ABOUT OUR COMPANY
Who is Guardian Direct Energy Programs, Inc.?
Where are the program wells located?
Who is Guardian Oil & Gas?
How are prospects identified and developed?
DIRECT PARTICIPATION PROGRAMS
What are direct participation programs (DPPs)?
What is the business structure of a DPP?
What is a private placement?
DRILLING PROGRAMS
What are the risks with direct investments in oil and gas?
How many drilling programs does Guardian Direct offer each year?
What is a multiple oil and gas well strategy?
Does Guardian Direct offer developmental or exploratory drilling programs?
Does Guardian Direct invest in the drilling programs it sells?
What type of cost structure does Guardian Direct offer?
Why does Guardian Oil & Gas need investments from individual investors?
How many partners does Guardian Direct work with?
INVESTOR INFORMATION
Why should I invest in oil and gas?
How will I receive income from my investment?
How will I know how my investment is performing?
Is an investment in an oil and gas partnership suitable for all types of investors?
How long does an investment program last?
What happens if the price of oil and/or gas drops?
What is the process for making an investment with Guardian Direct?
TAXES
What are the primary tax advantages associated with oil and gas investments?
Who is Guardian Direct Energy Programs, Inc.?
Guardian Direct is a registered securities brokerage firm devoted solely to private placement oil and gas direct participation programs (DPPs). Guardian Direct offers programs to qualified investors who seek the return potential and tax benefits of direct participation in oil and gas exploration and development.
Where are the program wells located?
About 90% of the programs Guardian Direct has offered are located in Texas. The rest have been in Louisiana, Mississippi, Oklahoma, and Utah.
Who is Guardian Oil & Gas?
Guardian Oil & Gas, Inc. (Guardian), a privately held non-operating oil and gas company, is the managing partner of all projects offered through Guardian Direct.
How are prospects identified and developed?
Guardian’s geoscience experts identify land with the potential for commercial oil and/or natural gas production. Guardian’s land professionals then determine who owns the targeted land and leases the mineral rights to that land. After lengthy negotiations, Guardian partners with operating companies with proven track records to extract the oil and gas from underneath the earth’s surface.
DIRECT PARTICIPATION PROGRAMS
What are direct participation programs (DPPs)?
Direct participation programs (DPPs) are a type of investment program that allows you to enjoy the benefits of a direct investment in tangible assets without many of the complications and risks that normally accompany such investments. As an investor in an oil and gas well DPP, you own an interest in the operating energy company’s assets and may benefit from the income it produces—namely, revenue derived from oil and natural gas sales.
What is the business structure of a DPP?
Energy ventures that offer DPPs are generally formed as limited partnerships. The partnership’s sponsors pool investors’ funds to make investments in oil and gas projects. Limited partnerships have one or more general partners and one or more limited partners.
The managing general partner, who in the case of a DPP is known as a sponsor, is responsible for managing the business’ assets and running its operations. Limited partners are not liable for losses beyond their own investment and do not participate in the partnership’s management.
If you invest with Guardian Direct, you may begin as either a general partner or a limited partner. If you invest as a general partner, at the end of the calendar year in which the partnership’s well is drilled and completed, you would automatically be converted into a limited partner. This automatic conversion feature limits your ongoing liability after you have reaped the accelerated tax benefits available to general partners in the first year of a DPP investment. Please discuss this two-step process with a legal or financial adviser before making an investment.
What is a private placement?
A private placement is a type of offering that is exempt from the Securities and Exchange Commission (SEC) registration requirements that public companies usually must follow. Typically used for smaller oil and gas projects, private placements are offered only to a select group of qualified individuals and businesses that generally must be accredited investors.
Individual accredited investors have either a net worth of $1 million excluding the value of the individual’s primary residence, net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors.
DRILLING PROGRAMSWe generally offer only single-well partnerships so that each well stands on its own merit and is not grouped with one or more other wells in which an investing partner may not wish to participate.
What is a multiple oil and gas well strategy?
Guardian Direct offers investors the opportunity to invest in multiple programs in strategic plays, or areas of similar geographic, geologic, or temporal characteristics that contain oil and natural gas, around the country to help increase diversification. In our view, diversification is a key component in creating a successful oil and gas portfolio.
We generally recommend investing in at least five partnerships. Under normal circumstances, this would equate to five different wells. Spreading your investment dollars over several wells generally decreases the overall risk associated with investments of this type.
Does Guardian Direct offer developmental or exploratory drilling programs?
Guardian Direct focuses on developmental drilling programs, which are projects drilled close to existing, productive sites. Drilling next to proven sites increases the likelihood that the new well will also be productive.
We also offer exploratory drilling programs, or those that seek to find oil and gas in new, untapped areas. We engage in exploratory drilling only if the land’s geological characteristics indicate that the risk is warranted and that oil and gas could exist beneath the earth’s surface.
Does Guardian Direct invest in the drilling programs it sells?
No, for a variety of legal and regulatory reasons, Guardian Direct does not invest in the programs it sells.
What type of cost structure does Guardian Direct offer?
Guardian Direct investors benefit from a risk-reducing cost structure provided by Guardian, the managing partner of Guardian Direct’s drilling programs.
Guardian offers a “turnkey” cost structure, which means investors pay a fixed cost for the well to be drilled and completed. Turnkey cost structures help limit investors’ liability since drilling and completing a well often costs more than was initially projected. The managing partner and the drilling operators are responsible for any amount that exceeds the projected drilling and completion costs—not the investors.
Why does Guardian Oil & Gas need investments from individual investors?
Though Guardian does not need them, investments from individuals help give Guardian quicker access to capital than it would otherwise have. As a result, Guardian can more quickly expand into plays it believes will be the most profitable, helping it to increase the number of drilling programs it can sponsor each year.
As an investor, you have the opportunity to participate in a drilling program with some of the country’s most experienced operators, including Anadarko, BBX, Chesapeake, Hunt, and XTO.
At Guardian Direct, you have access to a variety of drilling programs with reputable and experienced operators so that you can benefit from a diversified oil and gas portfolio.
How many partners does Guardian Direct work with?
Guardian Direct has over 300 active investor partners, and Guardian Oil & Gas works with about 10 experienced operators on drilling programs offered to Guardian Direct investors.
INVESTOR INFORMATION
Why should I invest in oil and gas?
Global demand for energy has been rising fast. According to the International Energy Agency (IEA), world demand is expected to increase 50% between 2007 and 2030, and the United States will play an important role in this increase.
Currently, the United States relies on fossil fuels for 85% of its energy. Though the use of alternative sources will increase in the coming years, oil is not an easily replaceable commodity as we rely on it for heat, transportation, and critical products such as plastic. As a consequence, there is political and economic pressure to increase domestic drilling for this natural resource.
As an investor in oil and gas, you can help contribute to the nation’s goal of becoming energy independent, while taking advantage of the potentially substantial returns that can result from investing in this significant industry.
How will I receive income from my investment?
Investors receive monthly distributions if a well is successful. You may elect to collect income payments or to reinvest your earnings into additional projects.
The amount of your monthly distribution is based on the revenue derived from oil and gas sales, your ownership interest, and the current market value of the natural resources paid by the intermediary at the time of the sale.
How will I know how my investment is performing?
So that you can stay informed on your investment’s performance, we mail detailed partnership reports to our investors on a monthly basis.
Is an investment in an oil and gas partnership suitable for all types of investors?
No, investments in direct oil and gas partnerships are not suitable for all types of investors.
You generally must be an accredited investor to be eligible to make a direct investment in oil and gas. Accredited investors have either a net worth of $1 million excluding the value of his or her primary residence, net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors.
There are also minimum investment requirements and upfront fees. At Guardian Direct, the minimum investment amount ranges from $12,500 to $20,000 depending upon the size of the program.
In addition to meeting these financial requirements, other critical factors include your risk tolerance, investment objectives, timeframe, experience, and other current investment holdings. One of our registered representatives will work with you to determine if the investment is suitable for you.
How long does an investment program last?
Direct investments in energy partnerships generally range from 7 to 12 years, though they may last longer and can be open-ended.
This illiquidity is especially important to keep in mind because there is no formal secondary market to sell your ownership interests. The long-term nature of oil and gas investments may make them unsuitable for some investors.
What happens if the price of oil and/or gas drops?
A drop in the price of oil and/or gas will have a direct impact on the value of the minerals produced from the well, which in turn will reduce the partnership’s revenue and each partner’s share thereof. However, Guardian endeavors to identify and acquire land in plays that will remain economically profitable to drill even if prices drop below current levels.
What is the process for making an investment with Guardian Direct?
The first step is to speak with one of our registered representatives to determine whether you are a qualified investor and if an oil and gas investment is appropriate for you. Once you have been qualified, we will send you information about the company. And, after you have had an opportunity to get acquainted with our firm, your registered representative will send you an offering for a specific investment opportunity that the registered representative believes is suitable for you. Should you elect to participate, your registered representative will walk you through the subscription documents and private placement memorandum, which outlines the risks, potential rewards and other pertinent information about the offering. Once the minimum program offering amount is met, the investment is finalized once you, the managing partner, and the placement agent have signed the subscription documents and your payment has been processed.
TAXES
What are the primary tax advantages associated with oil and gas investments?
There are a variety of tax incentives the US government has put in place to encourage domestic drilling for oil and gas. The two principle benefits include the tax deductions for intangible drilling and development costs (IDCs) and depletion. Deductions for geological and geophysical (G&G) costs and depreciation are also important.
IDCs are expenses related to the costs associated with drilling an oil well, including supplies, fuel, and the price of a drilling rig. These costs may be fully deductible within the first year, which may be appealing to those who have received a lump sum — for instance, proceeds from selling a business or selling stock options — in the same year they join the partnership. IDCs may also be capitalized, or recovered, over time.
Depletion allowances are permitted for the duration of the well’s productive life and may be used to offset your tax liability on any income you receive from oil and gas sales. There is more than one way to calculate your deduction, so it is important to speak with a tax or financial professional about which method may be most appropriate for you.
Geological and geophysical (G&G) costs are those associated with gathering and processing seismic and other data used to locate oil and gas deposits. Expenses paid or incurred in connection with oil and gas exploration and development may be amortized, or spread, over a 24-month period.
Equipment and other tangible drilling costs associated with oil and gas production gradually depreciate in value over time. You may also be able to take a depreciation allowance for these costs against any income you receive.
For any questions you may have about the tax consequences of making an investment in oil and gas, please consult a tax or legal professional.
