In parts one and two of this multi-part blog series, we’ve gone over the basics on the theme of ownership within oil and gas investments. Ownership interests and related themes like working interests are often a big part of determining whether a given gas or oil investment is a good one for you, so grasping how they work is vital.
At Legacy Exploration LLC, we’re here to offer numerous areas of expertise on investing in oil and gas wells, stocks, and several related areas. We’ve assisted a huge range of clients with improving and expanding their oil and gas investment portfolios, including answering questions on all the most important areas involved in this process. Today’s final entry on working interest and ownership interest in oil and gas investments will go over the theme of risk for investors, plus some important tax tips for those in this position.
As we’ve gone over previously in this series, purchasing working interest in an oil or gas operations involves becoming part of a group that’s investing. Working interests are naturally somewhat high-risk, coming with great potential returns – but it’s also important to know that any such returns will not be seen until the operation begins producing.
In addition, the machinery used for oil and gas drilling operations is high-quality, but not impenetrable. Issues may take place, and wells do run dry eventually. There are also many cases where compliance and environmental issues present risks that must be accounted for. But just like any other investment, these kinds of unexpected costs should be, well, expected by investors who take this area seriously.
Now, there are also some methods you can take to limit your risk levels as an oil or gas investor. One of the best is to work with proven operators and partners like ours – you need proper vetting in this industry and partners who will help you identify unnecessary risks.
In addition, whether you become a general or limited partner plays a big role here. A general partner can deduct contributions from your active income, while limited partners may deduct from passive income and have less liability. Speak to our team for more information on general or limited partnerships.
There are also a few basic tax incentives out there for oil and gas investment, including three major deductions:
For more on working and ownership interests in oil and gas investments, or to learn about any of our crude oil investing or related services, speak to the staff at Legacy Exploration, LLC today.