be used to offset your tax liability on any income you receive from oil and gas sales. There is more than one way to calculate your deduction, so it is important to speak with a tax or financial professional about which method may be most appropriate for you. Geological and geophysical (G&G) costs are those associated with gathering and processing seismic and other data used to locate oil and gas deposits. Expenses paid or incurred in connection with oil and gas exploration and development may be amortized, or spread, over a 24-month period. Equipment and other tangible drilling costs associated with oil and gas production gradually depreciate in value over time. You may also be able to take a depreciation allowance for these costs against any income you receive. For any questions you may have about the tax consequences of making an investment in oil and gas, please consult a tax or legal professional.
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*The information on this website is for informational purposes only and is not a solicitation to buy, or an offer to sell, securities or other investments. Oil and gas investments are speculative in nature, involve a high degree of risk, and are not suitable for all investors. An investment could result in partial or complete loss of the principal investment. Persons considering these investments must be accredited, sophisticated, and otherwise qualified to make them. Copyright © 2008. M&W Financial Inc. All rights reserved. |
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