Due diligence in oil and gas is the difference between investing and gambling. This page shows the exact process we run before any deal reaches an investor — and the checklist you should demand from any sponsor, including us.
Dry holes get the headlines, but most investor losses in this industry trace back to things that were checkable before a dollar moved: operators with thin track records, projections built on cherry-picked offset wells, AFEs that quietly understate costs, and lease structures that pay the promoter before the investor. Every one of those is discoverable — if you know where the public data lives and take the time to read it.
Add to that list the four items investors most often discover after funding, because nobody raised them: that the interest was assessable and a bill could follow; that liability in the holding form chosen was not limited; that plugging and abandonment costs fall on the working interest at the end of well life; and that there is no market whatsoever in which to sell the position. None of those is a surprise if you ask. All four are covered below.
We built our own screening platform because brochure-stage diligence isn’t diligence. Before we negotiate on any prospect:
Our software grades every producing U.S. county A–F using 4,000,000+ state well records — actual production histories, well density, decline behavior, and operator activity. A deal in a D-graded county has to explain itself before we look twice.
We pull the actual reported production of wells surrounding the prospect — not the sponsor’s selection of them. If the offsets don’t support the projection, the projection is fiction.
Return models run against a live price deck (WTI and Henry Hub, refreshed weekly) — not the $90 oil assumption that makes every deal look good. We stress-test at prices below the current strip.
State filings, plugging history, litigation, and the deal’s NRI math: how much of each revenue dollar actually reaches the investor after royalty burdens and promotes. If the structure front-loads the promoter, we pass.
The result of this process is simple: most deals we evaluate are never offered. See the screening platform behind it: Kingdom Scout™.
A diligence page that does not disclose the sponsor’s own conflicts is marketing. Here are the categories that exist in this business, stated plainly. The specific arrangements, fees, and economics that apply to any given program are set out in that program’s offering documents, which is where deal terms belong — ask for them and read them.
A sponsor may have an ongoing commercial relationship with the operator that drills and runs the wells, and may have relationships with landmen, service companies, or marketers involved in a program. Repeat relationships bring familiarity and negotiating leverage — and they also mean the sponsor is not a wholly disinterested party when assessing that operator’s performance. Ask what the relationship is, how long it has existed, and whether it is arm’s length.
Principals, affiliates, or family members of a sponsor may hold interests in the same leases, wells, or acreage offered to investors — including working interests, retained overrides, or interests that arise after payout. Alignment can be genuine, but so is the conflict: the sponsor sits on both sides. Ask who holds what, whether it was acquired on the same terms as yours, and what reverts to whom and when.
A sponsor running more than one program must decide which program gets which prospect, how shared costs and overhead are apportioned, how equipment and crews are prioritised when they are scarce, and how management attention is divided. Every one of those decisions advantages one set of investors over another. Ask what the written allocation policy is and who applies it.
Sponsors are compensated — through fees, promotes, carried interests, markups, or reversionary interests. Compensation that is earned on closing rewards raising capital; compensation that is earned after investor payout rewards well performance. Neither is improper, but the two produce different incentives, and you are entitled to know which one applies. It is disclosed in the offering documents. Read that section before the geology section.
Related-party dealing is normal in private oil and gas — it is concealment that is the problem. Any sponsor who becomes vague when asked these questions has answered them.
Whether you invest with us or anyone else, do not wire funds until you can answer these:
| Category | What to verify |
|---|---|
| Operator | Years operating, wells drilled and still producing, state enforcement or plugging violations, litigation history, financial condition, bonding position, references from current investors — and what happens to your wells if the operator becomes insolvent |
| Geology | Third-party reserve or engineering report and the name of the firm that signed it; actual offset-well production from state records (not the brochure); formation depth and decline profile. Confirm whether you are being shown proven reserves (a defined term requiring an independent report) or offset production history — these are not the same claim |
| Economics | AFE line items vs. regional drilling costs; price assumptions vs. today’s strip; payout timeline at conservative production; LOE per well and the price at which each well stops covering its own costs; price sensitivity run at a 25% drop and a 50% drop |
| Structure | Your working interest % vs. net revenue interest %; total royalty burden; promote/carried interest; reversionary interests after payout; who operates and at what fee; how costs are allocated between programs |
| Assessability | Can you be billed after funding? Is the interest assessable; is it turnkey or fixed-price; what happens if actual costs exceed the AFE; what are the non-consent penalties for declining a capital call; can another owner’s default be reallocated to you |
| Liability | Is your liability limited in the holding form proposed — and what does that do to §469(c)(3) treatment; what insurance is carried, at what limits, with what exclusions, and are you an additional insured; who bears plugging and abandonment cost and how is it funded |
| Escrow & funds handling | Where subscription funds sit between wiring and closing; who the escrow agent is; the conditions for release; what happens to your money if the offering does not close; who has signature authority |
| Takeaway & marketing | Who buys the production; is there an executed purchase contract; what is the differential to benchmark; what pipeline, trucking, or disposal capacity the wells depend on and what happens if it is unavailable |
| Liquidity & exit | Transfer restrictions and consent rights; whether any investor has ever exited and how; whether the sponsor will repurchase (usually not); expected hold period to end of well life; how the interest is valued for estate purposes when there is no market price |
| Reporting | What you receive monthly and annually; whether revenue statements itemise deductions; whether program financials are audited and by whom; your audit and information rights under the operating agreement |
| Legal | PPM risk factors read in full; Reg D filing (Form D is publicly searchable on SEC EDGAR — check it); subscription docs reviewed by your attorney; how distributions are calculated and audited; dispute resolution and governing law |
| Tax | IDC ratio in writing; your CPA’s confirmation the deduction works for your return, including at-risk (§465) and basis limitations; depletion limits; state where income is sourced and any nonresident filing obligation; K-1 delivery timing in writing |
| Background | Search the principals and the entity: state corporate registries, county records, court dockets, FINRA BrokerCheck and the SEC’s IAPD for anyone selling the offering, and your state securities regulator |
This checklist is currently on-page only — there is no downloadable PDF version. Print the page or copy it into your own working file.
A single set of projections tells you what a sponsor hopes will happen. What you need is the shape of the outcomes if it does not:
Diligence does not end at funding. Read every revenue statement and check the volumes, the realised price, and each deduction against the prior month. Compare actual production to what the plan assumed and ask about the gap. Watch for capital charges appearing in the netting. Keep every statement for depletion and for reconciling your K-1 — which will not match the total of your checks. Track your basis and your at-risk amount with your CPA each year. And keep an eye on the operator: state enforcement records, plugging performance, and financial condition matter for as long as you hold the interest.
Join the first-look list. When the next program clears our screening, you get the PPM, the offset data, and a direct call with founder Sean Pruitt — and you can run this exact checklist against it.
Direct oil & gas investments are speculative, illiquid, and offered to accredited investors only via confidential private placement memorandum under SEC Regulation D. Depending on the form in which a working interest is held, liability may not be limited to the amount invested. Nothing on this page is tax or legal advice; consult your own advisors. Last reviewed July 2026.
Investor Briefing
Answer a few quick questions to receive current project details and tax documentation.
For accredited investors · takes about 30 seconds
