More oil than you ever thought was possible

Why Invest In Oil and Gas?

Oil is the principal natural resource that drives a majority of the economies in the world. How important is oil in our daily lives? Nearly 90% of everything you have or use is in some way related to oil. From the clothes you wear, to the gas in your car, to the plastic soda container, to heating your home - these are just a few examples of how we use and depend upon oil each day in our lives.
Every day we become more dependent on hydrocarbons. As populations grow and economies change, this dependence continues to increase. The oil and gas industry is meeting this demand by applying new exploration and development techniques and developing greater capacities to deliver oil to the markets of the world, thus doing a better job of meeting the worlds' social concerns.

Benefits to Investing in Oil and Gas

Direct investment in oil and gas offers a unique opportunity for those investors who understand risk and appreciate the potential high revenues that may be achieved.

Investing in oil and gas programs can potentially offer tax incentives in the form of tax savings. Under the current rules of the Internal Revenue Code, an investor may be allowed to write off 100% of their investment. Further, an investor receives a 15% depletion allowance, thus he or she is only taxed on 85% of every dollar received from their investment.
Oil and gas investing may offer an investor portfolio diversification and a hedge against inflation. As with any investment, you should consult with your professional advisors first, to understand how a direct investment in oil and gas may affect you and your individual situation.

Tax Advantages


Save Taxes
Oil and gas drilling provides one of the few strategic tax benefits under the current Internal Revenue Code. The intangible expenditures of drilling (direct drilling costs, etc.) are usually 75-85% of the cost of a well. These expenditures are considered "Intangible Drilling Costs (IDC)" and are 100% deductible during the year the investment is made. These deductions can result in substantial tax savings and reduce "hard" dollars at risk and reduce alternative minimum tax obligations.

Approximately 15-25% of the amount invested is allocated to equipment and is considered "Tangible Drilling Costs (TDC)". These costs may be amortized and depreciated over 5-7 years - the first year also being the year of investment.

Maximum tax write-off for capital losses for investments in stocks and bonds, after offset to capital gains, is $3,000 per year. It is possible to write off 100% of an oil and gas investment over 5-7 years, with 75-85% being available to write off in the first year, unless the well is a dry hole, then you may write off 100% of the investment in the first year with no consideration of gains to offset.

Shelter Income
Monthly well income is further sheltered by the Depletion Allowance whereby 15% of the income is tax free. For example, when you receive a $10,000 monthly well income, you only pay tax on $8,500.

Additional Significant Potential Tax Saving Effect:
An investment in oil and gas programs may lower your adjusted gross income (AGI) up to 80% of the amount you invest in the year you invest. Since your taxes are based on AGI, you may lower the following taxes:

  • Federal Income Taxes (regular and AMT)
  • State Income Taxes
  • Self-employment Taxes

Other Potential Benefits:
In addition to decreasing your state and federal tax liability in the year of investment, reducing taxable income through participation in oil and gas drilling programs may provide additional benefits. Self-employed investors may save an additional 15% self-employment tax, without recapture.
The information set forth above is only an illustration of the tax benefits that may be realized under certain assumed conditions. Prospective participants must consult their own professionals for tax information and advice. This information should in no way be construed or relied upon as tax advice.