Requirements for an Oil and Gas DPP Prospectus
The SEC’s content requirements for the preliminary and final prospectuses of oil and gas DPPs are extensive. The following requirements are in addition to the requirements for all prospectuses discussed above.
Summary of Program. The prospectus’s cover page must contain a summary of the DPP that briefly states key details of the program. These include:
• general nature of the DPP securities (e.g., units of equity in an LP)
• minimum that must be raised in order for the DPP to begin operation
• maximum dollar amount of DPP securities to be sold
• minimum dollar amount that an investor must purchase
• how long the DPP securities will be offered for sale (e.g., by a specified date, or until the maximum amount is raised)
• compensation to be received by the issuer, sponsor, and underwriter
• how much of the offering’s proceeds will actually go toward the DPP’s operations
• percentage of expenses borne by the investors vs. other parties
• percentage of revenues payable to the investors vs. other parties
Risk Factors. Risk factors to be considered by the investors before making an investment in the program should be described in a well-organized series of concise paragraphs.
Definitions. This section is a glossary of industry terms that appear elsewhere in the prospectus. The definitions must conform to how those terms are actually used in the industry.
Terms of Offering. This section is a more detailed description of the DPP securities identified in the summary. The offering price should be restated, along with the minimum and maximum amounts sought and the minimum purchase required in order to invest. Often, this section also contains the details of the e