Our offices continue to report on investment losses suffered by investors in various oil and gas investments that brokerage firms have increasingly recommended to retail investors in recent years. These investments include private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks. See Overconcentrated in Oil and Gas Investments?, MLP Fund MainStay Cushing Royalty Energy Hurt by Failing Oil & Gas Prices; Oil and Gas Investments – Issuers Profit While Investors Take All the Risk, BlackGold Opportunity Fund Investors Suffer Losses
Oil and gas related investments have been recommended by brokers under the assumption that oil & gas would continue to be sold at around $100 and increase steadily over time. However, last summer the price of oil & gas plummeted due to a strengthening dollar and increased global supply of oil and remains below $60 to this day. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.
Before recommending investments in oil and gas companies, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company.
In the case of oil and gas investments, many of these companies, such as BZP Resources, took on enormous amounts of debt in order to engage in exploration activities that could only make sense if the price of oil remained high. As reported by the Wall Street Journal the drop in oil prices and the industry downturn has made it difficult for the BZP Resources to refinance its debts.
On December 10, 2014, BPZ Resources stated that the company received notification from the New York Stock Exchange (NYSE) that the Company had fallen below the NYSE’s continued listing standards and would be delisted. By April 2015, the stock price of BPZ Resources was approximately $0.03 per share on the Over the Counter exchange (OTC Markets). BPZ Resources stock price decline has taken place over the past six years.
Brokers who sell oil and gas products are obligated to understand the risks of these investments and convey them to clients. Investors who have suffered losses may be able recover their losses through securities arbitration. Our consultations are free of charge and the firm is only compensated if you recover.