Investors

Gulf Coast Midwest Energy Partners, LLC brings investors together with the best independent oil and gas operators on the Texas and Louisiana Gulf Coast. Any potential investor should consider the following questions:

Why does investing in oil and gas projects make sense?
Why is a Gulf Coast Energy partnership the best way to invest?

Why Invest in Oil and Gas

Diversification

Most investors diversify their investments across a range of asset classes and industries; equities, bonds, real estate, etc. The aim of asset allocation is to balance the characteristics of different asset classes to keep your portfolio:

• In line with your financial goals;
• Help ensure that if the value of your investments drops in one asset category, it may gain in another.

Energy represents roughly 8% of the US total GDP. Oil and gas is a major component of this sector and also serves as a major feedstock into chemicals, plastics and other manufacturing industries that produce many of the products we consume everyday. Investing in oil and gas offers an excellent opportunity to protect your portfolio against energy-related inflation and raw materials risk that cannot otherwise be diversified away.

Oil and Gas Versus the Rest of the Energy Sector

Quick and Potentially Very High Returns - Most oil and gas wells return 50% of their ultimate recoverable reserves during the first five years of their life; the well's primary recovery period. The best wells can achieve returns of 6 to 1 and much higher. No other energy sector investment can approach the magnitude and speed of oil and gas returns.

Global Market - Oil and gas are global commodities. As the Chinese, Indian and other rapidly expanding economies rise, demand for oil and gas will continue to rise. Other energy markets such as electricity are much more regional in nature and far more dependent on the status of the U.S. economy and supply demand balances within individual geographic regions.

Tax Advantages - There are numerous tax advantages associated with investing in oil and gas wells that are not available to investors in other parts of the energy sector.

The Future of Oil and Gas

Oil and gas exploration will continue to play a major role in our economic and energy futures despite many of the headlines to the contrary:

Oil is THE Feedstock for Internal Combustion Engines

The internal combustion engine will be here for the foreseeable future. Certainly technological innovations will increase the mileage we get from our vehicles. However, consider these statistics from the U.S. Department of Transportation:

Nearly three times growth in U.S. vehicle miles above pales in comparison to statistics globally; in 2017 there will be three times as many internal combustion engines worldwide as there were in 19922. Tata Nano, the world's cheapest car at $2,500 is just one example of a product that will drive this growth in global consumption of oil.

Alternative or "Green" Fuels Will Replace Fossil Fuels Soon

The common sense realities of fossil fuels versus today's green alternatives:

The Energy Information Administration publishes official energy statistics from the U.S. government. Click here (PDF) to see a table detailing sources of U.S. energy production by primary energy source from 1949-2006.

Percentage of Energy Produced in U.S. from Renewable Fuels 1949 to 1953: 8% Average
Percentage of Energy Produced in U.S. from Renewable Fuels 2002 to 2006: 9% Average

The simple limiting factor controlling renewable energy supplies is the availability of land. Consider the productivity of fossil fuels in generating electrical power versus renewable fuels in terms of land use1:

Unless we are prepared to double or more the footprint of our current croplands, we cannot expect renewable fuels to displace oil and gas over the next decade. A paradigm shift must occur in the technology around alternative fuels or dramatic new "green" sources of energy must be developed to make a significant contribution to eliminating the need to consume fossil fuels in the near future.

Energy Efficiency Gains and Conservation Will Reduce Overall Consumption

There are dozens of examples that support the notion that efficiency gains and conservation don't necessarily reduce energy consumption. Here are but a couple:

Furnaces - Today's gas furnaces are much more efficient than yesterday's models. Unfortunately, according to the National Association of Home Builders, the average home size in the United States was 2,330 square feet in 2004, up from 1,400 square feet in 1970. Efficiency gains in the furnaces are more than offset by the 66% increase in average home size as well as a 56% increase in the total number of homes.

Computers - According to Computer Industry Almanac, global computer density grew from 3 per 10,000 people in 1975 to 557 per 1,000 in 2000; a nearly 2,000 times increase over 25 years.

Efficiency gains and energy conservation are but half of the equation. Population growth, housing & GDP growth, and a host of new uses for products that consume energy far out pace these factors and will keep pushing global energy consumption higher.

We're Running Out of Oil and Gas.

Writing in the 1950's, American geologist M. King Hubbert predicted that the production of U.S. oil fields would peak in the early 1970's. It happened that U.S. production began to decline in 1970.

Princeton professor Kenneth S. Deffeyes, a colleague of Hubbert, sought to apply Hubbert's geological precepts on a worldwide basis. Deffeyes, author of the book Hubbert's Peak (2001) and Beyond Oil - The view from Hubbert's peak (2005) is a major proponent of the Peak Oil Theory, arguing:

"The economists all think that if you show up at the cashier's cage with enough currency, God will put more oil in ground."

The peak oil theory is valid. Production over time does deplete. However, Hubbert's work was based on very well known and documented fields located here in the U.S. Deffeyes global peak oil timing predictions are only as good as the data on global reserves, e.g., sketchy. Consider also the following facts regarding technological advances in oil and gas exploration:

3-D & 4-D Seismic - First developed in the late 1970's by big oil companies, these seismic surveys became widely available in the 1990's. They enabled the industry to evaluate seismic survey data in 3 dimensions, much like a CAT scan versus an X-ray. 3-D seismic gave smaller companies much improved capability to discover reserves in smaller lease plays.

Horizontal drilling - Another 1990's breakthrough opened up areas such as the Austin Chalk in Texas. In many circumstances, horizontal drilling boosts the production rates of wells making them economical to drill where they would not be drilled at all as vertical wells.

Completion Techniques - The natural gas potential of the Barnett Shale was known long before completion techniques were employed that could tap these large gas reserves.

Technology over time has allowed us to tap reserves that were not possible before. They have also increased our knowledge in already discovered fields. Imagine how effectively an older oil field can be developed with the addition of 3-D seismic where none had previously existed. A look at global reserve numbers over time demonstrates how technology has allowed reserves to rise despite advancing global oil consumption. Consider these facts from BP's Statistical Review of World Energy 2007:

1980 Proved Oil Reserves: 667 billion barrels
2006 Proved Oil Reserves: 1.2 trillion barrels

Proved reserves increased in every year but two despite total oil consumption of 682 billion barrels (PDF) during the period! Despite the world consuming more oil since 1980 than was proved at that time, world reserves have nearly doubled over the 27-year period.

No one knows when oil production will peak. What we do know is

• We are not running out of oil and gas and the timing of peak oil production is not known.
• Global demand will continue to rise for the foreseeable future.
• Alternative energy sources cannot be expected to replace fossil fuels any time soon.
• Tax incentives reduce the cost of investing in oil and gas here in the U.S.

All of these factors make oil and gas an incredible economic opportunity for investors.

1Peter W. Huber & Mark P. Mills, The Bottomless Well (Basic Books, 2005, p166)
2Peter W. Huber & Mark P. Mills, The Bottomless Well (Basic Books, 2005, p.75)

Why Invest with Gulf Coast Energy Partners

Investment Methodology

Gulf Coast's investment methodology is designed to preserve investors' capital and offer above average returns by utilizing the following techniques:

Gulf Coast invests in lower risk project classes. We are not wildcatters. We focus on hitting singles and doubles, concentrating on known resource plays and developmental wells.

Gulf Coast partnerships typically invest capital across 7 to 10 successful operators while limiting total exposure to any one operator.

Gulf Coast partnerships keep dry-hole risk of loss on any single well to a maximum of 2.5% of total capital invested. Investors of $1 million or more can expect that they will risk

Skin in the Game

Gulf Coast and its operating partners typically encompass more than 50% of capital invested per well. We stand shoulder-to-shoulder with our investing partners.

Proven Operators

Gulf Coast operators have a proven record of successful oil and gas exploration. They run cost effective operations and on site project management.

Interested in learning more about oil and gas opportunities at Gulf Coast Midwest? Click here to have our team show you more about our programs and operating partners.