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FREE WHITE PAPER
WHY INVEST IN OIL AND GAS
DRILLING VENTURES?
A WINDOW OF OPPORTUNITY
Copyright © 2006 MR Cox, IncWhy Invest in Oil and Gas Drilling Ventures? A Window of Opportunity 1. HIGH FINANCIAL REWARDS . Return of Capital in as little as 6 to 18 months. . Can offer better than a 10-to-1 Return on Investment. . Greater than 50% Annual Rate of Return Possible. 2. RISK . The average oil 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%. 3. TAX BENEFITS . Drilling is the very best tax advantaged investment (Newsweek Magazine). . Congress gives tax breaks to individual investors that are not available to large companies. . 100% tax deductible ... 65 to 85% of investment can be written off in first year. . Tax deductions available against Ordinary Income or Capital Gains. . Up to 100% tax-free income. 4. COMPETITION . The big money has gone offshore and overseas, for easy-to-find big oil fields. . They left behind millions of barrels of oil for small and medium producers to extract. 5. DEMAND/CONSUMPTION . Petroleum demand is doubling about every 10 years (China, India and U.S. driving demand). . U.S. oil stock piles are at a 27 year low. (14 days of domestic consumption on hand) . Imports are now over 60% (imports were 30% just before the oil embargo). 8. PRICE FORECASTS . Long range projections are up. . Many forecasters predict oil priced at $100/barrel by the end of the decade. 9. TECHNOLOGY . Recent advances in oil-finding-technology has improved recovery and reduced risk. . Some companies report 85% success on exploration wells and 95% on developmental wells. 10. STOCK MARKET DOLDRUMS . Traditional investments have been disappointing for the last six years. . Dow is up only 8% since 2000, NASDAQ is still down 30%, S&P 500 is also down 18%. . Oil and Gas is up 300% since 2000 (a bonanza for independent investors)! THIS REPORT IS FOR EDUCATIONAL PURPOSES ONLY AND IS BEING PROVIDED TO ACCREDITED INVESTORS AT THEIR REQUEST BY M.R. COX, INC. SAN ANTONIO,TX. www.mrcoxinc.com This is neither an offer to sell or to buy a security. An offer to buy or sell a security may only be made by a Prospectus. This is not a Prospectus. Tax Advantages of Oil and Gas Drilling From Houston Chronicle, October 12, 2004 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 tax advantaged investments. 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 up to $75,000 in tax deductions during the first year of the venture. 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 The total amount of the investment allocated to the equipment "Tangible Drilling Costs (TDC)" is 100% tax deductible. In the example above, the remaining tangible costs ($25,000) may be deducted as depreciation over a seven-year period. (See Section 263 of the Tax Code.) Active vs. Passive Income The Tax Reform Act of 1986 introduced into the Tax Code the concepts of "Passive" income and "Active" income. The Act prohibits the offsetting of losses from Passive activities against income from Active businesses. The Tax Code specifically states that a Working Interest in an oil and gas well is not a "Passive" Activity, therefore, deductions can be offset against income from active stock trades, business income, salaries, etc. (See Section 469(c)(3) of the Tax Code). Small Producers Tax Exemption The 19... [download for more]
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