1 00:00:00,000 --> 00:00:06,840 So many people don't know about these facts advantages and haven't taken advantage of any of the benefits. 2 00:00:06,840 --> 00:00:13,280 The wells that we're drilling right now, right outside of Midland, Texas, we're drilling 10, 11,000 foot laterals, 3 00:00:13,280 --> 00:00:16,980 and finding between a million and a million and a half barrels of oil. 4 00:00:16,980 --> 00:00:19,640 And those will produce out over the next 40 years. 5 00:00:19,640 --> 00:00:25,960 The idea of putting $100,000 into something that one doesn't understand is really concerning. 6 00:00:25,960 --> 00:00:30,040 I think it's just a great time right now to be investing in oil and gas. 7 00:00:30,040 --> 00:00:35,280 Last year we had 103 million barrels of oil consumption, which was the highest in history. 8 00:00:35,280 --> 00:00:37,800 Losing your money, I think that was off the table. 9 00:00:37,800 --> 00:00:39,280 You aren't going to lose your money. 10 00:00:39,280 --> 00:00:46,280 Welcome to the Executive Connect podcast. 11 00:00:46,280 --> 00:00:51,560 Today we're going to talk about tax strategies and oil and gas. 12 00:00:51,560 --> 00:00:56,160 And time with things you can use this year in 2025. 13 00:00:56,160 --> 00:01:06,360 Welcome Don Hossmer, co-founder of Royal Energy, with a deep expertise in oil and gas exploration for investor benefits. 14 00:01:06,360 --> 00:01:08,840 I'm so excited to have you here today, Don. 15 00:01:08,840 --> 00:01:10,680 Thank you for joining us. 16 00:01:10,680 --> 00:01:11,520 >> All right, Melissa. 17 00:01:11,520 --> 00:01:15,720 Good. Thank you to be here for having me here today. 18 00:01:15,720 --> 00:01:21,240 >> Don, I want to just kick it off with talking about some of the tax advantages 19 00:01:21,240 --> 00:01:24,680 that people need to know about in oil and gas. 20 00:01:24,680 --> 00:01:26,640 >> Sure. 21 00:01:26,640 --> 00:01:35,320 So, really it started back in 1986 when a lot of the partnerships were setting up by and working interests 22 00:01:35,320 --> 00:01:38,200 and wrapping them into the limited partnerships. 23 00:01:38,200 --> 00:01:41,040 And that would offset some of the high taxes. 24 00:01:41,040 --> 00:01:44,560 Back then it was about a 50% top tax bracket. 25 00:01:44,560 --> 00:01:51,920 And so everybody was buying oil and gas partnerships in order to offset that high ordinary income tax. 26 00:01:51,920 --> 00:01:58,600 Well, when Reagan came in, he passed what was called the Tax Reform Act of 1986. 27 00:01:58,600 --> 00:02:03,120 And he brought down those high 50% tax rates. 28 00:02:03,120 --> 00:02:10,840 But in turn, he eliminated the deductions from those passive investments, limited partnerships. 29 00:02:10,840 --> 00:02:17,000 But they specifically exempted the working interest form of ownership in oil and gas drilling 30 00:02:17,000 --> 00:02:19,120 from the passive loss rules. 31 00:02:19,120 --> 00:02:24,680 And so you can deduct your entire drilling investment from your ordinary income, capital gains, 32 00:02:24,680 --> 00:02:33,240 any kind of taxable event can be directly offset with an investment in the drilling operations. 33 00:02:33,240 --> 00:02:34,040 >> I love it. 34 00:02:34,040 --> 00:02:37,640 Let's talk a little bit about how you got into this space, Don. 35 00:02:37,640 --> 00:02:41,960 Can you share with our listeners how you found the oil and gas industry? 36 00:02:41,960 --> 00:02:49,120 >> Sure, I was in college still, my senior year of college and my father who was a real estate developer 37 00:02:49,120 --> 00:02:50,440 of his whole life. 38 00:02:50,440 --> 00:02:57,680 It kind of semi-retired and began investing in oil and gas with a former governor of Oklahoma. 39 00:02:57,680 --> 00:03:04,280 And he set up a package of four wells and they went to start drilling them and 40 00:03:04,280 --> 00:03:07,640 financing fell through at the last minute. 41 00:03:07,640 --> 00:03:13,400 And so I went and found most of the money on that project. 42 00:03:13,400 --> 00:03:18,680 And the investors got 100% right off, 50% tax bracket. 43 00:03:18,680 --> 00:03:21,400 They got half their money back the first year. 44 00:03:21,400 --> 00:03:26,040 And then the rest of it, they were getting 5,000 a month. 45 00:03:26,040 --> 00:03:30,520 So another 50, 60,000 first year of income. 46 00:03:30,520 --> 00:03:35,200 And so they got a tremendous investment on those four wells. 47 00:03:35,200 --> 00:03:40,120 And so that was so much fun and so such a good investment I've been doing it ever since for 48 00:03:40,120 --> 00:03:42,120 the last 35 years. 49 00:03:42,120 --> 00:03:46,600 >> You know, it's interesting to me about the oil and gas space. 50 00:03:46,600 --> 00:03:53,000 And so many people don't know about these tax advantages and haven't taken advantage of 51 00:03:53,000 --> 00:03:54,240 any of the benefits. 52 00:03:54,240 --> 00:03:58,280 So I want to kind of get your opinion on why this is. 53 00:03:58,280 --> 00:04:03,680 >> The item where people not invest in oil and gas outside of buying stocks. 54 00:04:03,680 --> 00:04:04,960 Is there a reason? 55 00:04:04,960 --> 00:04:07,080 Is it the SEC rules? 56 00:04:07,080 --> 00:04:10,840 Is there anything specific you can share with our listeners? 57 00:04:10,840 --> 00:04:14,040 >> Well, oil and gas is a high risk enterprise. 58 00:04:14,040 --> 00:04:16,880 And there's no doubt about that. 59 00:04:16,880 --> 00:04:20,560 There's risk in geology, there's risk in pricing. 60 00:04:20,560 --> 00:04:23,040 And so there's just a lot of different risks. 61 00:04:23,040 --> 00:04:29,000 But the tax deductions were put in the tax code back in 1913 when they were hitting maybe 62 00:04:29,000 --> 00:04:30,800 one out of 20 wells. 63 00:04:30,800 --> 00:04:32,640 It was wild gang. 64 00:04:32,640 --> 00:04:35,320 And the government doesn't invest in oil and gas. 65 00:04:35,320 --> 00:04:40,840 Our US government, unlike most countries where the government owns the oil and gas reserves, 66 00:04:40,840 --> 00:04:43,840 our country relies on the private sector. 67 00:04:43,840 --> 00:04:49,800 And so these deductions were put in the tax code in order to direct capital into oil and 68 00:04:49,800 --> 00:04:53,000 gas drilling and develop our energy resources. 69 00:04:53,000 --> 00:04:58,120 And so that was back when it was very high risk. 70 00:04:58,120 --> 00:05:07,680 Now with the advent of 3D seismic and drilling with horizontal and fracking through a continuous 71 00:05:07,680 --> 00:05:09,680 accumulation of oil. 72 00:05:09,680 --> 00:05:12,640 And so it's been much lower risk. 73 00:05:12,640 --> 00:05:20,760 Now in fact, our current project, they drilled over 120 wells in the field and no dry holes. 74 00:05:20,760 --> 00:05:25,880 So where you used to hit one out of 20, now we're hitting 10 out of 10 and we're getting the 75 00:05:25,880 --> 00:05:27,880 same tax deduction. 76 00:05:27,880 --> 00:05:32,640 But I think a lot of people just still equate oil and gas as a risky investment, which it 77 00:05:32,640 --> 00:05:34,560 does still have risk. 78 00:05:34,560 --> 00:05:41,840 But a lot less risk now with the advent of modern fracking and drilling into a continuous 79 00:05:41,840 --> 00:05:43,440 accumulation of oil. 80 00:05:43,440 --> 00:05:47,800 Yeah, when I think of oil and gas, I think of some of the cartoons I've watched as a 81 00:05:47,800 --> 00:05:52,920 kid, you know, drill soda straw, no oil, move over, drill soda straw, no oil. 82 00:05:52,920 --> 00:05:57,920 But now like you were saying with fracking, you drill runs and fracking. 83 00:05:57,920 --> 00:06:00,400 It's likely that you're going to hit oil. 84 00:06:00,400 --> 00:06:07,040 So the benefits substantially increase with fracking versus just drilling. 85 00:06:07,040 --> 00:06:14,260 I want to talk a little bit about breaking down what IDCs are and why they are such a game 86 00:06:14,260 --> 00:06:18,220 shager for investors as a technologist. 87 00:06:18,220 --> 00:06:26,860 I think of fracking like I think about technology in a way that it just increases, there's a substantial 88 00:06:26,860 --> 00:06:30,460 increase in benefits to using fracking. 89 00:06:30,460 --> 00:06:40,620 So by using it and able to drill more holes, how does that help investors with what they're 90 00:06:40,620 --> 00:06:42,900 going to get back from these deals? 91 00:06:42,900 --> 00:06:50,260 Well, you know, you've seen all the mergers, Exxon bought pioneer for 60 million, oxy bought 92 00:06:50,260 --> 00:06:55,820 crown rock for 12 billion, conoco bought marathon, they're all buying in the Permian right now. 93 00:06:55,820 --> 00:06:58,780 And the reason is really multi stage fracking. 94 00:06:58,780 --> 00:07:00,940 It's been a game changer. 95 00:07:00,940 --> 00:07:06,300 In the old days, they would frack across the entire 10,000 foot interval and the pressure 96 00:07:06,300 --> 00:07:10,940 would dissipate, you wouldn't get as deep a penetration into the rock. 97 00:07:10,940 --> 00:07:18,320 Well now we go every 200 feet set an iron bridge plug and track into that 200 feet oil rock. 98 00:07:18,320 --> 00:07:24,480 And so you get higher rates, higher oil reserves will put as many as 60 fracks on a 10,000 99 00:07:24,480 --> 00:07:26,080 foot interval. 100 00:07:26,080 --> 00:07:27,700 And so it's been a game changer. 101 00:07:27,700 --> 00:07:30,780 All the majors, you know, they treat it like manufacturing. 102 00:07:30,780 --> 00:07:35,680 They know the oils there, they know what their costs are to drill for it. 103 00:07:35,680 --> 00:07:38,180 Just what is the variable price of oil going to be? 104 00:07:38,180 --> 00:07:40,900 And so it's really been a game changer out there. 105 00:07:40,900 --> 00:07:44,020 Reduce the risk, increase the economics. 106 00:07:44,020 --> 00:07:49,340 And then when you include that tax benefit, which is still in the tax code, you're literally 107 00:07:49,340 --> 00:07:57,100 paying for your oil reserves with your tax taxes, through your tax deduction of the investment. 108 00:07:57,100 --> 00:08:01,980 Are you a high income professional looking for smarter ways to protect your wealth? 109 00:08:01,980 --> 00:08:06,820 The Texas Freedom Fund gives you the opportunity to invest in energy assets leveraging proven 110 00:08:06,820 --> 00:08:11,300 fracking technology and prime access to global markets. 111 00:08:11,300 --> 00:08:15,700 With strategic oil and gas investments, you can build real wealth while benefiting from 112 00:08:15,700 --> 00:08:20,220 tax advantages under laws, dating back to the Reagan era. 113 00:08:20,220 --> 00:08:23,060 Take control of your financial future. 114 00:08:23,060 --> 00:08:27,700 Visit Texas Freedom Fund.executiveconnectpodcast.com 115 00:08:27,700 --> 00:08:36,220 Yeah, I think of it like also trying to think of how to ask this. 116 00:08:36,220 --> 00:08:38,500 It's like mailbox money, right? 117 00:08:38,500 --> 00:08:45,060 I think of some of the benefits of getting money every month, like I do a rental home, right? 118 00:08:45,060 --> 00:08:48,420 You get somebody pays you with their monthly rent. 119 00:08:48,420 --> 00:08:51,940 You take your money off that monthly rent. 120 00:08:51,940 --> 00:08:54,300 Is that the same analogy with these IDCs? 121 00:08:54,300 --> 00:08:56,100 Are you paid monthly? 122 00:08:56,100 --> 00:09:02,620 And the kind of the second question is, the real risk sounds like the cost of oil to me 123 00:09:02,620 --> 00:09:06,700 outside of any other risk that there may be. 124 00:09:06,700 --> 00:09:08,380 I guess that's a two-part question. 125 00:09:08,380 --> 00:09:14,820 Part one is that something that people are getting paid monthly and then part two is 126 00:09:14,820 --> 00:09:18,020 the risk just really the cost of oil? 127 00:09:18,020 --> 00:09:20,020 Yeah, so you're correct. 128 00:09:20,020 --> 00:09:25,940 All the oil is sold each month and then distributions are made at the end of every month. 129 00:09:25,940 --> 00:09:27,940 We used to call mailbox money. 130 00:09:27,940 --> 00:09:32,020 Now we ACH directly into their bank account for the most part. 131 00:09:32,020 --> 00:09:37,380 That's directly deposited into the investor's account at the end of every month for the 132 00:09:37,380 --> 00:09:43,540 prior month's production and for both the sale, oil and natural gas. 133 00:09:43,540 --> 00:09:50,940 Now on the tax deduction, that's taken right up from that intangible drilling cost deduction 134 00:09:50,940 --> 00:09:54,020 can be taken immediately, the day that you invest. 135 00:09:54,020 --> 00:09:59,220 So if you're making estimated quarterly, that can offset that estimated quarterly payment. 136 00:09:59,220 --> 00:10:05,380 If you are at the end of the year, planning to sell a property or a business or have higher 137 00:10:05,380 --> 00:10:11,740 ordinary income, that's going to directly offset that and reduce your adjusted gross income. 138 00:10:11,740 --> 00:10:17,020 So in some cases, it can actually bring you into a lower tax bracket, but in every case, 139 00:10:17,020 --> 00:10:20,340 it'll give you back whatever your top tax rate is. 140 00:10:20,340 --> 00:10:26,380 So if you're in a 30% tax bracket, you'll get 30% back right away. 141 00:10:26,380 --> 00:10:30,140 If you're a state year in, you'll get that state amount back. 142 00:10:30,140 --> 00:10:36,740 And then on the income, that monthly income, 15% of that is going to be non-taxable through 143 00:10:36,740 --> 00:10:37,740 the depletional outs. 144 00:10:37,740 --> 00:10:40,540 It's actually a cost recovery. 145 00:10:40,540 --> 00:10:46,900 In the old days, they would take the total oil reserves and then divide it out and you 146 00:10:46,900 --> 00:10:49,300 would recover it over the life of the reserves. 147 00:10:49,300 --> 00:10:54,380 Nowadays, they just do a straight 15% is non-taxable. 148 00:10:54,380 --> 00:10:58,660 And that's an additional cost recovery for your investment. 149 00:10:58,660 --> 00:11:03,620 So is that how that plays out for the entire time of the drill? 150 00:11:03,620 --> 00:11:08,940 So that 15% of the gross income, that's for the whole long term, life of the wells. 151 00:11:08,940 --> 00:11:09,940 Yeah. 152 00:11:09,940 --> 00:11:14,860 So literally paying for your reserves through your tax write-offs. 153 00:11:14,860 --> 00:11:15,860 That's amazing. 154 00:11:15,860 --> 00:11:19,820 Now how long do the wells usually, can you pull from? 155 00:11:19,820 --> 00:11:21,740 How long is the life of the wells? 156 00:11:21,740 --> 00:11:26,860 So that's going to vary depending on how many reserves you find in the well. 157 00:11:26,860 --> 00:11:31,140 The wells that we're drilling right now, right outside of Midland, Texas, we're drilling 158 00:11:31,140 --> 00:11:36,820 10, 11,000 foot laterals and finding between a million and a million and a half barrels 159 00:11:36,820 --> 00:11:38,140 of oil. 160 00:11:38,140 --> 00:11:40,580 And those will produce out over the next 40 years. 161 00:11:40,580 --> 00:11:45,020 Those will have a 40 year life. 162 00:11:45,020 --> 00:11:46,020 Wow. 163 00:11:46,020 --> 00:11:48,500 That's amazing. 164 00:11:48,500 --> 00:11:54,980 I want to kind of circle back a little bit about people that are new to this. 165 00:11:54,980 --> 00:12:00,660 So just kind of summing what you said, people could invest, they have to be accreditive investors, 166 00:12:00,660 --> 00:12:04,100 right, to invest in these drills. 167 00:12:04,100 --> 00:12:08,460 And what is it accredited investor in the oil and gas space? 168 00:12:08,460 --> 00:12:09,460 Yeah. 169 00:12:09,460 --> 00:12:16,100 So they're sold in a private placement memorandum, regulation D. And so that just requires 170 00:12:16,100 --> 00:12:23,340 that investor either has 200,000 a year of income or a million net worth of assets. 171 00:12:23,340 --> 00:12:30,100 If they have either one of those, they're deemed to be accredited and can invest in the projects. 172 00:12:30,100 --> 00:12:33,820 Now what if they're a married couple, does that change the 200,000? 173 00:12:33,820 --> 00:12:34,820 Yes. 174 00:12:34,820 --> 00:12:37,660 For married couples, it's 300,000. 175 00:12:37,660 --> 00:12:38,660 Okay. 176 00:12:38,660 --> 00:12:43,300 And then the million stays the same for married couples, million net worth. 177 00:12:43,300 --> 00:12:44,300 Okay. 178 00:12:44,300 --> 00:12:45,300 Fantastic. 179 00:12:45,300 --> 00:12:46,300 Okay. 180 00:12:46,300 --> 00:12:55,740 I want to talk a little bit about how, you know, when I think about these IDCs, accredited 181 00:12:55,740 --> 00:12:59,500 investing, like you were saying a little bit, they're more of a riskier investment. 182 00:12:59,500 --> 00:13:06,180 So a lot of times, you know, women are less risk adverse and men are more comfortable with 183 00:13:06,180 --> 00:13:07,180 risk. 184 00:13:07,180 --> 00:13:15,260 So in your opinion, if people are investors of stocks and IRAs and rental and other 185 00:13:15,260 --> 00:13:21,140 than crypto and all these ways to invest, what percent of people's portfolio do you think 186 00:13:21,140 --> 00:13:27,860 IDCs could be for an investor now that have high ordinary tax income? 187 00:13:27,860 --> 00:13:32,660 Well, it really depends on what your investment goals are. 188 00:13:32,660 --> 00:13:37,820 You know, if you're looking for, you know, tax deduction, how much tax deduction do you 189 00:13:37,820 --> 00:13:38,820 need? 190 00:13:38,820 --> 00:13:43,540 If you're looking for income, you know, a lot of our investors are selling a business and 191 00:13:43,540 --> 00:13:52,660 retiring, probably 30% of our clients are retiring and taking money out of their IRA or 401K, 192 00:13:52,660 --> 00:13:54,820 which creates a taxable event. 193 00:13:54,820 --> 00:14:00,580 So they'll take 100,000 out of their retirement account and put 100,000 in the drilling and 194 00:14:00,580 --> 00:14:06,700 it completely offsets that taxable event and then creates a monthly income for their retirement. 195 00:14:06,700 --> 00:14:11,500 So it really just depends on what your specific investment, you know, goals are. 196 00:14:11,500 --> 00:14:13,060 Yeah, that makes sense. 197 00:14:13,060 --> 00:14:14,700 That's a tough question. 198 00:14:14,700 --> 00:14:19,540 I'm curious as like our new president has some very specific roles. 199 00:14:19,540 --> 00:14:22,460 I keep replaying in my head, drill, baby, drill. 200 00:14:22,460 --> 00:14:26,140 I know that's something that spends, you know, he talks a lot about. 201 00:14:26,140 --> 00:14:33,820 So there are there any tax policy changes or proposals this year that could positively 202 00:14:33,820 --> 00:14:39,060 affect oil and gas and maybe something that investors should consider with our current 203 00:14:39,060 --> 00:14:42,140 investment. 204 00:14:42,140 --> 00:14:49,020 So the last time President Trump was in office, he passed the Tax Cuts and Jobs Act of 2017 205 00:14:49,020 --> 00:14:52,700 where he enhanced the tangible well-hit equipment. 206 00:14:52,700 --> 00:14:59,940 We used to depreciate it over five years and he put in what's called bonus depreciation, 207 00:14:59,940 --> 00:15:01,340 full expensing. 208 00:15:01,340 --> 00:15:08,420 Now that's reduced now down to 40% bonus depreciation, but he also enhanced the section 209 00:15:08,420 --> 00:15:15,460 179, which allows you up to a million dollars of expensing of property or equipment. 210 00:15:15,460 --> 00:15:21,180 And so unless you're depreciating over a million dollars, you can take the full expensing 211 00:15:21,180 --> 00:15:24,460 the first year through the 179 election. 212 00:15:24,460 --> 00:15:30,180 But as far as what he's proposing now, you know, we haven't seen anything, you know, in 213 00:15:30,180 --> 00:15:35,980 terms of what he might or might not do with tax taxation on oil and gas. 214 00:15:35,980 --> 00:15:42,780 Yeah, and I know that you have to have a large amount of cash up front to invest in some 215 00:15:42,780 --> 00:15:47,140 of these deals, some of these oil and gas deals are hundreds of thousands of dollars to 216 00:15:47,140 --> 00:15:48,940 invest. 217 00:15:48,940 --> 00:15:51,420 So it's capital intensive. 218 00:15:51,420 --> 00:15:55,620 So we're recording this in March of 2025. 219 00:15:55,620 --> 00:16:01,740 Is there anything that would draw investors in right now when they're trying to decide? 220 00:16:01,740 --> 00:16:08,060 Do I put a hundred thousand dollars into the stock market versus oil and gas versus all 221 00:16:08,060 --> 00:16:11,380 the other investments one could invest in? 222 00:16:11,380 --> 00:16:16,740 Is there something that we could talk about that would interest people to put their money 223 00:16:16,740 --> 00:16:22,100 more in oil and gas now versus some of these other investments within the stock market? 224 00:16:22,100 --> 00:16:28,580 Well, with oil, you know, of course, you've got a hard asset that is stored in the ground 225 00:16:28,580 --> 00:16:31,260 and produced out for monthly income. 226 00:16:31,260 --> 00:16:36,060 And so if you're concerned, you know, about the stock market collapsing or maybe a bank 227 00:16:36,060 --> 00:16:39,940 failure or something, you've got a hard asset stored in the ground. 228 00:16:39,940 --> 00:16:44,580 You've literally owned oil barrels and natural gas in the ground. 229 00:16:44,580 --> 00:16:47,220 And so that is produced out. 230 00:16:47,220 --> 00:16:48,780 We'll always be produced out. 231 00:16:48,780 --> 00:16:54,940 People will always use it for, you know, heating their homes, electricity, transportation. 232 00:16:54,940 --> 00:16:57,020 So we'll always have a market for the oil. 233 00:16:57,020 --> 00:17:01,060 We import, you know, 50% of our oil right now. 234 00:17:01,060 --> 00:17:02,060 It's a nation. 235 00:17:02,060 --> 00:17:04,900 So we'll always have a market to sell that into. 236 00:17:04,900 --> 00:17:11,780 So you've got cash flow and I think safety of your, holding your asset in the ground. 237 00:17:11,780 --> 00:17:16,780 Yeah, Royal Energy Focus is mostly on domestic production. 238 00:17:16,780 --> 00:17:22,900 And I know living in Austin's sustainability and renewables are really trending. 239 00:17:22,900 --> 00:17:27,980 Where do you see oil and gas fitting in today's energy mix? 240 00:17:27,980 --> 00:17:28,980 Sure. 241 00:17:28,980 --> 00:17:38,380 So we're seeing a great deal of demand increase for electricity, you know, AI and all the electronic 242 00:17:38,380 --> 00:17:41,060 components that are being used now. 243 00:17:41,060 --> 00:17:46,700 And so energy overall is increasing pretty dramatically right now. 244 00:17:46,700 --> 00:17:50,220 Oil and gas is 80% of that demand. 245 00:17:50,220 --> 00:17:53,260 And so you're going to have demand growth. 246 00:17:53,260 --> 00:17:59,300 In fact, the International Energy Agency says that we'll probably have 2% per year for the 247 00:17:59,300 --> 00:18:01,060 next five years. 248 00:18:01,060 --> 00:18:07,820 And last year we had 103 million barrels of oil consumption, which was the highest in history. 249 00:18:07,820 --> 00:18:13,540 And so we could well be over 110 million barrels per day of consumption within five or ten 250 00:18:13,540 --> 00:18:14,540 years. 251 00:18:14,540 --> 00:18:17,780 So we think there's a strong demand for it. 252 00:18:17,780 --> 00:18:22,820 And you know, it's just a good time to own oil and gas right now. 253 00:18:22,820 --> 00:18:24,900 Yeah, it sounds like it. 254 00:18:24,900 --> 00:18:31,540 Now, I want to circle back to maybe one thing for people that have never heard about oil 255 00:18:31,540 --> 00:18:32,540 and gas. 256 00:18:32,540 --> 00:18:37,820 I know if you've not heard about IDCs and investing in some of these drills, the idea of putting 257 00:18:37,820 --> 00:18:43,980 $100,000 into something that one doesn't understand is really concerning. 258 00:18:43,980 --> 00:18:49,540 So is there one thing that we could point people to or boil it down for them to give them 259 00:18:49,540 --> 00:18:55,580 confidence that oil and gas is a safe place to invest right now, no matter what year it is, 260 00:18:55,580 --> 00:19:01,060 even if gas is a little bit lower next year than it is this year? 261 00:19:01,060 --> 00:19:08,060 Yeah, so we think it's a good time right now because in our case, the advent of multi-stage 262 00:19:08,060 --> 00:19:14,060 fracking, we're in a 20,000 acre play right outside of Midland, Texas. 263 00:19:14,060 --> 00:19:17,020 Next sign is drilled several wells to our north. 264 00:19:17,020 --> 00:19:21,900 They just went and bought another 3,000 acres to the south. 265 00:19:21,900 --> 00:19:28,260 Occidental petroleum is drilling right on our eastern edge and continental for the largest 266 00:19:28,260 --> 00:19:31,380 producers in Texas are drilling right around our acreage. 267 00:19:31,380 --> 00:19:39,060 In fact, we've received two written offers from two of the major producers out there. 268 00:19:39,060 --> 00:19:44,620 So this is an area where the risk is low, we haven't had any dry holes. 269 00:19:44,620 --> 00:19:50,660 They're all high rate between 813,000 barrels of oil per day and long life reserves. 270 00:19:50,660 --> 00:19:54,220 As I mentioned earlier, diesel produced for 40 years. 271 00:19:54,220 --> 00:19:56,900 So this is just a unique opportunity. 272 00:19:56,900 --> 00:20:03,060 You know, in my 35 years in the business, I've never been 100%. 273 00:20:03,060 --> 00:20:05,460 You know, we always have a dry hole here or there. 274 00:20:05,460 --> 00:20:14,340 And this played because of the continuous accumulation of oil in that shell, we have not had any dry holes. 275 00:20:14,340 --> 00:20:15,340 That's amazing. 276 00:20:15,340 --> 00:20:21,620 Now how does Oklahoma and Texas compare to other parts around the United States? 277 00:20:21,620 --> 00:20:26,540 Is it have more oil or less or how would you say they compare? 278 00:20:26,540 --> 00:20:29,740 Well, first of all, they're much more friendly to oil. 279 00:20:29,740 --> 00:20:33,060 You know, we were a California producer primarily. 280 00:20:33,060 --> 00:20:38,940 And here in California, it's become much more difficult to do business in the oil and gas arena. 281 00:20:38,940 --> 00:20:43,180 So, well, Oklahoma and Texas certainly more friendly. 282 00:20:43,180 --> 00:20:49,940 And it's in the case of the Permian Basin, that's got 12 different layers of oil. 283 00:20:49,940 --> 00:20:55,220 And most of those have been penetrated and drilled vertically with vertical wells. 284 00:20:55,220 --> 00:21:01,580 But now with this modern, multi-stage fracking, we're going back into shell formations that 285 00:21:01,580 --> 00:21:04,100 were not economic previously. 286 00:21:04,100 --> 00:21:06,780 And so it's just opened up a whole new area. 287 00:21:06,780 --> 00:21:12,940 The majority of the undrialed wells is right there in the Permian Basin. 288 00:21:12,940 --> 00:21:14,940 That's great. 289 00:21:14,940 --> 00:21:21,020 Now as we kind of any final thoughts or predictions you want to share with our listeners on oil and 290 00:21:21,020 --> 00:21:24,900 gas as we continue to head through 2025? 291 00:21:24,900 --> 00:21:31,620 Well, I think the current administration is going to make it much more friendly and less 292 00:21:31,620 --> 00:21:32,620 regulatory. 293 00:21:32,620 --> 00:21:36,380 It will lower our overall costs of doing business. 294 00:21:36,380 --> 00:21:38,900 It'll open up more areas certainly. 295 00:21:38,900 --> 00:21:43,220 You know, federal leases were off limits under the previous administration. 296 00:21:43,220 --> 00:21:48,420 So federal leases will become more active in drilling. 297 00:21:48,420 --> 00:21:51,580 And so I think the whole environment is going to be just much better. 298 00:21:51,580 --> 00:21:57,140 I think we'll have more demand for oil and gas going forward, less regulation on using 299 00:21:57,140 --> 00:21:58,140 it. 300 00:21:58,140 --> 00:22:03,140 And so I think it's just a great time right now at this early stage of the new environment 301 00:22:03,140 --> 00:22:06,220 to be investing in oil and gas. 302 00:22:06,220 --> 00:22:07,220 I love it. 303 00:22:07,220 --> 00:22:09,340 I know we talked a little bit about this before. 304 00:22:09,340 --> 00:22:17,220 I know a lot of times oil and gas, you know, from a tax standpoint, CPAs don't really 305 00:22:17,220 --> 00:22:25,700 understand how to navigate IDCs or how to take these write-offs because it's not a popular 306 00:22:25,700 --> 00:22:26,700 thing. 307 00:22:26,700 --> 00:22:31,860 Is there any advice you can give to our listeners who are presenting oil and gas investments 308 00:22:31,860 --> 00:22:37,340 to their CPAs and the CPAs are telling them this is a bad investment or a risky investment 309 00:22:37,340 --> 00:22:39,700 or I don't know anything about it? 310 00:22:39,700 --> 00:22:43,300 Is there any advice that you could share with those listeners? 311 00:22:43,300 --> 00:22:50,020 A lot of CPAs think they're talking about a partnership and right away when they say oil 312 00:22:50,020 --> 00:22:55,540 and gas, they think partnership, which is not deductible against ordinary income. 313 00:22:55,540 --> 00:23:01,460 But if we give them our tax book, we have a tax book, we can send out to anybody electronically 314 00:23:01,460 --> 00:23:02,860 or hard copy. 315 00:23:02,860 --> 00:23:12,140 But that will identify the tax code and show them exactly where that's legitimate write-off. 316 00:23:12,140 --> 00:23:17,500 So it's a standard schedule C business deduction, your deemed to be in the oil and gas business 317 00:23:17,500 --> 00:23:21,020 when you own a work in interest in an oil and gas well. 318 00:23:21,020 --> 00:23:26,180 So to that extent, you write it off on your schedule C and then that comes around to the 319 00:23:26,180 --> 00:23:31,820 front page and reduces your adjusted gross income by the amount that you put in. 320 00:23:31,820 --> 00:23:38,180 Back in 2021, I had a guy, Mike Weaver, out of Tucson, Arizona called me and he said, 321 00:23:38,180 --> 00:23:43,660 I received a stimulus check in the mail and he said, I call my CPA and I said, how in the 322 00:23:43,660 --> 00:23:46,980 world did I get a $1,200 stimulus check? 323 00:23:46,980 --> 00:23:54,780 And his CPA told him, your oil investment reduced your adjusted gross income below $75,000 324 00:23:54,780 --> 00:23:57,260 and that's what generated the check. 325 00:23:57,260 --> 00:24:03,580 And so it's a great way not only to recover your drilling costs through the tax refund, but 326 00:24:03,580 --> 00:24:09,540 it also reduces your overall tax bracket in some cases. 327 00:24:09,540 --> 00:24:10,540 That's great. 328 00:24:10,540 --> 00:24:14,020 I love that you guys have that book to share with our listeners. 329 00:24:14,020 --> 00:24:18,460 Don't anything, I know we covered a lot quick, rapid fire. 330 00:24:18,460 --> 00:24:25,580 Is there anything you want to leave with our listeners or any final closing thoughts? 331 00:24:25,580 --> 00:24:30,860 Well I think if you, you know, not been in oil and gas because of the risks, you know, 332 00:24:30,860 --> 00:24:32,420 there certainly is still risk. 333 00:24:32,420 --> 00:24:37,100 I don't want to let anybody know there's not, but a lot of those risks are mitigated now by 334 00:24:37,100 --> 00:24:43,180 using 3D seismic, which we have on all of our drill sites. 335 00:24:43,180 --> 00:24:49,620 And then good well control and then using modern multi stage fracks. 336 00:24:49,620 --> 00:24:56,220 I think when you mitigate the risk in those three ways, you've reduced your risk quite a 337 00:24:56,220 --> 00:24:57,220 bit. 338 00:24:57,220 --> 00:25:03,260 You've reduced the risk of, you know, prices, you can't reduce the risk of pressure or, 339 00:25:03,260 --> 00:25:06,100 you know, different production risks. 340 00:25:06,100 --> 00:25:10,820 But overall, I think losing your money, I think that is off the tape. 341 00:25:10,820 --> 00:25:12,220 You aren't going to lose your money. 342 00:25:12,220 --> 00:25:18,300 You're going to get your tax right off and get monthly income. 343 00:25:18,300 --> 00:25:24,060 And that's what we all love, monthly income and decreasing our tax burden. 344 00:25:24,060 --> 00:25:30,380 So thank you so much, Dawn, for being here today and sharing with our listeners all about 345 00:25:30,380 --> 00:25:33,020 IDC, oil and gas investing. 346 00:25:33,020 --> 00:25:35,500 I know you're a busy man. 347 00:25:35,500 --> 00:25:38,700 That is the Executive Connect podcast. 348 00:25:38,700 --> 00:25:42,740 Please follow us, subscribe and let us know what you'd like to hear.