Exploration, production AND MARKETING of oil and gas
There are two primary methods of investing in oil and gas. The first and most commonly known method is purchasing stock in an oil and gas company. The second is through direct purchase of working interest in one or several wells where the investor actually owns a portion of the well and receives a share of the income it generates. Boardman Energy Partners specializes in the sale of direct working interest programs.
A Direct Working Interest Program is a percentage of ownership in an oil and gas lease which enables investors to participate directly in a business venture's cash flow and taxation benefits.
We are currently drilling in Texas and Kentucky. We concentrate on Central Texas and Kentucky because of potentially higher returns in those areas because of the lower risk and longevity of oil and gas production.
As oil and natural gas supplies are declining, global demand is on the rise. The top ten oil-consuming countries alone consume over 50 million barrels of oil per day. And even with the rising popularity of alternative energy sources as a means to fuel our cars, oil cannot easily be replaced as it is used to manufacture virtually everything we use on a daily basis, from clothing and pharmaceuticals to detergents and insulation. There are thousands upon thousands of petroleum-based products that we rely on every day. Through direct participation programs in oil and gas, investors actually own a portion of a well and receive a share of the cash flow generated via monthly disbursements. In addition to the income potential, oil and gas investments offer substantial tax benefits, which the U.S. government has designed to encourage domestic drilling. Since the Tax Reform Act of 1986, direct participation programs in oil and gas are one of the few remaining investments that allow investors to shelter income, making it one of the most tax advantaged investments today. Investors may be able to deduct as much as 65 to 100 percent of their investment within the first year, whether the well is successful or not, and 15% of your income is tax-free.
Because of the risk associated with oil and gas investments, investors must meet minimum suitability requirements as defined by the SEC, TX State Securities Board and the Financial Industry Regulatory Authority (FINRA, formerly the NASD). Suitability requirements state that you must meet the following conditions: 1) you are able to sustain the loss of all or a portion of the investment; 2) you can benefit from the tax advantages associated with the investment; 3) you are an accredited investor; and 4) if not accredited, you are a sophisticated investor and the investment does not exceed 20% of your net worth. Contact us if you're interested in completing a questionnaire to determine if you qualify for an oil and gas investment or call
1 (512) 248-8120.
An accredited investor is defined as someone who: a) has earned in excess of $200,000 per year individually or $300,000 per year with a spouse for the last two years and expects similar earnings in the current year; OR b) has a net worth that exceeds $1,000,000 excluding home, automobiles and furniture. A sophisticated investor is defined as someone who can sustain the loss of all or a portion of the investment, and the investment does not exceed 20% of your net worth. Contact us if you're interested in completing a questionnaire to determine if you qualify for an oil and gas investment or call 1 (512) 248-8120.
After the Tax Reform Act of 1986 which eliminated many tax shelters, direct participation programs in oil and gas are one of the few remaining investments that allow investors to shelter income, making it one of the most tax advantaged investments today. Investors can deduct as much as 65 to 100 percent of their investment within the first year, whether the well is successful or not, and 15% of your income is tax-free. Limited partners may deduct expenses and/or losses associated with their investments against passive income. General partners may deduct expenses and/or losses associated with their investment against ordinary, active income on Schedule C of their tax return. Generally, there are two areas that are immediately deductible in the first year, including Intangible and Tangible Development Costs, which enable investors to deduct as much as 65 to 100 percent of their investment within the first year. Intangible Development Costs (IDC) include the labor, fuel, geology, engineering, logging, testing, hauling, supplies, etc. necessary for the drilling and development of oil and gas wells. Tangible Development Costs (TDC) include the well equipment necessary for the development of oil and gas wells, which are considered as the production of an asset. TDCs are capitalized and amortized over a seven year period, beginning with the month in which they are paid.
Even as alternative energy sources are being developed and more efficient uses of petroleum are discovered, the demand for oil and gas continues to rise, most markedly in China and India where the population in each of these countries now exceeds one billion people. The top ten oil-consuming countries alone consume over 50 million barrels of oil per day. And, oil is more than a means to fuel our cars. Oil is used to manufacture thousands upon thousands of products we use on a daily basis. So, oil will remain a top-consumable for the foreseeable future and beyond as any alternatives would take decades to gain enough of a foothold to impact the demand for oil.
Drilling and completion costs are typically handled on an "invoice-cost" (aka actual-cost) or "turnkey" basis. The invoice-cost structure means the investor pays the actual cost to drill and complete the well after paying a one-time overhead fee to cover the expense of managing and offering the project. With the invoice-cost structure, investors receive an accounting of all invoices paid toward drilling and completing the well. The turnkey structure, on the other hand, is a fixed amount set by the project manager to drill and complete the well. In some instances, the invoice-cost structure is the preferred method as is the case with shallow wells where there is low mechanical risk. In other instances, the turnkey structure with a fixed cost is more appropriate as is the case with the deeper wells where the mechanical risk may be higher.
The best way to evaluate a drilling project is to identify the potential payout of a project versus your investment. We call this the "acid test." The acid test will tell you your break-even point, meaning how many barrels of oil the project must produce just to break even and ultimately return your investment. This requires a little math, and you must know the price per unit, net revenue interest per unit, gross revenue and price of oil per barrel. For example, suppose your net revenue interest is 1.25% at a per unit price of $100,000. For your investment to break even, the well will need to produce a gross revenue of $8,000,000 ($100,000/.0125 = $8,000,000). If oil averaged $80 per barrel, your investment will have to produce 100,000 barrels over its productive life just to break even ($8,000,000/$80 = $100,000). You can do the same math for gas or combined oil and gas projects using an anticipated price per thousand cubic feet of gas. Now, look at the surrounding wells / fields to see if any have yielded the amount of oil and/or gas your project requires to return your investment. Be sure to use conservative estimates with regard to the price of oil and/or gas used in this formula as you cannot predict what the future will hold. Be wary of those who inflate the market price in their projections.
As with any investment, investors run the risk of losing part or all of the investment principal; however, you can offset your losses through tax deductions. Because of the risk associated with oil and gas investments, regulatory agencies have defined suitability requirements to help identify who is a good candidate for such an investment. Contact us if you're interested in completing a questionnaire to help determine if you qualify for an oil and gas investment.
Oil and natural gas were formed hundreds of millions of years ago and are the result of plant and animal remains or organic material from within the earth that primarily contain hydrogen, carbon and oxygen. For the most part, these plants and animals lived in seas, and their remains settled on the ocean floor together with sediment which washed down from exposed earth and rock. This sediment ranged in size from molecules that dissolve in water to small boulders. In later periods, these layers of organic material and sediment were covered by more sediment which, as a result of time and pressure, converted to layers of sedimentary rock.
A "landman" is an agent who works for an oil company to establish ownership of mineral rights and, ultimately, negotiate the lease terms between two or more parties. The landman also understands the laws and rules concerning leasing in a certain area and how to file the proper paperwork with the local government. In addition, the landman works to resolve problems that may occur in disputed ownership rights, and they're generally knowledgeable about drilling that has taken place in a certain area.
Production projects are oil and gas properties that are already in production, typically producing and selling oil and gas. Sometimes production projects require rework / repairs. This approach allows you to enjoy an immediate income from their investment; however, it's important to know the projected lifetime of the well.
There are 42 gallons of oil in a barrel.
Yes. Oil and gas are finite resources. While they are less plentiful today, the technology to locate resources is better. Experts believe we have already reached our peak oil supply, so the simple economics of supply and demand indicate the value will only increase as our supply falls off.
Wildcatting is essentially drilling a hole in the ground without a great deal of geologic facts or research.
While many oil and gas investment firms represent investors fairly and responsibly, we understand many investors are skeptical of oil and gas investments due to the increasing presence of unscrupulous players engaging in fraudulent practices, many of whom have burned investors in the past. As the market fluctuates, state securities regulators warn that high oil prices often create a heightened interest in oil and gas investments, and, as with any highly publicized economic circumstance that creates an opportunity for money to be made, scam artists follow in the shadows to take advantage of the situation. Check out the U.S. Securities and Exchange Commission's red flag warnings website at http://www.sec.gov/investor/pubs/oilgasscams.htm. This website details steps you can take to protect yourself from oil and gas investment scams.
Securities are offered only to persons with whom we have created a substantive, pre-existing relationship, who meet certain qualifications established for all investors and who reside in states where the securities or transactions are exempt from registration. The information on this website should not be deemed a solicitation of any person to purchase a security or as an offer by Boardman Energy Partners to sell any security to any person. The information contained in this website is for informational purposes only.
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