Whats the difference between the “invoice-cost” and “turnkey” structure?
Drilling and completion costs are typically handled on an “invoice-cost” (aka actual-cost) or “turnkey” basis. The invoice-cost structure means the investor pays the actual cost to drill and complete the well after paying a one-time overhead fee to cover the expense of managing and offering the project. With the invoice-cost structure, investors receive an accounting of all invoices paid toward drilling and completing the well. The turnkey structure, on the other hand, is a fixed amount set by the project manager to drill and complete the well. In some instances, the invoice-cost structure is the preferred method as is the case with shallow wells where there is low mechanical risk. In other instances, the turnkey structure with a fixed cost is more appropriate as is the case with the deeper wells where the mechanical risk may be higher.
