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25.06.2008
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WHY INVEST IN THE ENERGY DEVELOPMENT INDUSTRY?
BY DR. WALTER W.KIELHOLZ., PHD.
THE SECRET TO ASSET APPRECIATION IS TO BUY IN THE PATH OF GROWTH.
Oil is one of the most important natural resources known to mankind. For most societies in the world, oil is the principal natural resource that fuels their economies.
Then why, in this great age of communication and technology, do we need to be concerned about a natural resource like oil? Simple. Nearly 98% of everything you have or do is in some way related to crude oil. Heat for your home, gas for your car, 2 liter plastic bottles for pop, and petroleum jelly are just a few examples of products created from crude oil.
As democracy and capitalism are spreading around the world, global oil consumption is at record levels. Throughout Latin America, CIS, India and Asia, economic growth is accelerating at a remarkable pace; Recently, Bill described the development now exploding across Asia:
"You can almost smell the money in Shanghai, Bangkok, Kuala Lumpau or just about any East Asian commercial center outside Japan these days. Traffic snarled, construction booming, glitzy shopping malls showing the latest Hollywood movies... These formerly traditional societies, stagnant for centuries, are exploding into the modern capitalist world and spawning vast new middle classes with a taste for consumer goods and the means to indulge that taste. Healthy economics generate great wealth, and Asia is churning out billionaires as though on a conveyor belt."
PERSONAL FINANCE
The secrets of making money investing in natural gas, or investing in oil programs offered by private, and independent oil & gas companies…just got even more attractive to the private, and qualified investor...
PETROLEUM FINANCE WEEK
Demand is increasing at a much faster rate then supplies can be made available, and in order to give us time to find additional reserves, the countries who have the oil are raising prices...of course greed is part of the reason...but there is another important reason as well...as prices go up because of greater and greater demand...the economics of developing certain prospective oil & gas fields become more attractive...
In more simple terms, the economics, and feasibility of certain oil and gas targets are now making sense...deeper targets, and harder to get targets become very good discoveries when prices support the development effort...we're there, and its only getting better...We have always known where are reserves are because of seismic analysis done years ago across the CIS...
We now have the pricing to justify the expenditure of the development capital, and even more importantly the technology to make it happen...the SS is our partner as well...The Tax write-offs are better than any investment I know of in the CIS today...You might as well take advantage of the facts...demand is going to increase, and oil & gas prices are going to go up...there shouldn't be any question that what I'm saying is true... You must notice this when you fill-up your gas tank these days.
Why not be an investor, and make some money, while reducing your taxes, instead of just remaining a consumer.
Oil & gas prices are consistently higher than ever before...and the latest technology is being implemented to help investors in the oil & gas business today make some very attractive returns on their money...don't pass this opportunity by, because as most investors know, timing is everything...it is particularly so, and is very much the case with oil & gas investments right now.
Tax advantages, and tax benefits, that can be taken during the initial development stages of new oil & gas drilling efforts, plus even more tax write-offs... that can also be taken during the completion, and production stages of oil & gas development, can make the over-all returns that are possible, especially when factoring-in cash flow from successful wells, outstanding...
OIL AND GAS INVESTOR
Consider making an investment in the oil & gas industry... it is just too good to pass-up right now...as usual, as almost everyone knows...this is particularly so, when you are investing with the right people, and at the right time, and place...
I believe the oil & gas business just got a lot more interesting for you active investors...we now have much better...and more accurate methods of finding large commercial reserves of oil & gas than ever before...and this is making our business even more exciting, and profitable... than in the recent past...especially because of the new technology, and again...much more accurate process of verifying targets where the biggest, and most likely recoverable reserves of natural gas, and oil are and will be found...
Our computer power, and speed available now, plus having access to a huge historical data base of oil & gas data...is making the identification process much more of a 'check-list technique' of finding the best reservoirs of both oil & gas, than ever before... and as a result this is where production revenue is being established in the big numbers...
How big? How about establishing on line production of eight million cubic feet of natural gas per day, and 860 barrels of oil per day, while on a 4/64ths choke...from a single well...for those of you with some technical expertise...
To make a long story short...this rather expensive and deep well in the Gulf States area will pay-out in less than six months at current pricing in the marketplace. I see quite a few of these new wells being brought on line these days...
You can diversify in a production package, or participate in a number of single wells to spread-out your risk...and take the excellent tax write-offs as well...this is a perfect time of the year to invest because you will have all year long to generate cash flow, and take the big first year Intangible Drilling Cost (IDC), write-offs...these IDC'S can be 80% or more of your original investment in the first year of your investment...You also take depreciation and get a 15% or more depletion allowance on the revenue side each year...
ENERGY MARKETS
Through the 1990's up to the present, natural gas has become the preferable fuel, and demand for natural gas has been increasing yearly, while domestic supply has decreased because of depleting fields and a lack of domestic drilling. These fundamentals have caused a sustained rise in natural gas prices, and these indicators suggest that high prices will continue for the near future.
TAX BENEFITS
With a proper election, and when monies are considered at risk and not passive for IRS purposes, intangible drilling and development costs may be deducted as an expense for federal income tax purposes. Generally, intangible costs constitute anywhere from 75% to 95% of the total cost to drill, complete, and equip the well. All of these "non-salvageable" costs are deductible in the year expensed.
To be certain, this deduction can be quite significant, and the large write-off potential signifies the government's desire to increase domestic drilling discoveries.
In addition, the owner of an oil and gas interest is generally entitled to a deduction for depletion with respect to the income received from the productions of oil and gas. This allowance has changed several times through the years, but currently allows for 15% of the revenue to be tax-free.
The following is a generalized summary of certain items in the U.S. Internal Revenue Code relating to oil and gas exploration. It is neither exhaustive nor detailed. Each individual should understand how these items will impact him or her personally. In addition, other items unique to the individual may also be relevant. Investors should contact their tax consultants for a complete explanation of the benefits of investing in oil and gas.
LARGE POTENTIAL FINANCIAL REWARD
By concentrating its efforts in proven natural gas provinces, ANSAD-PETROL can utilize existing infrastructure to quickly develop and market its natural gas and oil production. The company pays close attention to the details of its operations, and controls the costs and expenses of its operations, which ultimately improves the economics of its projects for itself and its investing partners.
Although not a guarantee of future performance, investing in an array of oil and gas prospects is an excellent way to diversify any portfolio. Returns on successful oil and gas investments can be expected to significantly outperform high-yield corporate bonds and mutual funds.
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