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K2 Capital provides our investors with a wealth of knowledge and experience in
the Oil & Gas vertical. There are a few thousand independent Oil and Gas
companies located in the United States. Many of these firms offer the
opportunity to invest with independent producers in industry development
projects as well as exploration. These direct participation investments are called
private placement and can utilize the full capability of the tax benefits. K2
Capital is continuously analyzing and putting deals together for our investors.
Some of the different vehicles that K2 Capital uses to produce great returns for
our investors are:
Drilling Funds - In the early 1980s, many of the small independent companies
that were publicly held provided funds that specifically targeted drilling projects.
Most drilling funds can be broken down into two general categories:
1.) Exploration Drilling
2.) Developmental Drilling
Exploration Drilling is described as the search for oil or gas more than a mile
away from any existing or proven economic oil or gas wells.
Developmental Drilling is typically categorized as wells designed to define or
extend a proven field or existing production. This can be a step-out project to
define the productive limits of a reservoir or can be considered in-field (or in-fill)
drilling of a pattern of wells. It can be used in a water flood development. Some
types of horizontal drilling are considered developmental due to the fact that the
drilling operations are being conducted in known reservoirs, thereby reducing
the risk. Developmental drilling offers the highest profit potential of any oil and
gas area, as well as significantly lowering the risk.
New Technology - K2 Capital evaluates many new or emerging technologies in
the Oil & Gas Industry. We work with our valuable contacts in the industry to
test and develop new Technologies for drilling and field services.
Royalty Funds - Generally speaking, a royalty fund is when royalty interests
are being bought, sold and held by the funds sponsors. In nearly all leasing
situations, once a lease has been developed, it provides a revenue stream. A
portion of the revenue stream is set aside for royalty which generally amounts to
12.5 percent and overriding royalty and/or carried working interest of 2 to 5
percent.
In a royalty fund the objective of the fund is to generate its revenue from
royalties that are held from different producing fields throughout the country.
The main feature to owning a percentage of a royalty fund is that the royalty
owner (or interest owner) pays no percentage of operating or developmental
costs associated with the production of the oil or gas. Royalty programs
generally offer a low risk factor along with a relatively low return. However, their
main feature is that these types of programs last for many years.
Lease Acquisition Funds - The main feature with this type of fund is that the
fund will retain a royalty for accumulating the leases that it will "turn" into an
operating company. Generally, the funds are used for acquiring acreage in
developing exploration plays. These types of acquisition programs offer a higher
degree of risk, but can generate a significant return on equity if the sponsors of
the fund are able to turn their acreage to other exploratory type oil companies.
Combination Funds - These are what they sound like, a combination of
acquisition and drilling funds. Generally, this type of fund will target a
regional-type oil development play whereby they will acquire existing properties
and then do a developmental drilling program on the properties they have
acquired. These types of programs generally have a high degree of success
and offer an excellent rate of return as well as providing a minimal amount of risk.
