Questa Energy Corporation is continually developing oil and gas projects primarily in the Mid- Continent region. Questa retains a substantial equity position in most projects, and the remaining interests are offered to knowledgeable investors and industry participants. A typical project is developed by securing acreage based on specific geologic conditions. A prospectus can be created once the acreage is secured. The prospectus may include a geologic, land, and engineering summary, geologic and land maps, an estimate of costs in the form of an Authority for Expenditure (AFE), a participation agreement and joint operating agreement (JOA).
Exploration efforts are concentrated in niche areas where we can utilize our local knowledge and expertise. Projects range from horizontal drilling and aquisition programs in the Texas Panhandle and Oklahoma to vertical drilling programs in Western Kansas. Questa minimizes its drilling risk in its Western Kansas drilling programs by utilizing 3-D seismic, along with other proprietary technologies. We have participated in an extensive number of 3-D projects and rely on our experience, expertise and analogs in new project development. We require adequate data to be able to analyze prospective acreage for a potential drilling location to insure a quality reservoir capable of producing substantial quantities of oil and gas. Projects target long life reserves (15-20 years+) and quick pay-outs (36 months or less) and rates of return are expected to be no less than 20%.
Direct participation in oil and gas is for the risk tolerant investor. Oil and gas investment provides an inflation hedge, as well as diversity to an equity investment portfolio.
Direct participation in oil and gas can generate several tax benefits. These benefits range from large up front deductions for intangible drilling costs (IDC), to tax credits for the development of certain types of tight formations. Deductions are generated mainly from the cost of nonsalvageable equipment or services conducted during the drilling phase, testing, and/or completion of the well.
As is evident from this discussion, the tax benefits generated by a direct participation in oil and/ or natural gas are substantial. The immediate deduction of the intangible drilling costs or IDCs is very significant, and by taking this up front deduction, the risk capital is effectively subsidized by the government by reducing the participant's federal and possibly, state income tax. Each individual participant of course, should consult with their tax advisor