The investment attorneys at Gana Weinstein LLP are investigating various potentially unsuitable sales of oil and gas private placements. These investments include those being underwritten and offered by David Lerner Associates, Inc. (David Lerner) – Energy 11 and Energy Resources 12.
Energy 11 was formed to enable investors to invest in oil and gas properties located onshore in the United States. The funds’ stated primary objectives are to acquire producing and non-producing oil and gas properties with development potential, and to enhance the value of those properties through drilling and other development activities. The fund plans to after five to seven years to engage in a liquidity transaction in which they will sell properties and distribute the net sales proceeds to investors, merge with another entity or list common units on a national securities exchange.
Investors often do not understand the substantial risks of oil and gas private placements. As reported in Reuters, when offerings by Atlas Energy LP, another issuer of oil and gas private placements were analyzed, investors only get to see 65-70% of their capital actually put to work on oil and gas projects. Further, the returns on these projects had more in common with running profitable casinos than investments. Reuters found that slightly more than half of 43 private placements Atlas issued over the past three decades investors lost money or just broke even. While investors lost in more than half of the deals in 29 or 67% of those deals, Atlas actually out-performed their own investors.
The costs and structures of many oil and gas private placements are very similar which cause these programs to fail at alarming rates even when oil and gas values trade favorable. Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.