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OilStrata

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Frequently asked...

What are the eligible tax deductions in the first year? 

  • Intangible Drilling Costs (IDCs) are non-passive drilling expenses related to labor, fuel, chemicals, hauling, etc. and can be deducted 100% against earned income in the 1st year.

 

  • Tangible Drilling Costs (TDCs) are oil and gas drilling equipment such as casing, pump jacks and wellheads that are capitalized and depreciated over a 7-year period and are deductible non-passive expenses.

 

How is the lease value price determined at divestiture? 

  • The divestiture price is approximated to be five years of net cash flow: The net monthly cash flow at the time of divestiture times 60 months per 1000 bopd plus the value of the extra remaining PUD locations.