The White Law Group is investigating the Reef Oil & Gas Income & Development Fund (“Fund”) after some investors received a letter announcing that the Fund is planning on selling all their assets and dissolving the partnership. This is troubling news for many investors who have received less than 40% return on their initial capital contribution.
According to the letter, the funds “primary reaming assets,” which consist of 25 oil wells known as the Mathews wells, have steadily declined in production. After several recompletions with minimal results, coupled with an increase in maintenance and equipment cost, the wells have become unprofitable. Without mentioning the performance of the other 13 wells, the fund decided to sell all their assets and distribute any proceeds to investors based on their prorata share of ownership.
According to form S-1 filed with the SEC for Reef Oil & Gas Drilling & Income Fund, the Fund raised approximately $21.7 million from nearly 400 investors. Less than 7 million has been returned to investor through distributions since the start of operations in 2005 to 2012. According to the Funds form D, approximately $5 million was set aside for sales commission.
The trouble with oil and gas partnerships, like Reef, is that the high sales commissions often provides some brokers with enough incentive to overlook suitability requirements. Though oil and gas partnerships can be lucrative investments, they are extremely high risk and are intended for accredited investors. As such, brokers must take into consideration a clients age, risk tolerance, net worth, financial needs, and investment experience before recommended an investment opportunity to clients.
Brokers that misrepresent the risks associated with an investment or overlook suitability requirements can be liable for investment losses.
If you invested in Reef Oil & Gas Income & Development Fund II and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at (312)238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.WhiteSecuritiesLaw.com.