Oil and Gas Investments (Direct Participation Programs) are considered to be a Non-Registered Securities (in most cases) and can only be sold by three different types of entities:

1. Broker/Dealers-That are registered with the Securities Exchange Commission/NASD 
2. Independent Oil and Gas Companies - Must be an Officer of the Company making the offer. 
3. Operators that are registered with state agencies - Cannot sell accross state lines - Intrastate only

Master Limited Partnerships are a fully registered Securities and are also used in direct participation programs. Fully registered Securities are expense and time consuming to prepare for an offering of a drilling program. This type of partnership is rarely seen. Most investments are structured under the guidelines of a non-registered Securities (Regulation D) Offering.

Filings must be made to State Securities Agencies in most states in the U.S. ( Blue Sky )

A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all securities offerings and sales, as well as of stock brokers and brokerage firms. Each state's blue sky law is administered by its appropriate regulatory agency, and most also provide private causes of action for private investors who have been injured by securities fraud. Your state agency that regulates these offerings has to be notified within 15 days from the date of the sale by the issuer of these investments.

Direct Participation investments in drilling programs, require a fully disclosed Private Placement Memorandum, a.k.a Confidential Information Memorandum. This document must fully disclose all legalities associated with this type of investment and the individual drilling prospect being sold. A potential investor must see this information before purchasing working interest any drilling program. This is required, by Federal and State laws. A memorandum that has any validity should provide at least 80 pages of extensive information in regards to Securities Laws / Taxes / Overview of the Drilling Project and the Management of that offering. Turnkey Drilling and Testing and Completion Contracts, in addition to an Operator Agreement.

Simply put, never involve yourself with any offering in Direct Participation without this memorandum being offered to you for review before you sign any contracts to participate as a partner in the program. No exceptions. The investment would not be considered to be legal and your investment would be subject to a legal abyss. Direct Participation has risks when you drill wells, don't enhance that risk by investing into a poorly structured investment.

The above information is designed to give you some insight as to Oil and Gas Direct Participation Drilling Programs and is not intended to be legal advice. Consult your Tax Advisor or Attorney if needed.

Duane Stephens
Indepth Exploration LLChttp://www.indepthexploration.com