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Frequently Asked Question How do I invest in Oil & Gas ?When a person makes the decision to invest in the drilling of an oil and gas well proposed by PanAmerican Operating Inc., PanAmerican furnishes the investor with a Subscription Agreement that states the amount of interest the investor is purchasing in the well to be drilled and the cost of this interest. This agreement is signed by investor and returned, along with investor's share of the drilling and completion funds, to PanAmerican Operating, where the funds are deposited into the well's escrow drilling account. Back to TopWhat do I earn or receive ?Once the well is successfully drilled and completed, the investor will receive from PanAmerican Operating an Assignment of Interest in the well. This legal document states the interest owned by the investor and is duly recorded in the County Clerk's office of the county where the well is located. This Assignment of Interest show's the investors Working Interest and Net Revenue Interest in the well. Back to TopWhat is the difference in Working Interest and Net Revenue Interest ?Working Interest is the percentage interest identified as the interest purchased in the well and is the percentage share of the monthly operational expenses that the investor will pay. Back to TopHow do I make money ?Once the well starts producing, the produced oil and gas are sold to a purchaser, such as Exxon or Shell. These sales are accounted for on a monthly basis and PanAmerican is paid at the end of the month for the oil and gas sales made the previous month. Incomes to be received by PanAmerican will be paid directly into the account of a certified accountant for distribution to the investor/partner, based on the investor's Net Revenue Interest owned. PanAmerican will furnish the accountant with the monthly operational expenses, which will be deducted from the income prior to distribution. The investor will receive a check for his/her net monthly income, along with an itemized accounting, showing the incomes and expenses incurred for that accounting month. Back to TopWhat tax advantage is there in a Oil & Gas investment ?Oil and gas drilling has the best tax incentives of any investment planning program. Of major importance in one's tax planning is the fact that whether an oil and gas well is a dry hole or a successful completion, approximately 75% to 80% of a person's investment is deductible in the same year as the investment was made. This is due to the fact that 75% to 80% of the costs incurred in drilling and completing a well are "intangible" costs, with the IRS allowing these costs to be deducted in the year incurred. The remaining 20% to 25% of the costs are classified by the IRS as "tangible" costs, which have to be depreciated usually over a 5 to 7 year period. Few if any other investment program can compete with this level of deductions. Back to TopIs this investment safe ?While no investment of any kind can be classified as risk free, it is felt that drilling in this Barnett Shale gas play is about as low a risk investment as can be made in the current business environment. Because the Barnett Shale is a "blanket" formation, over 80 miles wide and 250 miles long, and because PanAmerican's acreage is in the immediate vicinity of several new Barnett completions, it is almost assured that our drilling will also provide a successful completion. With gas prices now running above the $5.00 per Mcf level and expected to remain at this level for the foreseeable future, the probability of a Barnett Shale gas well providing an above average rate of return to an investor are even more likely to occur. Back to Top
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