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by Terry Stanfield

Investing in domestic oil exploration is not the same as investing in oil commodities. When you invest in oil commodities, you are betting on the price of the oil going up. This pertains to oil that has already been discovered and refined. When you invest in domestic oil exploration, you are investing in a potential well for oil. There is a risk for both types of investment, but investing in exploration of oil or natural gas has the potential for better returns, includes tax benefits and can not only help you, but the entire nation as a whole.

When you are considering investing in the exploration of oil, such as the drilling of a new well, you should consider companies that are close to home and have a proven track record in the field of domestic oil exploration. You will be buying a share of the well when you invest in such a venture. The cost of the drilling, including labor and equipment, can be written off on your income taxes, prorated to the portion of the well that you own.

Before you decide to embark on investing in a domestic oil drilling project, get to know the company that you will be dealing with. Make sure that they have been in the business for a while and have provided returns for their investors. You should also know about where the well is located and why they feel that drilling will yield oil or natural gas. Make sure that you understand just how much of the well you will own.

When you deal directly with the company rather than a series of brokers, you have a better understanding of what is going on with your investment. Many people get turned off by investing in this type of venture because they have heard about people getting cheated in scams. This usually happens when someone deals with someone other than the company. They might buy a share of a well from someone who owns one twelfth of the investment from someone else who also has a share from the company. This is usually too many hands in the proverbial pot. If you deal directly with the company as solid investor, you are privy to what is really going on and not hearing it second hand. You are avoiding the potential for a scam.

You also have more of a chance of obtaining not only a profit, but a steady cash flow, if the drilling is successful. While some people hope to strike it rich by hitting pay dirt in a wildcat well where there are few other investors, others play it safe and invest with companies that have been successful in drilling and will provide them a steady cash flow on their return. The returns on the investment can be 10 to 1 in many cases, making them more lucrative than any other type of investment.

Learn about the company and deal with trusted individuals before you embark on investing in domestic oil exploration. This can be an investment that provides you income for many years and offers you tax benefits as well.

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