Domestic Energy Development, Inc.
Oil and Gas Exploration & Production |
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FREQUENTLY ASKED QUESTIONS
What kind of oil
and gas exploration is the most conservative?
Exploration risk can
be minimized by developmental drilling in mature, well defined producing oil
and gas fields. Moving outward from known production increases the risk but
usually increases the potential return. We believe the best approach is to
blend lower risk developmental drilling with exploratory drilling in
combinations that maximize the yield for the risk you are willing to
accept.
What is the minimum investment I should
consider?
We encourage each investor to carefully consider their
resources and ability to withstand the loss of an entire investment prior to
participating. That being said, we encourage our investors to take a longer
range view and design their oil and gas investment program to take full
advantages of the odds associated with current technology. Having a smaller
interest in 10 wells offers a better chance of success by spreading the
risk.
What is the difference between a royalty owner and a working
interest owner?
The term Royalty Interest originally meant the
king's percentage of gold or silver taken from mines owned by the king. Royalty
Interest is now more commonly referred to as the land owner's percentage of oil
or gas produced from their land which is free of any
encumbrances.
What is Direct Working Interest
Ownership?
The Direct Working Interest Owner participates in the
revenue from the well and the cost of operating the well. They also hold Real
Title (assignment) of ownership in natural resources such as oil and gas
minerals resources.
Why does the government provide special tax
treatment to the oil and gas industry?
Domestic crude oil production
is vital to national security. Our nation's airplanes, battleships, factories,
automobiles, etc. derive their power from crude oil. The nation's daily
production of domestic crude oil is approximately six million barrels
(6,000,000 bbls) per day. The nation's consumption of crude oil exceeds fifteen
million barrels (15,000,000 bbls) per day and has made us dependent and
vulnerable on foreign sources for our supply.
What are the tax
benefits due an oil and gas investor?
Oil and gas exploration is the
last remaining true tax shelter available to the American tax payer. Generally,
almost all expense involved in drilling for and developing oil and gas reserves
is 100% tax deductible. That being said, we encourage all investors to seek
qualified tax advice on this matter. We caution that only a few tax advisors
are well qualified to handle oil and gas tax issues. Finally, never make oil
and gas investments on the tax consequences. The investment must stand on its
own merit and the tax benefits are secondary.
How long can I
expect to receive income from my oil investment?
This is a tough
question to answer. Many oil and gas wells in our operation will have a
productive life of eight to thirty years and more. In any event, by their
nature, wells decline slowly in the amount they produce so we either sell them
while there is value or eventually they will no longer produce enough revenue
to sustain operations. At that time the well is usually plugged and abandoned.
This productive life varies greatly depending upon many
factors.
How will I be paid from my oil and gas
investment?
If the well is productive, you should receive a check
each month that represents your pro-rata share of the income from the well.
When a well is nearing the end of its productive life and revenue is low,
operators will collect several months of revenue and send you just one
check.
How can I be sure you won't damage the
environment?
We have been successfully operating for over twenty
years in several states with careful attention to environmental issues and
laws. We have never been cited or even questioned about our practices although
we have often been inspected by state officials. Additionally, we carry
environmental insurance in excess of that required by the states in which we
operate - just in case.
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