Natural Gas

It is time to directly invest in Natural Gas directly at the well head. Drilling programs offer many tax advantages and these benefits can greatly enhance the overall economics of an investment. These incentives in the Tax Code exist to encourage capital to go into domestic production of oil and gas. This makes participation in oil and gas ventures one of the best tax advantaged investment options available to high net worth investors.

The intangible expenses (IDC’s) involved in drilling (labor, services, chemicals, etc) are 100% deductible and are available in the year such money was invested. An investor will be able to write off a certain portion of the investment, regardless of the outcome of the well. Historically, the rule of thumb is that the typical write-off will be approximately 60-75% of the investment. In addition, tangible drilling costs (the amount of the investment allocated to equipment) may be deducted as depreciation over a five-year period. (See Section 263 of the Tax Code.)

Once a well is completed and producing, a percentage depletion allowance provides 15 – 24% of the Gross Income (not Net Income) to be tax-free. Further, cost depletion allowances give investors the ability to deduct 100% of property lease costs, sales expenses, legal expenses and administrative accounting expenses.

When it comes to investing, smaller is better! The smaller independent energy companies discover over 65% of all oil fields, not the major oil companies. The majors have left behind thousands of smaller oil fields, which are now becoming valuable high producing resources for the small independents. There will be only a 8 to 10 year window of opportunity for those to create great wealth before we will have sufficient new larger reserves.