Definition of Oil and Gas Direct Participation Program
An Oil and Gas Direct Participation Program is a type of DPP designed to invest in oil and gas production or exploration. DPPs typically lack liquidity and involve some degree of risk. The level of risk can be extremely high or relatively low depending upon the type of oil or gas program involved.
Applying "Oil and Gas Direct Participation Program" to Securities Exams:
There are several types of oil and gas partnerships that an investor may participate in. An investor may invest in oil and gas income programs, developmental programs, or exploratory programs also known as wildcatting programs. The type of DPP selected will depend on the investor’s objective and risk tolerance. Once the oil or gas partnership has been formed and has begun operating, the limited partners and the general partner will share in the income and tax benefits generated by the partnership according to the sharing arrangement laid out in the partnership agreement. There are several ways DPPs will be tested on your exam. You must know the objective and risk levels associated with each type of partnership as well as the roles of the general and limited partners. Oil and gas direct participation programs will be heavily tested on the series 22 exam , series 39 and series 7 exams. Individuals who are taking the series 24 or series 65 exams will also see questions relating to oil and gas direct participation programs.