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Posted by Harlan Lunsford on September 28, 2008, 12:40 pm
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ritpg wrote:
> I have been "invited" by a company named Rockwell Energy
> (http://www.rockwellenergy.com/) to join a limited partnership. The fact
> that I have never invested in anything riskier than a mutual fund based on
> the value of gold, I would think I have no business even considering such a
> gamble. But I figure the least I can do is a little homework before I make
> my final decision.
>
> The minimum investment is $100K. Participation would involve moving the
> $100K from my current IRA to a Sunwest Trust IRA where I would now be
> subject to an application fee of $50 and annual fee of $190 plus a fee of
> $10 per transaction after the first transaction per year for a single asset
> account. For a multiple asset account, instead of the $190 annual fee, I
> would be charged 0.5% of the asset value if it is more than $38K. I assume
> that as long as I limit my Sunwest portfolio to the Rockwell LP, I would not
> be subject ot the multiple asset account fees.
>
> The money they are collecting would be used to acquire the rights to
> additional natural gas wells within the U.S. and to outfit all the wells
> with a passive dehydration system (PDS) (see cpshouston.com) that is alleged
> to be greener and more efficient than current extraction methods. As I
> recall, I was told that 30% of the NG is lost using less advanced extraction
> methods.
>
> I was also told that the price of NG would have to slip to $3 for me to lose
> money on the deal. The "guaranteed - I mean projected ROI" will be 18% the
> first year increasing to 30% for each ensuing year. I would be capped at a
> 200% return and the period of the partnership would be 3 to 5 years. I do
> not understand why the period would be a range of years. I would think it
> would be a specific time period, for example 3 years, and that the
> partnership would end after 3 years or when the 200% cap was reached,
> whichever happens first. I'm also told I would have the first right of
> refusal for future partnerships.
>
> Rockwell currently has the rights to 20 wells in the Houston area, 11 of
> which are already outfitted with the PDS extraction hardware. Some number
> of the 20 are already producing NG and I could expect my first check some
> time in October (which I would arrange to have deposited in my Sunwest IRA).
>
> I am far from a wealthy person. With all assets included, I barely make the
> minimum portfolio requirement of $1M and a $100K loss would be significant
> for me. Of course, I'm asking myself the question, why me and why now? I
> figure this is related to the current difficulty in getting loans.
> Companies, who would normailly seek bank loans, are now being forced to
> acquire capital in atypical ways. To me this could mean there might be
> reasonable LP opportunities for folks like myself that would not normally
> exist.
>
> Last night I received an e-mail from Sun Trust with all the paperwork and
> documentation needed to complete the transaction. I am reviewing it now but
> of course, I am not an attorney.
>
> My instincts tell me to run, not walk, away from this. But I know there are
> people out there in the news groups who know much more than I ever will
> about such investments and why not get their opinions? I am posting this to
> a broad spectrum of NGs because I know there are many considerations in
> making such an investment (investment risk, legal, energy, taxes, etc.). If
> you feel I am posting this to an inappropriate NG, I apologize. If you can
> suggest an NG I have missed, please let me know. I will try to post all
> future articles on this matter to the appropriate NGs based on the feedback
> I receive.
>
> I will be contacted by a Rockwell representative Monday night and I'm sure
> it'll be one of those "I must have your commitment today" deals (which will
> end it right there if it happens). Any insights, warnings, cautions, advice
> you may want to give me will be greatly appreciated. Thanks so much for
> taking the time to read this.
>
> Terry
>
Without commenting on the appropriateness of Rockwell (really, I haven't
researched it), one things stands out, that you would have to take the $
from your IRA. IF.... you are not rolling it over into another IRA that
owns the Rockwell, you'll be up (the) creek with a taxable paddle.
ChEAr$,
Harlan Lunsford, EA n LA
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