By RACHEL LOUISE ENSIGN

Fund investors can go wrong in all sorts of ways. But since mid-April is fast approaching, let’s talk about one of the most common and least understood: taxes.

Even if it is too late to do anything about this year’s returns, it is a good time to start planning for next year’s.

At the root of the most common blunders are three types of taxable fund payouts: interest income, dividends and capital gains. While all three are subject to a complex web of tax rates and regulations, investors can limit their tax bills by understanding their funds, planning carefully and staying abreast of tax changes in Washington.

Here, according to financial advisers, are five of the biggest mistakes many fund investors make:

1. Keeping ‘tax-inefficient’ funds in a taxable brokerage account

Some types of funds distribute lots of dividends, interest income and capital gains, all of which can boost tax bills. Many investors would be better off holding those funds in tax-sheltered retirement accounts. With a standard 401(k) plan or individual retirement account, you pay tax only when you make withdrawals; earnings and withdrawals usually are tax-free in a Roth 401(k) or Roth IRA.

Tax-efficient funds—those unlikely to make big distributions—can be left in a taxable account, says Michael Gibney, a financial adviser in Riverdale, N.J. You will owe capital-gains tax if you sell those securities at a gain, but at least the timing of such sales is under your control.

Taxable-bond funds, including high-yield funds and funds holding Treasury inflation-protected securities, are among the investments you might consider holding in an IRA, advisers say. Ditto for funds that emphasize high-dividend stocks. Meanwhile, index funds that track a broad stock-market benchmark—and most but not all ETFs—might be candidates for a taxable account, as would municipal bond funds, since interest earned is tax-free.

Determining whether a fund is going to have capital gains can be tricky. Each year, funds must distribute gains if portfolio managers sell securities for a net taxable gain. One indicator is the level of turnover in the portfolio, though, admittedly, it is an imprecise gauge.

The higher a fund’s turnover, a figure that can be found on Morningstar.com, the more likely it is to pay out capital gains, says Mark Armbruster, president of Armbruster Capital Management, which is in the Rochester, N.Y., area. If a fund has paid out capital gains in the past, something that also can be found on Morningstar, that also is a sign it may do so again, he says.

Small-stock funds may produce more capital gains than large-stock funds, advisers say, because there are many more small stocks to trade among.

Broad index funds, which don’t change their holdings very often, are less likely to pay out capital gains than some actively managed funds that change their investments based on market conditions. The Vanguard 500 Index

fund, for example, has a 4% turnover ratio and hasn’t distributed capital gains since 1999. The actively managed CGM Focus,

on the other hand, has a nearly 500% turnover rate. It has performed poorly in recent years, so it hasn’t been in a position to distribute gains, but it distributed $8.21 a share in mostly short-term capital gains in 2007.

Still, when and why a fund realizes capital gains is complex, so “turnover is only a very rough gauge of tax efficiency,” says Christine Benz, director of personal finance at Morningstar. Another gauge is Morningstar’s “potential capital-gains exposure” statistic, an estimate of the percentage of a fund’s assets that represent mostly unrealized gains.

ETFs, in particular, rarely distribute capital gains, Mr. Armbruster says. That is because most are index funds but also because they are structured to minimize taxable sales of portfolio securities.

2. Holding on to funds that cost you big

Capital gains, whether taken on purpose by the investor or passed along by a fund, can add to your tax bill. But you can lessen their impact by strategically booking capital losses when holdings decline in value, so that they offset any gains dollar for dollar. In any year, if your capital losses exceed your capital gains, you can take up to $3,000 of the loss as a tax deduction and carry the rest of the loss forward to offset gains in future years.

This “tax-loss harvesting” has to be done carefully, however, to comply with Internal Revenue Service rules. Once you sell a fund or other security at a loss, you have to wait 30 days before buying either that same fund or a very similar fund (for instance, one that tracks the same index), or the loss is invalidated. “The securities cannot be ‘substantially identical,’ ” says Gil Charney, principal tax researcher at the Tax Institute at H&R Block, a division of H&R Block Inc., but “the IRS never clearly defined what substantially identical means.… It’s gray.”

If you want to keep exposure to the sector that fund covered, you can buy a slightly different fund—for instance, you likely could sell a fund tracking the Standard & Poor’s 500-stock index and immediately buy one tracking the Russell 1000, says Mr. Armbruster. You could later return to your original holding.

Keep tax-loss harvesting in mind any time the market or a particular holding suffers a major decline; you’ll miss opportunities if you think about this only near year-end.

3. Buying an ETF without learning what its tax treatment is

Gains and income from certain ETFs are subject to funky tax rules because of the funds’ holdings or their corporate structures. Though most of these aberrations invest in niche industries, some of the most popular ETFs could leave you with a surprisingly large tax bill.

The most popular offender: Gains from selling SPDR Gold Shares,

the second-largest exchange-traded product by assets, are taxed at a top 28% rate on collectibles, rather than the maximum 15% rate on long-term capital gains. That is true for all other funds that hold physical precious metals.

There are different rules for ETFs that provide commodities exposure by investing in futures contracts: Gains are taxed 60% at a long-term rate and 40% at a short-term rate. ETFs structured this way include some from the U.S. Commodity, PowerShares and ProShares families.

Also, some non-stock ETFs are structured as partnerships and report their tax information on a Schedule K-1 instead of the common 1099 form. Schedule K-1 typically is sent later than a 1099—it may not even arrive before your tax return is due because the partnership has to file its own return before sending you this form, says Eric Smith, an IRS spokesman. In this situation, you’ll want to ask for an extension from the IRS, he says. You can avoid these hassles by holding these funds in an IRA.

4. Fudging the new forms

Reporting securities sales on your tax return has gotten more complex, with new rules that require brokerage firms and fund companies to report to the IRS what you paid for some securities you sell. Because that reporting applies only to securities purchased after specified dates, you may have sales of both “covered” and non-covered assets. As in the past, for non-covered securities, the financial firm may voluntarily provide cost information only to you.

The new rules could make tax preparation more complex, tripping up some investors.

“Basically what they’ve done is taken Schedule D and added a new schedule behind it—Form 8949. All the transactions you used to put directly on Schedule D…are now on this new form,” says Robert Schmansky, a financial adviser in Bloomfield Hills, Mich.

The most important thing to know about Form 8949 is that you will have to separate the covered transactions from those that aren’t and report them on different lines. Individual stocks purchased on or after Jan. 1, 2011, are covered; for mutual funds and most ETFs, the new treatment applies to purchases on or after Jan. 1, 2012. Then, you must add the covered and non-covered transactions and put the total on Schedule D.

5. Investing without paying attention to the tax debate in Washington

When deciding when to take gains and what account to hold various funds in, it is important to stay abreast of what is going on in Washington.

Think hard about where tax rates are likely headed in the future. While some tax changes affecting funds are already in store, some experts watching the political debate—and the ballooning federal deficit—say investors may want to hedge their bets against higher rates and pay taxes on their gains soon.

There are a number of big tax changes on tap starting in 2013 that could deal a huge blow to your funds. If the Bush tax cuts are allowed to expire, the top rate on ordinary income and short-term capital gains will rise to 39.6% from 35%.

The current top 15% rate on long-term capital gains is set to rise to 20%. Qualified dividends will no longer be taxed at a top 15% rate and will be taxed as ordinary income. Also, net investment income, which includes dividends, interest and capital gains, will be subject to a new 3.8% Medicare tax, part of the Affordable Care Act, for married couples filing jointly who earn more than $250,000 a year and individuals earning more than $200,000 a year.

One possibility is that some of the current rates will be extended for most taxpayers, but not for high earners. “People who are over the $250,000 mark—Obama has drawn a line in the sand for those people,” says Ken Weingarten, a financial adviser in Lawrenceville, N.J. “It’s going to be crazy after the election. There is going to be a lot of horse trading to get these things straightened out.”

If you think that your tax rate on capital gains will rise soon, you may want to book a capital gain this year to lock in the 15% rate. Unlike with a capital loss, if you’re booking a gain you can repurchase the same exact fund in any quantity immediately after selling it.

Ms. Ensign is a staff reporter for The Wall Street Journal in New York. She can be reached at rachel.ensign@wsj.com.

A version of this article appeared April 5, 2012, on page C7 in the U.S. edition of The Wall Street Journal, with the headline: Tax Pitfalls for Fund Investors.

By ELIZABETH GUNNISON

“SKÅL!,” WE CRIED, and no sooner had I set down my thimble-sized glass than a colossal Swede slapped me on the back and seamlessly refilled it. Then we began again, lilting through a new melody, my bleary eyes struggling with the foreign text spelled out phonetically before me.

This is how I whiled away one long summer night at a wedding reception on the Baltic coast of Sweden: hearing toasts, crooning local drinking songs and draining a profusion of little nips bottles of something called snaps (which is pronounced “schnahps,” but is very different from dessert-like schnapps). My first glass was a mouthful of pure licorice; the second, redolent of rye bread; others gave off the earthy taste of cardamom or a bitter marmalade kick.

Such was my introduction to aquavits (or aquavites or akvavits), high-proof liquors that have been made in Scandinavia since at least the 15th Century by distilling fermented potato or grain mash and flavoring it with savory, herbaceous ingredients. Caraway seeds—which account for rye bread’s flavor—are always included in a traditional aquavit. Cumin, lemon or orange peel, cardamom, dill, clove, aniseed and fennel are also typical. Some aquavits—particularly Norwegian ones—are mellowed with barrel aging, while others are consumed young, raw and crystal clear.

These savory spirits form perfect counterpoints to the bold flavors commonly found in Scandinavian cuisine: pickled and smoked fishes, ripe cheeses, rye bread and dill-inflected potato salads.

Regardless of the flavor or production method, there’s only one way to drink aquavit in Scandinavia: straight up, from a small, stemmed glass. The tradition is referred to as “drinking snaps,” and it is not for the faint of heart. In Sweden, drinking snaps is mostly reserved for celebratory occasions like weddings, Christmas and Easter; in Denmark, they’ll do it over a long lunch; Norwegians prefer to sip their aquavit, which is a sensible place for the snaps novice to start.

Countless varieties of aquavit are available throughout Scandinavia, but its rarer in the United States. Here are a few of my favorite bottles available stateside and instructions on how to make your own at home.

A Lesson in Homemade Aquavit

Despite the ample supply of commercially available aquavits, it’s still common for Swedes to make their own. “A family will have its own aquavit recipe, just as Indian families have their own unique garam masala recipe,” said Keri Levens, the beverage director at Aquavit Restaurant in New York, who oversees the eatery’s in-house infusion program. While true aquavit production involves distillation, you can cop the same effect by infusing a store-bought spirit with any number of savory ingredients. Here are Ms. Levens’s ground rules, plus a few of her recipes.

1. Start with a neutral spirit. Ms. Levens recommends potato vodka—such as Boyd & Blair, Chopin or Teton Glacier— which picks up flavors better than grain vodka due to its higher viscosity.

2. Clean your ingredients thoroughly. Cut all the pith from citrus to avoid bitterness, and toast hard spices to intensify their flavors. Chop or slice fruits and vegetables into manageable pieces; the more surface area, the more flavor gets extracted.

3. Use a clean glass jar as an infusion vessel. A vodka bottle works fine, provided your ingredients fit through the small opening.

4. Different ingredients require different infusion times, ranging from a few days to a few weeks. Taste is the best judge here. Once the infusion is complete, strain finished aquavit through a coffee filter. It will keep indefinitely in the freezer.

Classic Aquavit

Toast ¼ cup coriander seeds and combine with 750 ml potato vodka, leaving to infuse for one week. Add ½ bunch dill fronds (from crown dill if available) and let infuse for three to four more days. Strain and store.

Fig and Cardamom

Toast ¼ cup cardamom pods and combine with 750 ml potato vodka, leaving to infuse for one week. Wash and halve ½ cup dried black mission figs and add to the infusion for four to five days more. Strain and store.

Horseradish

Peel, wash and coarsely chop a horseradish root. Combine ¼ cup chopped horseradish with 750 ml potato vodka. Leave to infuse for one to two weeks. Strain and store.

Three Brands to Sample

Lysholm’s Linie Aquavit.

Norway’s signature spirit is barrel-aged in sherry casks, and spends almost four months on the deck of a ship that crosses the equator twice. The motion and temperature fluctuations along the way are said to lead to a mellow, balanced final product. It might sound like pure marketing gimmick, but Lysholm has been at it for two centuries, producing a dry, smooth-drinking amber aquavit that’s softly spiced with caraway and hints of aniseed, fennel and coriander. Drink at room temperature. 42% ABV, $30

House Spirits Distillery Krogstad Aquavit.

There’s no rule that says great aquavit has to come from Northern Europe. This one is made according to a classic recipe by the same Portland, Ore.-based micro-distiller that produces Aviation Gin. The brilliantly clear spirit is flavored primarily with star anise and caraway, imparting a licorice zing that recalls pastis or ouzo. Ideal served right out of the freezer, alongside flavorful, rich foods like smoked salmon, strong cheeses and cured meats. 40% ABV, $30.

North Shore Distillery Private Reserve Aquavit.

This spicy, small-batch spirit out of Lake Bluff, Ill., is another example of high-quality aquavit made stateside. North Shore’s aquavit picks up its straw color and caramel notes over six months spent in American white oak barrels. Cardamom and cumin dominate, complemented by hints of lemon grass and pink peppercorn. Serve chilled or at room temperature. 45% ABV, $30.

A version of this article appeared April 21, 2012, on page D8 in the U.S. edition of The Wall Street Journal, with the headline: Sipping the Spirit of the North.

By SUDEEP REDDY And JOE LIGHT

The job market is showing signs of life, though its slow recovery suggests unemployment will remain high for years to come.

Employers added 162,000 jobs in March, the biggest monthly gain in three years, with one-third of the growth coming from the government’s hiring of 48,000 temporary workers for the 2010 Census. Despite those gains, the jobless rate held steady at 9.7% as new workers entered the job market and people who had previously quit the labor force returned.

The average length of unemployment rose last month to the highest point since record keeping began in 1948: more than 31 weeks. The number of workers out of work for six months or more rose sharply.

The latest report, which marks the third month since November in which payrolls increased, indicates the labor market is pulling out of a deep downturn that slashed more than eight million jobs since the recession hit in late 2007.

“It confirms that the economy has turned an important corner,” says J.P. Morgan Chase & Co. chief economist Bruce Kasman. “It’s been growing for a while, but I think what we’re seeing is that this growth is now broadening out to include jobs.”

The stock market was closed Friday for a holiday, but the jobs report sent stock futures climbing during a morning session. As investors anticipate a stronger economy—and look ahead to an eventual Federal Reserve rate hike—they pushed down Treasury debt prices, sending the yield on 10-year Treasury notes, the benchmark for corporate and consumer borrowing, to 3.94%, the highest since June.

Among those who have landed jobs lately is New York Web developer Philip John Basile, although, as with many other new hires, it is a temporary six-month assignment with the Leukemia & Lymphoma Society. He had been searching in earnest for three months, he says. “I’m still looking for a permanent job, but this is a good middle ground,” he says.

Many employers are reluctant to hire until they see stronger evidence of an economic recovery. Private-sector payrolls increased by 123,000 in March, but much of that boost was a bounce back from employment depressed in February by snowstorms. The government said overall payrolls increased by an average of 54,000 a month over the last three months.

The economic recovery so far remains heavily reliant on government support, which is visible in the jobs numbers. Hiring for the decennial census is expected to add hundreds of thousands of temporary jobs in the coming months. Other forms of government intervention also remain crucial. The housing sector’s boost is being driven in part by tax breaks and extensive government support for the mortgage market. And last year’s $787 billion stimulus is temporarily preventing even deeper job losses in fields from construction to education.

“We don’t expect it to get worse, but we’re not seeing a rebound yet,” says Donald Stone Jr., chief executive of Dewberry & Davis, a Fairfax, Va.-based engineering firm. The closely held company is hiring 30 right now, but doesn’t expect employment to return to its peak anytime soon, Mr. Stone says. Dewberry employed 1,800 in 2009, about 10% below its prerecession high.

While stimulus projects have bolstered its business with the federal government, state and local governments still seem strapped for cash, Mr. Stone says. Dewberry’s private development work also has remained scarce. “Projects have been very sporadic and certainly not what I would call a rebound,” he says.

Catholic Health Initiatives, a nonprofit national health-care provider based in Denver, is taking a wait-and-see approach to hiring. Over the last 18 months, the company laid off about 2,000, leaving its work force at 70,000, says chief operating officer Michael Rowan. With inpatient admissions down 3.5% this year, Mr. Rowan expects staffing to grow only 1%, and that will happen through acquisitions.

Health care was one of the few sectors adding jobs during the downturn. But in March, the gains were broad-based.

The retail sector added 14,900 jobs. Temporary employment—a positive indicator for the labor market, since many employers increase temp hiring as a prelude to adding permanent jobs—increased by 40,200. Construction added jobs for the first time since mid-2007, although the gains likely were the result of a bounce back from February’s weather slowdown. Manufacturing added 17,000 jobs, the third straight month of gains.

Replacing the more than eight million jobs lost since the recession started likely will take much of the next decade. The economy needs to create at least 100,000 jobs a month just to keep the unemployment rate flat, due to population growth. Because of the downturn, millions of Americans quit searching for work or dropped out of the labor force. A broader measure of unemployment, which includes people who stopped looking for work and those settling for part-time jobs, rose to 16.9% in March.

The improving economy is certain to draw more job seekers back into the market, one factor likely to keep the unemployment rate from dropping quickly. The labor force—those working or looking for work—grew by 398,000 in March, the third straight monthly increase.

Federal Reserve officials expect the jobless rate to remain above 9% through this year and above 8% throughout 2011. The large pool of available labor is likely to constrain wage growth in the coming years. The report showed that average hourly earnings declined 0.1% during the month, although the average work week and total hours worked grew. For that reason, even with the latest turn toward job growth, the Fed isn’t likely to raise interest rates until late this year at the earliest.

Write to Sudeep Reddy at sudeep.reddy@wsj.com

This hasn’t exactly been the spring of Jordan, Pippen, Gretzky and Lemieux.

This year’s NBA and NHL playoffs have been taken over by the (relatively) unknown and unsung. Because of the surprising play of success-starved teams like the Indiana Pacers, Los Angeles Kings, Philadelphia 76ers and Phoenix Coyotes, this postseason is full of who-dats and what’s-his-faces, while other big-name teams have less-than-household names playing key roles.

Do you have any idea who’s been on your TV every other night for the past month? Below is a quiz, with the answers at the bottom.

The cost of medical care for pets is rising as fast as it is for humans, and that’s helping to spur sales of pet insurance.

Pet owners are able to choose from a rapidly growing array of policies, featuring everything from high-deductible designs to coverage of alternative-medicine treatments like acupuncture. Some pet policies focus on accidents and illness, while others include wellness checkups and shots. And some things that traditionally weren’t included in pet insurance, such as hereditary conditions, are now paid for under many plans.

Consumers need to be careful, since many pet policies can be as confusing as coverage you buy for yourself. Pet insurance often places strict limits on how much it will pay for particular procedures. And policies can have tricky designs that can leave consumers with big out-of-pocket bills for their animals. Premiums vary from around $10 a month to $75 a month, depending on factors including the richness of the plan, your location and your animal’s breed and age.

This year, pet owners are expected to spend around $12.2 billion for veterinary care, up from $11.1 billion last year and $8.2 billion five years ago, according to the American Pet Products Association. Complex procedures widely used for people, including chemotherapy and dialysis, are now available for pets, and the potential cost of treating certain illnesses has spiked as a result.

Donna Oliver, in Austin, Texas, has shelled out about $32,600 since 2007 to care for two dogs who passed away earlier this year. Marley, a Labrador, got stem-cell therapy for his arthritis, surgery on his windpipe to deal with a condition that was choking off his breathing, and, at the end, medication to ease the pain of advanced cancer. Maddie, a corgi mix, suffered from Cushing’s disease, a hormonal disorder, and got treatment including surgery to heal ulcers on her corneas.

“It does cost a lot if you want to do the right thing by them,” says Ms. Oliver, a 38-year-old customer-service manager, who says she is still paying off the credit-card bills. To avoid a similar situation with her three remaining dogs, Chelsea, Jasmine and Runner, she recently bought insurance for them.

One Million Insured

Currently, around a million U.S. pets are insured, according to the North American Pet Health Insurance Association. The number is growing about 10% a year, the group estimates, though that still represents just a tiny fraction of all pets.

Around 90% of the insured are dogs, with about 10% cats and a small number of other animals. The biggest U.S. pet-insurance company, Veterinary Pet Insurance, or VPI, a unit of Nationwide Mutual Insurance Co., says it has written policies for hedgehogs, snakes, turtles and geckos, among other creatures.

Karen Becker, an art-school program director in Baileys Harbor, Wis., has insured her African grey parrot, Darwin, and blue and gold macaw, Big Bird, since she got them in 2001 and 2008, respectively. Treatments for birds can be at least as pricey as those for larger animals, she says, and the parrots may live for decades. Ms. Becker, 52, says she doesn’t want financial concerns to guide decisions about her pets’ care: “I want it to be because of quality-of-life issues.”

If you’re considering pet insurance, start by shopping around. It’s best to start when the animal is still young and healthy, since new policies won’t cover pre-existing health conditions and some insurers won’t take on pets over a certain age.

The industry has grown in recent years, with new competitors such as Pets Best LLC, Petplan Inc., Embrace Pet Insurance Agency LLC and Trupanion, a unit of Vetinsurance International Inc., entering the market. In the past, a number of startup pet-insurance firms have gone out of business, so it is worth checking with your state regulator about companies’ age and record.

Workplace Benefit

Consumers may also be able to buy pet insurance through their workplace, which can often be cheaper than buying on your own. Around 19% of employers offer the policies as a voluntary benefit, according to a survey conducted this year by the International Foundation of Employee Benefit Plans. That includes firms such as Colgate-Palmolive Co. and Chipotle Mexican Grill Inc.

To learn about policies, you can start with overview Web sites such as petinsurancereview.com, dogtime.com and petinsuranceguideus.com. For definitive information, though, you should click through to the sites of the individual pet insurance firms, which can offer premium quotes.

Once you’ve narrowed down the list, get full policy documents, which are often posted online or available through a phoned request. Use those, in combination with phone calls or emailed inquiries to the companies, to delve into the details of the plans.

You will want to check how the company will raise premiums as you renew the policy. Often, they go up with age and veterinary inflation. They may also be linked to your animal’s claims history—so a pet with a lot of health issues in a given year could see a heftier increase the following year.

You also want to take a close look at what you would have to spend out of your own pocket if your pet got injured or ill. Pet-insurance firms tend to limit what they reimburse for various treatments. And you’ll generally have to pay the bills up front, then seek reimbursement from the insurer.

Crystal’s Surgery

When Elizabeth Pannill’s Labrador, Crystal, needed back surgery a few years ago, the insurance covered less than half of the nearly $4,000 total bill. Then, when Crystal got a tumor removed from her rib earlier this year, spending 10 days in an animal-hospital intensive-care unit, the plan paid about $1,700 of the nearly $5,500 total, which already included a professional discount for Dr. Pannill, a veterinarian who isn’t currently in clinical practice.

Dr. Pannill says that despite the limited payouts, she also has purchased insurance for two other dogs and a pair of cats. “It just gives you a little peace of mind that you would have some financial help when an illness came along,” says the 56-year-old, who lives in Staples, Texas.

VPI pays flat amounts for various treatments. Other pet insurers pay a percentage of vet bills, although some limit payouts to a percentage of what they consider “usual and customary” fees, which may be lower than what vets actually charge.

As with insurance for people, consumers need to look closely at how the out-of-pocket charges on pet insurance are structured. Pet plans offer a range of deductibles, some as high as $1,000 a year. These may be levied on an annual basis, or charged anew for each illness or incident.

Congenital conditions, behavior modification and pregnancy-related costs are often not included, in addition to pre-existing health issues. VPI is beginning to introduce a cat-focused plan that offers limited payouts for certain common feline issues, like chronic kidney failure.

At least two companies, Embrace and Petplan, offer coverage of alternative treatments such as acupuncture and chiropractic.

Many policies now include coverage for hereditary conditions. It’s often worth paying for this, particularly for pure-bred dogs. Each insurer has its own lists of genetic illnesses, and they vary somewhat, says John Albers, executive director of the American Animal Hospital Association.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

By SHIBANI MAHTANI

As alternative energy sources such as wind and solar power gain traction and investment, and volatility roils the global oil market, it might not be the sexiest time to be exploring for oil and gas.

Lionel Lee, managing director of Ezra Holdings Ltd., is confident in Ezra’s sustained growth. With its acquisition last year of Norwegian subsea specialist Aker Marine Contractors, a four-decade-old company, Ezra propelled itself into the ranks of major global players. The company, also known by its operating brand EMAS, now manages subsea-exploration projects for some of the world’s biggest oil companies, including BP

Exploration & Production. In the nine months following that acquisition, Mr. Lee said, Ezra acquired contracts of $850 million.

To be sure, the initial months following the $250 million acquisition were rough. Ezra’s earnings sank and its share price dropped, as it promised investors and shareholders that the long-term strategy—focused on expanding fleets of ships and their expertise to all corners where deep oil and gas reserves are found—will pay off. Mr. Lee told his investors that the company is built for the next 50 years, and encouraged them to be patient. The strategy seems to be paying off. The company’s shares, at 95 Singapore cents (76 U.S. cents) as recently as November, closed Friday at S$1.255. Earlier this month, CIMB Research upgraded the firm to outperform from underperform and raised its target price to S$1.40.

Mr. Lee spoke with Shibani Mahtani about changes within the industry and hiring the right people. The following interview has been edited.

WSJ: How did you expand from your headquarters in Singapore and establish regional bases in Texas and Norway?

Mr. Lee: Getting to know and understanding people based in Europe and the U.S. is key. I’ve literally grown up with the management team here in Singapore, and what I try to do in our regional centers is to understand my management team there. After a couple of years [in Houston], I understand how the management is run there and there’s been extremely good rapport.

When we wanted to grow globally, we did not have the choice of luxury or time. We acquired AMC, which was a 40-year-old company. If we were going to take the same amount of time to grow, we were not going to get the resources we needed to build up the company. We took the acquisition route, and it has paid off—it put us a step ahead of our competition in the region.

WSJ: What was the importance of expanding overseas so quickly?

Mr. Lee: Though we are based in Singapore, we have no clients at all here. Singapore has an excellent infrastructure, but only after being in the U.S. and Europe do you become a truly global oil and gas player. A lot of know-how is held there, so your engineering centers can be kept there. In Houston, you also have all your major oil companies in a 50-mile radius.

WSJ: How satisfied are you with Ezra’s performance since the 2011 acquisition?

Mr. Lee: Typically when you grow a business, you will have growing pains. Overall, I think we’ve done the best that we could’ve right now—our first-quarter profits have remained flat but our revenue has jumped 138% from a year earlier. Our profile is completely different from that of the previous year, our model is changing rapidly. Our revenue in particular is diversifying from the traditional Asian-Pacific region, where we were once primarily based.

WSJ: Is it difficult working for the company with your father as chairman?

Mr. Lee: The first one to tell me this was a mistake was my mother—she said working with my father was the worst thing I could ever do. Seventeen years ago, when I wanted to join the oil and gas industry, everyone thought I was crazy because it was thought to be a sunset industry.

It had a lot of challenges at first, because when I went home, I still had to face him. Even if I did not agree with his view, I still had to go home and respect him as my father. But when I was doing a job, I really wanted to execute it the way I myself wanted to. In the initial years, it was hard for us as a family. Still, I grew up with many of the crew members on the ships, and have known them for decades. This relationship has carried on, and has made the transition between the leadership of myself and my father easier.

WSJ: What do you look for in potential hires?

Mr. Lee: I look for people who share my passion for the industry. I still dream of ships, I still want to sleep and eat with the boats. I spend a lot of time at the shipyard, and miss the smell when I am away. It is important for new hires to share that—I like to see the sparkle in their eyes.

They don’t need to understand the business initially, but they need to want to learn and improve themselves. I look for the enthusiasm in them, and see if they can think of different ways to execute a project.

WSJ: What is the biggest challenge for the industry?

Mr. Lee: It is not increased regulation or risk, but rather getting the right people and fitting a square into a square. I like to work with my colleagues for decades and decades to come, but younger people move around a lot more. Trying to find the right successors is also extremely challenging, so we name them early and make sure there is enough time to train them.

We also recruit globally, from the U.S., Norway, Holland and of course here in Singapore, where we try to groom local graduates from the engineering schools.

WSJ: What drives young graduates to a company like Ezra?

Mr. Lee: When we [in this industry] were laying pipes in thousands of meters of water, people had not even been to the moon yet. Our operations are not just about ships, and are very complex—which is interesting.

Being a global organization, we are able to give all our people a global feel, and show them what different fields are like. You can be working in Brazil today, and the U.S. tomorrow, be exposed to Europe but trained in Asia-Pacific.

A lot of Europeans are also attracted to work in Singapore, because it is a great place to live. It is not difficult to attract people to this region. We may not be as exciting as a marketing company, but we have huge exposure in so many different countries.

I think we have gone past the stage where the oil and gas industry is a sunset industry; a lot of young engineers are attracted to this business because it is a need business, rather than a want.

I don’t need a new smartphone, but I need energy every day.