Why don confidential offering memorandums typically include prospective financial information about oil and gas investments?
A financial projection is not considered appropriate for an offering statement of an entity’s debt or equity interests. The only acceptable form of prospective financial information in a Confidential Offering Memorandum is a financial forecast. Oil and gas exploration and development, by its very nature, involves a great deal of risk because of the uncertainty of successful drilling results, the volatility of the price that can be realized when the gas and oil is marketed, and all the other factors that can influence the ability to produce and sell these commodities. Forecasts of oil and gas development activities could only be prepared if most of these risk areas could be controlled. An example would be very shallow, low risk drilling prospects with a long, reliable history of production, very high documented drilling success in the field, and a long-term fixed price contract to sell the gas or oil. Investments that are combined with the purchase of certain annuities or insurance cont
