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Oil and Gas is a naturally occurring resource, it is finite and once it is consumed there is no replacing it. Currently, Oil and Gas production is rising to a point which can not be sustained. Major Middle Eastern countries Oil and Gas production is rapidly approaching 100 percent of capacity.Even if the demand for Oil and Gas in the Western world were to remain constant, the reality is that Oil and Gas prices will continue to rise. On the supply side, the world’s major Oil and Gas producers face declining Oil and Gas reserves which increase the costs of Oil and Gas production. Additionally, increasing demand for Oil and Gas from the developing world (including China and India) is placing a greater strain on the dwindling supply of Oil and Gas, escalating prices.“Oil prices will average $90 a barrel in 2008 and will rise to around $100 a barrel by the end of 2008. Triple digit Oil prices is not a spike. It’s what is required to maintain, let alone grow, world Oil and Gas supplies.” CIBC World MarketsThere are many ways in which investors can profit from the imbalance between supply and demand in the Oil and Gas markets. Investors can buy publicly traded stocks, purchase mineral rights or invest directly in Oil and Gas through Direct Participation Programs (DPPs).The disadvantage with stocks is that the Oil and Gas Company typically reinvests the profits back into the company, effectively giving away control of your profits.The advantage of DPPs is that you get all the benefits of ownership. You receive the revenues, you directly deduct the expenses and you control the profits of your well. You additionally, benefit from the incredible tax deductions and incentives of Oil and Gas production.Tax BenefitsInvesting directly in Oil and Gas not only provides the potential for great investment returns, it also enables you to shelter portions of your ordinary income from taxes. As a DPP investor, you may deduct expenses, or losses, associated with this type of investment.Tax benefits for Oil and Gas allow for the deduction of Intangible Drilling Costs (IDCs) associated with drilling which can be 100% deductible in the first year of the investment. IDCs typically represent 60% to 80% of the well’s total costs.Tax deductions have also been established by Congress for Tangible Drilling Costs (TDCs). The TDCs associated with the Oil and Gas wells equipment may be 100% depreciated over a five to seven year period.“Drilling for Oil and Gas is the very best tax-advantaged investment. 65% to 80% can be written off in the first year of the investment and 100% is tax-deductible.” –NewsweekDPP investors are allowed to shelter 15% of the annual gross income through a depletion deduction. Furthermore, investors may be entitled to enhanced Oil and Gas and gas recovery credits that may be applied to the investor’s ordinary income.Speak to an investment advisor today to learn more about the tax benefits that DPP’s can offer you.Direct InvestingWith Oil and Gas prices skyrocketing, investments in private placement drilling projects to accredited investors have become increasingly attractive. Although these ventures have risk associated with them, they still provide the potential of 50% plus annual returns, incredible tax deductions and long term stability.50% ReturnsDirect Participation Programs offer a profit potential un-equal to most investments, including stocks and mutual funds. With DPP’s your profit is tied directly to the income generated by the wells, unlike stocks and mutual funds, where your profits are tied directly to market conditions.Direct Participation Programs (DPPs)DPP’s are designed to allow investors to participate directly in multiple Oil and Gas drilling projects. You’ll own a portion of the wells and receive your corresponding share of the income generated by them. This income is tax-free. Advantages of Direct InvestingAs a DPP investor, you may hold DPP’s in your IRA account, allowing you to take full advantage of the IRA’s many taxes and retirement benefits. DPP’s are flexible investments that can be placed in your self-directed IRA. This type of IRA allows you to invest in your choice of any asset class: Direct Participation Programs, Limited Partnerships, Private Placements and other closely held investments.This report is for educational purposes only and is being provided to accredited investors at their request by Direct Oil Investing.
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