Limited Partnership Question


I have been "invited" by a company named Rockwell Energy (
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) 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
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) 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
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Reply to
ritpg

These operations are getting very common now. Over labor day I was in Oklahoma and read about an LP much like the one you've described that went belly up. Turned out it was a Ponzi scheme and the operator of the LP eventually went broke taking all the investors with him. _Money_ magazine had a small sidebar warning about the proliferation of these scams last month as well.
This may be true, but there are plenty of cash heavy oil and gas folks out there, why does Rockwell need your money?
Trust your instincts on this one.
-Will
william dot trice at ngc dot com
-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.
Reply to
Will Trice

Even just that piece of it is interesting. Ask for some guidance about the tax advantages of holding an LP in an IRA. It's a trick question so it could be entertaining to hear the answers.
I'm guessing you have little or no real interest in this investment. If you do...take a copy of the PPM to an attorney, and pay someone to evaluate the thing before plunking down $100k/10% of your net worth from your IRA. That's why securities laws in the US restrict private placements to "accredited investors"...you are assumed to have the resources to properly assess the thing. You are also assumed to have enough common sense to use a resource other than Usenet, and not to go writing big fat checks without doing your own due diligence. =)
-Tad
-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.
Reply to
Tad Borek

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