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Abbott, David M.1
(1) Consulting Geologist, Denver, CO

ABSTRACT: Oil and Gas Interests Are Securities: Consequences for Deal Promotion

Those involved directly in deal promotion or who supply the technical information used in deal promotion are subject to the antifraud provisions of the federal and most state securities laws. This stems from the fact that “fractional undivided interests in oil and gas or other mineral rights” are part of the definition of a security. There are no exemptions from the antifraud provisions of the securities laws as there are from the registration provisions. Avoiding the potential litigation and liabilities thus imposed requires that the geoscientist ensure that all material aspects of his or her involvement are discussed in language that potential investors understand. “Material” covers any information for which the geoscientist is or can be held responsible and which the potential investor would consider in deciding whether to participate in the proposed deal. “Transparency” is the key concept in avoiding problems. Violations of the securities laws can result in loss of your home, other assets, and professional licenses and certifications. Consultation with qualified securities counsel to identify and correct potential problems protects both sides of the deal, should be a routine part of any deal, and included in the deal’s AFE.

AAPG Search and Discovery Article #90026©2004 AAPG Annual Meeting, Dallas, Texas, April 18-21, 2004.