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Saratoga Resources, Inc. Common Message Board

  • drillingsolutions@ymail.com drillingsolutions Mar 1, 2013 2:41 PM Flag

    The beauty of Drilling UD...

    The beauty of this exploration strategy (or deepwater GoM) is that whether you drill a successful well or a dry-hole, neither the operator nor working interest partners have to bear the cost of exploration as long as the well does not generate revenue for the first 2 years after drilling is completed... There is a loophole that oil & gas lobbyist have had written into the tax code, which allows parties investing in unconventional oil & gas exploration to subtract 100% of the cost of failed exploration endeavors from their tax liabilities (not taxable income)... I think it takes 2 years without revenue generation to declare a well to be a failure and receive these tax reductions... This is why you will never see a deepwater or UD well that will be producing within the first two years after drilling is finished...

    SARA (or a JV-Partner) can & eventually will take advantage of this loop-hole to place a well-bore near the top of their long John Silver structure, wait two years to get their expenses reduced from their tax payments, then spend a few million dollars sidetracking into the top of the gas trap, & complete the well... This will give SARA & Partners a $100-Million dollar UD well for the low cost of only about $10 Million...

    I'm waiting on Repsol to sidetrack the SL 214 GARDEN ISLAND BAY #001 well on DUNR's lease that was originally drilled in 2011 and declared unsuccessful. Note: the well was considered unsuccessful despite DUNR's 8-K stating: "we found reservoir quality rocks with hydrocarbon shows in the perspective section"...
    In the meantime (while waiting two years) DUNR commingled their condensate & crude production from the Garden Island Bay Field about 9 months ago & have been upgrading their condensate pipeline. I look for the well to be re-entered & sidetracked this year to make a nice condensate / wet-gas producer...

 
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