Does anyone know details of where the land is that Reef Companies is purchasing mineral rights? It is a huge purchase. They are closing the opportunity to become an owner of the purchase soon.
I've never heard of this particular company. However, be very careful about what you are buying if they're soliciting you as an investor. The opportunity for merely pumping a bad investment, or even outright fraud, is very high. So you are asking one of the right questions as to where they are acquiring rights. Just be cautious you're putting money into a viable entity with legit properties and not just buying into smoke and mirrors. A safer option is via a publicly traded stock such as Whiting or Continental Resources.
I will second Eastern MT. I never heard of them either. I would also want someone I invested with to have their own building and not just rent space in someone elses, especially if it's not a skyscraper, and they seem to be trying to insinuate that they can afford offshore rigs, note the pictures. Possibly it gives me more of a sense of permanance. I hope they were not trying to get you to invest in a particular well. Buying stock would spread your risk. I think oil insiders have no trouble financing obvious good deals, they just go to their associates who participated before. It's when they want someone to buy a pig in a poke, that they look for investers from outside their usual circle. I would spend as much time and as much money as necessary, to thoroughly vet any company I wasn't familliar with before I invested with them. There are so many well known publicly traded companies, why go anywhere else ?
I think the Reef Companies are located in Dallas TX.
Richardson, is the burbs.
Gail Cotton said:
I think the Reef Companies are located in Dallas TX.
Thank you all for your thoughts on this company. I was not solicited by anyone. My nephew owns a finance business in Scottsdale AZ, and I called him to see if there was any interesting investments out there and he said he just invested in Reef which got me started looking into it.
Well here is what I have found out. This is a private partnership that is being put together to purchase mineral rights and leases of Bakken oil and gas. They have an agreement to purchase rights and leases in the Three-Forks formation. The land currently has 400 wells and the partnership will develop 300 more wells. The goal is to sell the wells and leases within 5 to 7 years.
The company has 16 other partnerships under management that are doing well. The finances of these partnerships have been audited by BDO and the land they are purchasing in the Bakken area has been evaluated by Cawley, Gillespie & Associates Inc.
I am investing in the partnership with a small amount of my capital assets. I am a North Dakota gal and own productive farm land in the Red River Valley, so am familiar with the oil and gas in the state through out the years. I am also invested in a private partnership in North Dakota Bakken mineral rights and leases which was put together by my father and some of his friends back in the 70's. This partnership has been a success.
Thanks for this site, as it is interesting and educational. I will be posting as Reef moves along with their activities.
Ms. Graffius, that sounds like quite a buyout if it's 400 producing wells. 300 more wells will certainly mean the rig count is going up in ND.
Dear Joan,
Reef Exploration LP and its predecessor, Reef Exploration Inc et al, has operated for quite a long time, more than 20 years and probably at least back to the late 1980's from my own personal experience. The company's predecessor got into upstream operations in Texas in 1987-88. The company is located in Richardson, TX @ 1901 N Central Expwy, I think in suite #300. I was in their offices about 20 years ago. They currently operate in TX, LA, MS & NM (they report a very small amount of production from Kansas), and I think in 2010 they reported total production worth something like $22 million in gross value (not a huge company). I've never heard a negative thing about the company, and I would definitely have reason to hear it. Be sure we are talking about the same company, though as that is essential in a discussion like this. That's why I provided the above address. I doubt these folks are fly-by-night at all. I suspect they have access to significant capital sources like a lot of other small and medium-sized companies nosing around in the Bakken Shale. I also suspect because of the huge costs of engaging in multi-well drilling programs the Bakken seems to require, that they will probably have partners in their project. Maybe not, but that is what they have historically done, developed oil & gas projects, and found partners to help fund the projects. I'd think its their MO, and not uncommon among upstream operators. That's probably why the "LP" is on the end of the companies name. I also suspect the company is an operating entity for limited partnerships that may end up owning the leasehold interests in the oil & gas leases they buy. Can't know for sure without courthouse research. It may or may not end up owning any leasehold interests, but the courthouse is the place to find that out when it has had time to digest the leases it buys.
Joan,
Also, as to your interest in investing in oil & gas wells, unless you are very wealthy, are familiar with the oil business, and can afford to lose it all, I personally would advise against it. Reef sounds legitimate to me, but there can be a lot of frustration associated with this type of investment. The risks are immeasurably higher than in a stock investment, even to the point of losing everything you invest. And the first thing you want to perform due diligence on is whether Reef is qualified to solicit investments from the general public, and whether this investment qualifies under State & Federal gov't rules that apply to soliciting this type of investment. You either qualify as an individual or you don't, and not all individuals qualify for this type of investment. And by qualify, I mean the company soliciting the investment, beforehand, must be able to demonstrate that you qualify for it, and not that you aren't a good person or smart investor. The requirements are unique to private solicitations, especially those relating to oil & gas investments. I'd check SEC.gov and see if the company filed a Schedule D first. Also, the State of North Dakota certainly has a gov't agency that is interested in companies soliciting money from private investors, and may even have a process a company must go thru to qualify to solicit. I don't know about North Dakota, but most states have regulatory agencies with the authority to approve this type of solicitation, and primarily to help state residents from being scammed. I doubt Reef is doing anything wrong, but the oil & gas private investor industry is replete with folks who have no intention of making investors any money. Just be very, very careful. If you are worth millions and millions, a reasonable investment might be fun. Again, invest what you can afford to lose.
Thank you Mr. Skipper. I was somewhat suspicious of Reefs choice of offices, verses their presentation showing offshore rigs. $22,000,000 production for 2010, and they could well have lost money that year. If Reef is intending to take over a few hundred wells and drill a few hundred more, as I am told, it sounds like a case of OPM (other peoples money), where everyone but Reef will take the hit if it fails. Should it be successful, I am sure Reef will carve a slice of the profits outsized compared to their risk. Just my opinion.
Again, Reef has been a very reputable operator for more than 20 years, and its not a bad thing to be using "other peoples' money", so to speak. I specialize in "other peoples' money" in the oil industry upstream sector. I also doubt Reef will make a mistake. It sounds to me from what you wrote, that Reef is going to be acquiring producing properties from another company. Oil companies don't come by 300 abandoned wells very often at all, almost never. So, it sounds like there's a producing properties acquisition in the works, and Reef is the buyer. That could easily mean tens of millions will be spent buying those properties, probably more than $50 million, and companies with access to tens of millions in capital to buy producing properties, don't usually make a mistake unless there's a collapse in the price of oil or gas, oil in this case since its supporting all the activity in ND right now. Plus, the OPM folks are probably being represented by experts in the oil industry or are experts themselves, and I would consider Reef in that category. Regardless, for mineral and royalty owners, the key is dealing with companies with identifiable assets, and if Reef buys production, then those certainly exist in this case. From what you've written, I don't see anything suspicious at all about the circumstances. Actually, it sounds to me like another good company is probably getting into ND, and that's a great thing for mineral owners in ND. Finally, the upstream requirements of E&P in ND are huge, and there's lots of oil companies, most in fact, who can't afford to do it alone. There's more than 25,000 operators in the United States right now reporting production. Many of them are getting together to get into liquids-rich shale plays like the Bakken. The key for mineral owners is in being able to identify the folks who don't have the capital to do what they hope to achieve. It so happens I specialize in evaluating oil companies, professionally for a living, especially privately-held companies. Also, from what I've seen of the oil & gas lease forms ND minerals owners are signing, they really aren't doing much to protect themselves from the bad companies, or the good ones that don't operate properly. That's not their fault really, since E&P activity has been relatively modest until the Bakken got going a few years ago. Mineral owners in ND really do need to get along the learning curve of oil & gas leases as fast as they can. Their peers in OK, TX, LA & NM have been at this much longer, and the leases you see in those states are much, much different than those being signed by mineral owners in ND.
The price of oil may not be crashing per se, but there is currently a quite noticable dip in field prices in ND, due to the hubs being overloaded. I would certainly want to see that situation rectified before I embarked on such an investment. The OP mentioned the wells, did not mention whether they were producing or how much and then mentioned the hundreds of new wells to be drilled. I wonder where all the rigs are to come from to drill all these wells or are they on a 50 year plan ? Doesn't sound realistic from a company that made 22 mil in 2010, and who knows how much it cost them to make the 22 mil, almost enough money for 3 Bakken wells, if it was pure profit. If the prospect of the acres acquired were so great, why isn't the present operator holding them by the production they already have and exploiting them to a greater extent when they have time and resources to do so? I believe that an oil company needing money for a great deal has the usual suspects they have dealt with before to help with financing, and when they have something that isn't so great they look for investors outside their circle. I won't say you can't win, I'm saying, why do they need money from private parties outside of experienced oil investors. Ask yourself these questions and if you still feel warm and fuzzy, go for it.
First, if you happen to know what oil company is operating the "300 wells" and what counties they are located in, I can find out how much they are producing and probably determine what its worth. As to the rigs, the type of drilling rigs they use in ND are the most expensive to contract, probably more than $25K-$35K a day, so all drilling contractors with rigs like that are eager to move them to ND if they can get a multi-well contract. I'm sure there already is a lot of interest in midstream oil pipelines being built in ND to service a need that seems to be serviced by rail, which is very unusual. I would not focus too much on the $22 million. I just evaluated a new company that received $56 million from a private equity provider, and its principals operate a $12 million operating company. Its not a Bakken company. Normally, for companies going to ND, my guess is they have access to at least $50 million in capital, and most have more than $200 million. Most smart oil companies already know they can't play in that arena without very substantial capital, and so that limit keeps a lot of well run oil companies out of the Bakken, unless they can find a source of capital. Capital sources in the upstream sector are looking for good management teams to fund to get into the Bakken and elsewhere. And most equity sources are smart and knowledgeable about the oil business. There's a new deepwater company being formed with $1 billion in capital resources. Again, the key is to be able to identify the good ones from those that are not good or under-capitalized. I see hundreds of startup, new oil companies every year, and evaluate more than 1,000 existing operators a year.
Also, my guess is those 300 wells are producing. If you happen to know what county(s) they are located in, I can probably determine the current operator. Why is the present operator not holding onto the wells. 1) it may not have enough capital, interest or expertise to participate in the Bakken, or 2) the amount of money being offered is sufficient to make it want to sell. For instance, if you owned 4,000 acres with 300 wells, I can envision 4,000 acres in the Bakken selling for $20K an acre if its in a really good area where the wells have high cumes. That would be $80 million for the acreage alone. If its $5,000/acre, then you are looking at $20 million, still a lot of money to turn down, especially if its in cash! Prices like these are not at all unrealistic. I know of other shale plays where they are paying that much for acreage where the wells don't produce as much as many Bakken wells. Plus, a 4,000 acre block is going to bring a higher price per acre than the same acreage spread out among a lot of townships.
The $22 million is from the wells they operate and probably own a majority interest it. It is not uncommon for a company like Reef to own working interests and many, many wells they don't operate, but that is very difficult to quantify since the info is not easily mined from public record sources. Plus, the cost is not justified either. I just know Reef's been around a long time, fairly successful, and I've never heard a negative thing against it of any consequence. And again, I would have reason to learn about it if anything truly negative happened.
I agree with your OPM taking the hit. That's the nature of oil & gas E&P. Plus, a lot of companies and investors are very sophisticated oil folks, they simply don't want to be involved as an upstream operator. Remember too, the folks at Reef have reputations they've built for 20 or 30 years or longer, and most folks like that want to protect their professional reputations, so overall, most of the OPM money is going to professionals who want to keep their good names in an oil industry they've been involved in for decades. The Bakken is risky for them, since it is highly driven by technology, which means huge costs too, and not all companies are as adept with technology as the bigger companies, or at figuring out how to identify the sweet spots in the Bakken. I understand a lot of the technology is driven by micr-seimic interpretation, locating fracture zones with it. That's not cheap because 3-D seismic is not cheap, and then there's the learning curve of figuring out how to interpret it. Brigham has been very successful so far in doing it, but each company has its own learning curve, and some probably won't figure it out, especially if they are under-funded.
r w kennedy said:
Thank you Mr. Skipper. I was somewhat suspicious of Reefs choice of offices, verses their presentation showing offshore rigs. $22,000,000 production for 2010, and they could well have lost money that year. If Reef is intending to take over a few hundred wells and drill a few hundred more, as I am told, it sounds like a case of OPM (other peoples money), where everyone but Reef will take the hit if it fails. Should it be successful, I am sure Reef will carve a slice of the profits outsized compared to their risk. Just my opinion.
Funny thing is I don't know if the OP was ever told exactly where the acreage is,. and if she did know and said I could look at their production myself. I also have thought about rig cost. I don't think operators are ready to abandon the southern midwest for ND yet, or they would have already done so. Or I should say that those that think it's a good idea have already done so. In any case, I stand by my answer that if you think about what I have said and you still get the warm fuzzy feeling, go for it.
The partnership was told the wells are in McKenze, Mclean, Dunn, Mercer, Billings and Stark counties.The oil companies operating and drilling the wells are Contental, EOG, Exxon, Hess Tracker, American (Hess), Marathon, Enerplus, Burlington, Whiting, Slawson, Petro-Hunt, Newfield Brigham and others. The partnership's goal is $50 million and is open until March 31 or when the $50 million is reached. The oil companies estimate there are 600 more wells to drill on the leasted land. This lease price contract was negotiated late last summer. The leases were purchase from WHC Exploration, LLC.
I am currently receiving 15.4% income on invested capital and should not have to pay taxes on most of that income. There are 11 wells being drilled at this time.
I'm not sure by this information what is being described. WHC Exploration LLC has been buying and selling a lot of oil & gas leasehold interests in North Dakota, but the website of the DMR O&G Div does not list it as an operator, so it seems it would be a non-operator. I checked SEC.gov for "Reef Ex" and "WHC Ex" and neither query returned any filings about a $50 million securities filing. Pretty clear WHC has come serious money. Maybe it is participating as a non-operator in all of those wells, but I haven't confirmed it yet.
I don't know if you've ever been to the website of the North Dakota Securities Department. It seems to have regulatory jurisdiction over raising investments from private sources in North Dakota. Here's a link to its "Top Traps List" of October 20, 2011. Remember, there is a huge amount of fund raising from private individuals, much of it in violation of state and federal regulations, concerning oil & gas-type investments. Internet results for "WHC Exploration LLC" were really pretty poor:
http://www.ndsecurities.com/news/detail.asp?newsID=114
Which seems a little strange. But its filed more than 500 instruments in various ND counties since 2005, so it is clearly spending some money buying interests in oil & gas leases. I suggest you contact the ND Securities Dept if you have questions about WHC Exploration and see what they know. Link to the Contact Us page of its website:
http://www.ndsecurities.com/contact-us.asp
Did you receive a telephone call about this investment from someone seeking for you to invest in this program? That is the type of circumstance the ND Securities Dept might be interested in.
No, I did not receive a telephone call for this investment. My nephew owns a finance services business and I called him to see if there was someplace to put some money and Reef was on his list. I can afford to lose all my money in the investment so it is not the end of the world if some of the risk's come to fruition. Reef is an approved oil company in North Dakota and this partnership is filed with the SEC. The one risk I expect to show up is the inability to move oil out of the area since there is so much drilling. Last week one of their new wells came on production.
Mark Skipper said:
I'm not sure by this information what is being described. WHC Exploration LLC has been buying and selling a lot of oil & gas leasehold interests in North Dakota, but the website of the DMR O&G Div does not list it as an operator, so it seems it would be a non-operator. I checked SEC.gov for "Reef Ex" and "WHC Ex" and neither query returned any filings about a $50 million securities filing. Pretty clear WHC has come serious money. Maybe it is participating as a non-operator in all of those wells, but I haven't confirmed it yet.
I don't know if you've ever been to the website of the North Dakota Securities Department. It seems to have regulatory jurisdiction over raising investments from private sources in North Dakota. Here's a link to its "Top Traps List" of October 20, 2011. Remember, there is a huge amount of fund raising from private individuals, much of it in violation of state and federal regulations, concerning oil & gas-type investments. Internet results for "WHC Exploration LLC" were really pretty poor:
http://www.ndsecurities.com/news/detail.asp?newsID=114
Which seems a little strange. But its filed more than 500 instruments in various ND counties since 2005, so it is clearly spending some money buying interests in oil & gas leases. I suggest you contact the ND Securities Dept if you have questions about WHC Exploration and see what they know. Link to the Contact Us page of its website:
http://www.ndsecurities.com/contact-us.asp
Did you receive a telephone call about this investment from someone seeking for you to invest in this program? That is the type of circumstance the ND Securities Dept might be interested in.
Mark, you may know this company "Cawley,Gillespie & Associates" out of Texas. They did the analysis of the leased property. I have a spreadsheet of each and every well and all the data associated with each one.
Mark Skipper said:
I'm not sure by this information what is being described. WHC Exploration LLC has been buying and selling a lot of oil & gas leasehold interests in North Dakota, but the website of the DMR O&G Div does not list it as an operator, so it seems it would be a non-operator. I checked SEC.gov for "Reef Ex" and "WHC Ex" and neither query returned any filings about a $50 million securities filing. Pretty clear WHC has come serious money. Maybe it is participating as a non-operator in all of those wells, but I haven't confirmed it yet.
I don't know if you've ever been to the website of the North Dakota Securities Department. It seems to have regulatory jurisdiction over raising investments from private sources in North Dakota. Here's a link to its "Top Traps List" of October 20, 2011. Remember, there is a huge amount of fund raising from private individuals, much of it in violation of state and federal regulations, concerning oil & gas-type investments. Internet results for "WHC Exploration LLC" were really pretty poor:
http://www.ndsecurities.com/news/detail.asp?newsID=114
Which seems a little strange. But its filed more than 500 instruments in various ND counties since 2005, so it is clearly spending some money buying interests in oil & gas leases. I suggest you contact the ND Securities Dept if you have questions about WHC Exploration and see what they know. Link to the Contact Us page of its website:
http://www.ndsecurities.com/contact-us.asp
Did you receive a telephone call about this investment from someone seeking for you to invest in this program? That is the type of circumstance the ND Securities Dept might be interested in.