LAND FOR SALE OR LEASE
COMMERCIAL LOTS FOR SALE OR LEASE
MINERAL RIGHTS FOR SALE
OIL & GAS RIGHTS AVAILABLE
Working interest oil and gas participation is typically divided into three phases:
Acquisition and Exploration Phase
Drilling and Development Phase
Production Phase.
Acquisition and Exploration
During this phase an “area of interest” is identified the operator feels could produce oil and gas in economic quantities. From this area of interest the operator identifies and contracts the mineral owner to obtain the right to drill for oil and gas. This mineral owner grants this right to operate in exchange for a cash consideration called a bonus and the primary lease term is typically three to five years as long as oil and gas is produced. The bonus is typically referred to as Leasehold costs.
Drilling & Development Phase
During this phase the actual drilling location on the leased acreage is identified and the oil or gas well is drilled. Intangible drilling cost (IDC)are the unique risks involved in drilling for oil and gas. Generally speaking, expenditures are classified as IDC if they have, in themselves, no salvage value. Expenditures may include wages, fuel, repairs, hauling, supplies, etc., incurred in connection with the following operations, whether undertaken by the owner or through an outside contractor:
Clearing of ground, draining, road making, surveying, and geological work necessary to prepare for drilling of wells.
- Drilling, shooting and cleaning wells, including the drilling of water wells to furnish water for drilling operations.
- Construction of derricks, tanks, pipelines, and other physical structures necessary for the drilling of wells and the preparation of wells for the production of oil and gas.
Intangible drilling cost typically constitute 80-85% of the cost to drill and complete an oil or gas well
The Production Phase:
Subsequent to the completion of the well and the installation of all of the production equipment, “production operations” commence. During this phase the oil and gas is produced and sold. Generally, expenditures incurred during this phase are considered to be an operating expense. Examples of some operating expenses are as follows:
- Contract pumping services, charts, lubricants, repairs, electric, insurance, supervision, etc
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