Different Approaches to Oil and Gas Investing
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Different Approaches to Oil & Gas Investing

By Jeffrey Bangerter

Our previous post discussed the potential advantages of Oil & Gas investing to help address today’s investment challenges. We focused that discussion on the most common private investment strategies, which included:

Drilling Partnerships

Direct Investments in Working Interests

Direct Investments in Royalties

You can find additional insight on the program in our newest guide, An Introduction to Alternative Investments

There are, however, several public Oil & Gas investment strategies available to investors, and we highlight a few of those here.

Exchange-Traded Funds (“ETFS”). Known for their low-cost structure and diversification benefits, ETFs are passive investments generally tied to an index. As a result, they don’t have the advantage of an active manager to be proactive and help investors navigate during downward market movements.

Mutual Funds. You are likely familiar with mutual funds. Much like they offer investors exposure to virtually any industry, Oil & Gas mutual funds are available to investors in various market sub-sectors, including drilling, extraction, transportation, and oilfield services refining, for example. Actively managed mutual funds may have higher expenses than ETFs.

Futures and Options Contracts. Not for the faint of heart, investors can access the Oil & Gas industry by investing directly in commodities like oil and natural gas, if suitable, and investors should be aware any potential risks involved. Futures and Options are often the domain of active traders who are willing and able to make bets on future pricing. As a result, the investments offer the potential for both gains and losses.

Large-Cap Stock Investments. If names like Exxon-Mobil, Chevron, and BP sound familiar, for example, you understand the approach to Oil & Gas investing via large-cap stocks. Popular among investors for their sheer size and ability to typically weather different market conditions and pay dividends, these industry giants are subject to, but are not limited to, supply & demand, geopolitical, and commodity price volatility risks.

Master Limited Partnerships (“MLPs”). MLPs are publicly traded entities that offer investors ownership in a partnership infrastructure. In our example of Oil & Gas, this may include gathering systems, pipelines, and storage facilities. MLPs may appeal to investors looking for alternative sources of income potential, as they can provide investors with certain tax benefits as well. They are, however, dependent on upstream production companies as a steady source of revenue which can vary as market conditions change.

Get the Fuller Picture

We hope you have enjoyed our posts on Oil & Gas investing. If you’d like to discuss the public and private strategies available in relation to your objectives, call us at 916.965.1879 and we can explore these alternative investments in greater detail.


This is for informational purposes only and does not constitute individual investment advice. Bangerter Financial does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

The companies mentioned herein may have proprietary interests in their names and trademarks. Nothing herein shall be considered an endorsement, authorization, or approval of Bangerter Financial Group or the investment vehicles they may offer, of the aforementioned companies. Further, none of the aforementioned companies are affiliated with Bangerter Financial Group in any manner.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.

Oil and gas offerings may involve a high degree of risk, such as speculation, the potential loss of your entire investment, and illiquidity. These types of offerings are also subject to political, geological, price, supply and demand, and cost risks.

Potential cash flow, returns and appreciation are not guaranteed. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.

Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Mutual Funds are: Not FDIC Insured · May Go Down in Value · Not Guaranteed By the Bank

Options are not suitable for all investors. There are risks involved in any option strategy. Individuals should not enter into option transactions until they have read and understood the option disclosure document titled "Characteristics and Risks of Standardized Options," which outlines the purposes and risks of option transactions. This booklet is available from your Financial Advisor or at OCC - Characteristics & Risks of Standardized Options. Supporting documentation of claims will be supplied upon request.

Trading futures involves the risk of loss and is not suitable for all investors. Please consider carefully whether futures are appropriate to your financial situation. Only risk capital should be used when trading futures. Investors could lose more than their initial investment. You must review customer account agreement prior to establishing an account. Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

Master Limited Partnerships (MLP) can lose their entire investment or experience lower-than-expected returns. Investors should understand that governance and standard of care can favor the sponsor, the sponsor's relationship with the MLP and General Partner (GP) may create inherent conflicts of interest, as well as face industry risk and concentrated exposure.

Large-capitalization (“large cap”) stocks refer to a company with a market capitalization value (calculated by multiplying the number of a company's shares outstanding by its stock price per share) of more than $10 billion.

Investment advisory services offered through Bangerter Financial Services, Inc. A state Registered Investment Advisor. Registered Representative and securities offered through Concorde Investment Services, Inc. (CIS), member FINRA/SIPC. Bangerter Financial Services, Inc. is independent of CIS.

Topics: Financial Planning Financial Advisor Diversification Alternative Investments Oil & Gas