More bad news in yet another Reef Oil & Gas Partnership. In a letter sent to investors, Reef Oil & Gas Income & Development Fund II (Fund II) plans to sell 32 wells that have been unprofitable and focus on the development of approximately 2,100 wells known as the Azalea package. Though the Azalea package has been profitable, the fund only has a “small interest” in the wells. In addition, the Reef letter says, “We believe it is unlikely the current or future revenues generated from the Azalea wells will be sufficient to return the investors original capital contributions in the Reef Oil & Gas income & Development Fund II[.]”
According to form S-1 filed with the SEC for Reef Oil & Gas Drilling & Income Fund, the initial capital contributions from investors for Fund II was more than $20 million dollars. Distributions to the some 240 investors was approximately $3.3 million, that’s less than 20% return over nearly 7 years since Fund II became operational in 2006. Between 2006 and 2010, Fund II purchases approximately 1700 producing wells and drilled roughly 70 wells, in addition to working interests in a number of fields.
Reports from some investors claim that distributions have not been made since 2009. Moreover, this most recent letter to investors indicates that distributions are not likely to resume “until a significant price increase in natural gas occurs” since a majority of the wells are natural gas.
The trouble with oil and gas limited partnerships, like Fund II, is that they are highly speculative and illiquid investments. Unfortunately for many investors the risks were understated or misrepresented by their brokerage firm. Brokers get paid big money to sell oil and gas partnerships and will often sugar coat the risks in order to make the sale.
Furthermore, these limited partnerships are intended for accredited investors. In addition to net-worth, brokers must consider a clients age, investment experience, financial objective, and risk tolerance before selling them any investments. Brokers that overlook suggestibility requirements or misrepresent an investment 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.