Our primary development area encompasses 23 counties, over 6,900 miles with upward of 12,000 potential target wells, in northern Oklahoma.
An accredited investor is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience. The term is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include natural individuals, banks, insurance companies, brokers and trusts.
To minimally qualify as an accredited investor you must have an individual income over $200K (or joint income with your spouse of more than $300K) in each of the past two (2) years and reasonably expect to reach the same level of income, in the current year, AND/OR you have an individual net worth in excess of $1,000,000, excluding home equity. All information will be verified prior to acceptance of investment.
Disclaimer: Faro Oil & Gas is not providing tax advice. To understand how your specific investment will reduce your unique tax liability, you must consult a certified tax professional.
Intangible Drilling and Completion Costs.
When an oil or gas well is drilled and completed, there are numerous expenses may be deducted. These IDC and ICC expenses are deductible due to the fact that they represent nonrecoverable costs in the event the well is determined to be a dry hole. Examples of these types of expenses would be equipment rentals (rigs, generators, mud pumps, and frack tanks), fuel, drilling and completion fluids, frack proppant, and labor. IDC’s and ICC’s can represent up to 65% to 85% of the overall well cost and are generally deductible in the year the investment was made. [See Section 263 of the US Tax Code]
Tangible drilling and completion costs.
The TDC costs represent expenses for items that have some recoverable salvage value, such as well heads, pumping equipment, well casing, tank batteries, separators, and any other equipment on the surface with value. These items are usually deducted through depreciation using the Modified Accelerated Cost Recovery System or MACRS.
Depletion Allowance
The percentage depletion deduction is a form of depreciation for mineral resources that allows for a deduction from taxable income to reflect the decline in reserves over time. The two types of depletion allowances are cost depletion and percentage depletion. Cost depletion is determined by dividing the amount of reserves produced in a given tax year by the total estimated remaining reserves in order to find the percentage used to calculate the deduction. Percentage depletion is taken by applying a 15% reduction of the taxable gross revenue of a well.
