While environmentalists and industry enthusiasts scrutinize and monitor oil and gas investment companies, sophisticated investors have a different view of the industry. Oil and gas companies have become popular over the years for reasons that make this particular investment unique above all other forms of investments.
Here are four reasons why qualified investors are choosing oil and gas companies.
Serious investors are always in search for the best return on their investments. One way to do this is by looking for opportunities that offer tremendous tax incentives. The US government continues to play a significant role in providing tax exemptions and benefits for investors and producers to foster the production of oil and gas in the country. The tax code does not have any other investment venture that offers robust tax advantages than oil and gas investment. The US government hopes that by providing generous tax benefits to investors, domestic production of oil and gas will increase, thus curbing reliance on foreign fuels.
If you would like to invest in oil and gas, you are set to enjoy significant tax benefits and exemptions such as the ones discussed below.
Both tangible and intangible oil and gas tax deductions cover about 90 percent of drilling costs. This means you are relieved of most of the drilling costs. Moreover, you will still receive incentives even if you don’t extract any oil from the ground. Note that there is no relationship between oil production and drilling deductions.
To qualify for this tax benefit, you must not produce more than 50,000 barrels of oil or 6 million cubic feet of gas per day. Depletion allowance takes into account depletion of gas and oil at a particular site for a given period.
The interesting thing about the oil and gas tax benefits discussed above is that they have very few limits. The only notable limitation is the small producer limit. This means that tax credits and exemptions from investing in this industry are the best options even for high-net-worth individuals. As an investor, you can earn a lot of profit if you own at most 1000 barrels of oil per day, and you can be exempted from most of the tax credits and exemptions discussed above.
Return on Investment
Sophisticated investors understand investing in investing in oil and gas has high return investments. Currently, however, there is an oversupply of the oil and gas although the industry still provides a window of investment opportunities for accredited investors, and it is expected to remain constant for some time. Oil and gas investments continue to offer stable returns when compared to other types of investments, where most of the profits are paid out to investors.
Long-term Passive Income Generation
Oil and gas allow potential investors to tap into a financially lucrative venture with long-term high yield return on investments. Furthermore, you do not need to be actively involved in the business. Plus passive income attracts low taxation.
The workings of the oil and gas industry have always been different from the general economy. When the economy is not performing well, your business can experience huge financial losses, but the demands and supply shifts in the economy do not affect the prices of oil and gas. In fact, as the prices for natural gas and oil rise, their stocks increase simultaneously. Thus, investments in the oil and gas sector can protect you against slowdowns in the economy.
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