Skip to: site menu | section menu | main content
* TAX BENEFITS (click here for more Information)
* DRILLING PROSPECT AVAILABILITY
Small drilling prospects are better than ever (and there are more of them).
* COMPETITION
The big money has gone offshore and overseas, because there are too few
easy-to-find big oil fields remaining.
Over 10,000 oil companies have left the arena since 1982.
* LEASE COSTS
Oil companies are not as anxious to renew expired leases (so lease costs are low).
* DEMAND/CONSUMPTION
Petroleum demand is doubling about every 10 years.
U.S. oil stock piles are at 27 year low. (14 days of domestic consumption)
* OIL PRODUCTION TREND
US output is at a 36 year low
Over two-thirds of domestic oil wells are classified as marginal (avg
= 3 bbls/day).
Imports are now over 60% (imports were 30% just before the oil embargo).
* PRICE FORECASTS
Long range projections are up.
* DRILLING COSTS
Presently (Feb '06) Rig activity is substantially up, but remains reasonable.
* TECHNOLOGY
Recent advances in oil finding technology has improved recovery and reduced
risk.
Some companies report 85% success on wildcat wells.
* ENVIRONMENT
Sierra Club endorses natural gas
Combustion by-products are carbon-dioxide and water.
* GOVERNMENT
Encourages domestic drilling with special tax breaks.
Mandating natural gas usage over oil and coal.
Natural gas is now deregulated.
* MONEY CRUNCH
Traditional sources of drilling money are no longer available (which is a bonanza for independent investors).
WHY INVEST IN OIL AND GAS:
* RISK
By its very nature, oil and gas investing is considered
to be HIGH RISK.
However, Average well is less risky than 10 years ago.
Several projects have a probability of success better
than 90%..
Available projects would be economically attractive if
oil price would fall 50%.
* TAX BENEFITS
Drilling is the very best tax advantaged investment
(Newsweek).
Congress gives individual investors tax breaks that are
not available to large companies.
100% tax deductible ... 65 to 80% first year write-off.
Up to 100% tax-free income.
* COMPETITION
* LEASE COSTS
* DRILLING PROSPECT AVAILABILITY
* DEMAND
* CONSUMPTION
* OIL PRODUCTION TREND
* PRICE FORECASTS
* DRILLING COSTS
* TECHNOLOGY
* GOVERNMENT
* MONEY CRUNCH
TAX ADVANTAGES OF OIL AND GAS INVESTMENTS:
Congressional Incentives
Encourage Domestic Petroleum Development
Oil and Natural gas from domestic reserves helps to make
our country more energy self-sufficient by reducing our
dependence on foreign imports. In light of this,
Congress has provided tax incentives to stimulate
domestic natural gas and oil production financed by
private sources. Drilling projects offer many tax
advantages and these benefits greatly enhance the
economics. These incentives are not "Loop Holes" -- they
were placed in the Tax Code by Congress to make
participation in oil and gas ventures one of the best
Intangible Drilling Cost Tax Deduction
The intangible expenditures of drilling (labor,
chemicals, mud, grease, etc.) are usually about (65 to
80%) of the cost of a well. These expenditures are
considered "Intangible Drilling Cost (IDC)", which is
100% deductible during the first year. For example, a
$100,000 investment would yield approximately $75,000 in
tax deductions during the first year. These deductions
are available in the year the money was invested, even
if the well does not start drilling until March 31 of
the year following the contribution of capital. (See Section 263 of the Tax Code.)
Tangible Drilling Cost Tax Deduction
Active vs. Passive Income
Small Producers Tax Exemption
Click here for more details on Tax Advantages of Oil and Gas Drilling
PRIVATE PLACEMENT:
In today's current financial market, companies have encountered increasing, if not impossible, difficulties in their attempts to secure capital for their financial needs. As a result of this challenge, companies have been left with the task of seeking funds from alternative sources. A growing number of these companies have looked to the investment banking industry to assist in raising the necessary capital requirements. The Wall Street Journal and Inc. magazine reported a record amount of $280 billion dollars being raised through PPM's in the first three-quarters of 1997. That equates to approximately forty (40%) percent of all corporate financing in today's business world being raised through private funds. With the current low interest rates available to investors in today's markets and the strong stock market, this industry is expected to grow at an even higher percentage through the next decade.
1031 TAX FREE EXCHANGE:
Many investors are unaware that they can sell real estate properties and roll all the money forward into oil or gas producing wells without paying any tax on the profits from the sale of their real estate property. The IRS considers real estate and producing oil and/or gas properties as “Like Kind”. You can purchase either working interest or royalty interest in oil and gas wells with money that you otherwise would have paid in taxes. The 1031 Tax Free Exchange is one of the most valuable techniques for preserving profits by deferring taxes, thereby increasing the value of your investments. Berkshire Moody, Ltd. has accounting and legal consultants that can explain how you can accomplish a 1031 Tax Free Exchange. If you have recently sold, or are about to sell a real estate property, contact your tax advisor or Contact us to learn more about how oil and gas projects can reduce your taxes and increase the value of your portfolio.
© Berkshire Moody, LTD