Erez Law is currently investigating financial advisors across the country who recommended investments in EnerVest Ltd., a Houston, Texas-based oil and gas company that has been focusing on energy investments since 1992.
Once rated as one of the top 25 oil and gas companies in the United States with a $2 billion valuation, EnerVest raised money and invested $1.3 billion in oil during the drilling boom in 2013, when oil prices were averaging about $90 a barrel. During this time, EnerVest bought oil and gas wells and field already producing oil and gas but were neglected by big oil companies, and then the company made improvements and drilled more to increase output. This use of fund-level debt allowed bad investments to pull down good ones.
This type of investment was attractive to institutional investors, as they would typically pay out a stream of income after the first investment, unlike other private investments that would typically take years to produce such results. Institutional investors included universities across the country, charitable organizations, and Florida’s largest pension fund manager and the Western Conference of Teamsters Pension Plan, a manager of retirement savings for union members in nearly 30 states.
In the past, EnerVest funds would see a return of about 30%, which allowed them to raise larger pools of cash for new endeavors. Then, the volatile energy sector experienced significant turmoil, and EnerVest and other energy companies were negatively impacted when global crude oil prices fell below $40 per barrel at the end of 2015. This was the lowest level since early 2009, as supply was in excess of global demand. As of July 2013, the cost of oil per barrel is around $45.
Investors in EnerVest from the 2013 crude oil price spike will now be left with just pennies on the dollar for their investments. According to an article in the Wall Street Journal, “Though private-equity investments regularly flop, industry consultants and fund investors say this situation could mark the first time that a fund larger than $1 billion has lost essentially all of its value.”
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
Investments in EnerVest and similar stocks and bonds in the volatile energy sector may not be suitable for investors looking to generate income or maintain principal. Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its brokers customers.
Erez Law represents investors in the United States for claims against brokerage firms who recommended investments in EnerVest stocks and bonds. If you have experienced investment losses as a results of investments in EnerVest, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.