Oil Facts Questions & Answers

Q. Where does US & Oil & Gas explore for oil and gas fields?
A. Most of our exploration center on oil & gas leases in Illinois, Indiana, and Kentucky.

Q. What is the cost for a person to participate in one of your oil/gas exploration projects?
A. It depends on the lease and the depth of our exploration. Most of our wells are drilled to a depth of 3,500 to 4,500 feet. The cost is broken down in two parts. The first part is for drilling and testing of the prospect and the second part is for the completion and putting the well into production if oil/gas is discovered.

Q. Other than the initial monies required during the drilling and completion phase of a project, are there any other expenses that I am liable for?
A. No. There are two types of participation opportunity vehicles used by oil companies for working interest holders that would like to participate in an oil exploration project. The first vehicle is called "cost plus" which means that interest holders are exposed to all liabilities, known and unknown in the drilling and completion of a well plus a management fee to the operator of between 10/15%. The second vehicle for working interest participants wanting to limit their liabilities is the most popular and is called the "turnkey" method. The non-operator (participant) will have no additional charges or liabilities related to the initial drilling and completion cost of the project.

Q. Are there any tax advantages in participating in an oil/gas project?
A. There are many tax advantages to interest holders involved in oil/gas exploration. First, hit or miss, the drilling portion of the participation opportunity is a complete write-off. If oil is discovered, the completion portion can also be written off. Secondly, there is a depletion allowance on all oil produced. This means that part of the oil revenue is free of tax.

Q. How am I paid for my share of the oil produced?
A. All oil produced from a lease is titled to each working interest holder and the refinery pays the check directly to the interest participant.

Q. Are there any expenses involved in the operation of a well?
A. Yes. The fixed monthly expenses for the well operator and company pumper run 350.00 plus any maintenance required. This expense is divided between the participating interest holders. (Example: 15 interest holders) $350.00 divided by 15 = 23.33 monthly expense per participant.

Q. If oil/gas is discovered on a project that I am involved in and the operators decides to drill more wells on the lease, will I have the option to participate in these addition wells?
A. Yes. All interest holders participating in the initial well will have first rights to participate in the further development of the lease.


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