How do I invest in one or more of TOK's prospects?
Investing in a TOK prospect is done through the industry accepted approach of acquiring Working Interest in
each opportunity. Working Interest is analogous to owning a slice of a business, that is, you will participate, up
to 100%, in the revenues of the petroleum production less royalties, taxes and expenses associated with its
extraction. Initially, just like a neighborhood business opening its doors, you will need to pay at a minimum an
“at-risk” (also called “dry hole”) sum of money to get the well prospect hole drilled. If the drilled hole exhibits
commercially viable petroleum potential then the well will be “completed” which requires an expenditure of cash
beyond the at-risk/dry hole monies. Working Interest may be traded or sold with other working interest owners
and/or third parties, however, all ownership interests are governed by an industry standard joint operating
agreement (JOA). The JOA concept has been in existence for decades and helps to equally protect the
financial interest of each investor and the well operator. TOK prefers to sell Working Interest in increments of
five percent or more, however, exceptions can be made for lesser whole percentage amounts.
What are the tax advantages of oil & gas investing?
At present, the tax advantages of oil & gas investing may be divided into three broad categories. First,
"intangibles", these are items such as drilling costs that may be written off immediately in the current tax year
dollar-for-dollar. Second, "tangibles", these are items of a durable nature, such as pumping units, that are
typically written off over a period of time. Lastly, "operating expenses", these are items that may be written off
immediately and typically offset any production revenue such as routine well maintenance and repairs, daily
field labor, taxes, etc.
How long does my investment last?
Your investment in a particular prospect may go through several life cycle stages. Initially, Working Interest is
purchased in anticipation of bringing in a producing well. If this does not occur then your "at-risk" or “dry hole”
portion of your investment is consumed in the effort. Once a well is brought into a commercially viable status
then your investment converts into the role of income generator until the well can no longer commercially
produce or your ownership interest is sold to another party. If your well interest is kept through the entire well
life cycle then the Working Interest owner is responsible for the wellbore plugging and returning the well site
back to its original natural state. Typically, there is enough residual salvage value in a well to offset these final
When do I receive income from my investment and for how long?
Once a well is successfully completed, that is the well is brought online after drilling, it may take sixty to ninety
days to receive your first check in the mail. However, after that you will receive monthly checks in your mailbox
as long as the well is producing sufficient petroleum revenue to exceed the operating expenses of the well. The
reason for the initial slight delay is attributed to the fact that although oil and gas may be sold to refineries on a
continuous basis, the refineries themselves pay for the purchases once a month on or around the 25th day of
the month following the month of the actual purchase.
Disclaimer - This document’s content is provided for educational and informational purposes only
and is limited in its depiction, reference or inference to the total amount of activity, equipment, and
work services necessary to attempt or achieve extraction of the intended natural resources from
their natural state. There is no assurance that T.O. Kimbrell, L.L.C., its Managers, Operators or
Agents will be successful in extracting petroleum or natural gas resources from any site or location
selected for such a purpose. Investing in oil and gas exploration and production can lead to the
complete loss of one's investment. Because of the speculative nature of oil and gas investments
individuals need to perform careful due diligence before proceeding with any such investment.
The information provided does not represent investment advice, guarantee of returns, or an offer
to buy or sell securities. Potential investors are strongly advised to seek consultation with
qualified professionals such as oil and gas industry advisors, attorneys, and certified public
accountants before making any decision regarding participation in any oil & gas prospect.
|T.O. Kimbrell, L.L.C. - 2006-2017