Investors in Energy 11, L.P. (“Energy 11”) may be able to recover investment losses through FINRA arbitration. if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
On March 19, 2020, Energy 11 announced that it would suspend distributions to limited partners until further notice, citing “recent volatility in the market and oil prices in particular” that “has caused uncertainty to our cash flow for the remainder of 2020.” Energy 11’s letter announcing the suspension is accessible here. ex_178082
Energy 11 has published an estimated per common unit value of its common units of $13.82 as of December 31, 2019. However, this value may be premised in part on oil prices of over $50 a barrel that prevailed in 2019. Oil prices have since plummeted to less than $30 a barrel as of this writing in March 2020.
Energy 11 is a Delaware limited partnership formed in 2013 “to acquire producing and non-producing oil and natural gas properties onshore in the United States and to develop those properties.” Specifically, as of March 31, 2017, Energy 11 had made key acquisitions in certain Sanish Field Assets (for approx. $340.5 million) located in North Dakota in proximity to the Bakken Shale.
Structured as a limited partnership, Energy 11 carries significant risks that may not be adequately explained to retail investors in marketing pitches by financial advisors who may recommend these complex financial products. Oil and gas investments by their very nature are extremely volatile as they are subject to the boom and bust cycles which characterize the oil market.
Perhaps of greatest concern to investors in oil and gas limited partnerships like Energy 11 is their illiquid nature. Investors in the common units of either Energy 11 cannot readily or easily sell their units, as there is no public market on which these units trade. Rather, investors must be able to hold their investment position indefinitely, until such time as a Liquidity Event may occur, which will likely only occur “within five to seven years from the termination” of the investment’s offering, at the earliest.
When a broker and/or brokerage firm recommends an oil and gas investment to a client, the financial advisor should first ensure that the investor is aware from the outset of the volatile nature of an oil and gas investment. Further, the financial advisor has a duty to determine if the investment is suitable in light of the investor’s profile and stated investment objectives. In addition, in instances where an investor’s account becomes over-concentrated in oil and gas investments, or if a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may well be held liable for losses on the investment.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes concerning oil and gas investments, including MLPs and limited partnerships, drilling programs, and private placements. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at email@example.com for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).