StrategIQ Funds

Strategies · Oil & Gas Exploration

A real asset, owned directly.

Direct oil & gas exploration gives accredited clients a working interest in energy production — a real-asset return with its own drivers, a distinctive tax profile, and real, speculative risk.

The asset

What direct oil & gas exploration is

In a direct oil & gas exploration investment, the investor takes a working interest in a program that drills for and develops oil and natural gas reserves — funding part of the cost of finding and producing energy, and sharing in the revenue from any production that results. It is a direct stake in a physical, producing asset, not a share of a fund.

That makes it fundamentally different from owning an energy stock or an energy ETF, which give you equity exposure to companies. Here the return comes from the wells themselves — driven by how much is produced, the price of oil and gas, and the economics of each project over its producing life, rather than by the stock market.

The case

Why advisors and clients consider it

For the right client, a small allocation can do something most of a portfolio can't — add a real-asset return stream that doesn't simply track stocks and bonds.

Returns are tied to production and energy prices — drivers that often move differently from public equity and credit markets.

Once wells produce, a working interest can generate cash distributions over the producing life of the project. Income is variable and never guaranteed.

Working-interest investments carry some of the most notable tax features in private markets — described below, and to be confirmed with your tax advisor.

Tax profile

A tax profile unlike most investments

Much of the interest in direct oil & gas comes from how the tax code treats a working interest. A large share of a well's cost is classified as intangible drilling costs — labor, drilling fluids, and services — which are generally deductible in the year they are incurred. The remaining tangible costs, such as equipment, are typically recovered through depreciation over several years.

Once a well produces, a depletion allowance may shelter a portion of the income it generates. And because a working interest is generally treated as an active, non-passive activity, certain losses may be available to offset other income — treatment a passive limited-partner interest usually does not receive.

These are general features of the asset class, described for education only. They are not tax advice, and not a description of any specific StrategIQ program. Eligibility and treatment depend entirely on a program's structure and your individual tax situation — confirm everything with a qualified tax advisor and the program's offering documents.

The lifecycle

How a program works, stage by stage

Prospects are evaluated on geology, seismic data, and economics before any capital is committed to drilling.

Capital funds the drilling and, if a well proves viable, the completion work that prepares it to produce. Not every well succeeds.

Producing wells generate revenue from the oil and gas sold; a working interest shares in that revenue, net of operating costs, over the well's life.

Investors typically participate through a partnership or joint venture that holds the working interest — with the rights, costs, and risks that direct ownership carries.

The risks

Understand the risk.

We hold oil & gas to the same honest standard as everything else we offer. Before a client considers it, these risks have to be understood — not glossed over.

Exploration can come up dry. A well may find nothing commercially viable, and the capital committed to it can be lost entirely.

Revenue depends on oil and natural gas prices, which are volatile and outside anyone's control.

There is no public market. These are long-horizon commitments — often many years — and capital cannot be readily withdrawn.

Returns depend on a limited set of projects and on the operator executing well; trouble at either level affects the outcome.

A speculative, illiquid investment — you can lose your entire stake. Direct oil & gas exploration is suitable only for those who can bear the loss of their entire investment. It is generally offered only to accredited investors. Nothing here is a recommendation or an offer to buy or sell any security.

Is this right for your client?

Who direct oil & gas is for

Direct oil & gas exploration is generally available only to accredited investors — and even then, it fits a narrow profile: clients who want real-asset diversification and the tax characteristics of a working interest, who can commit capital for years, and who can comfortably absorb the loss of the amount they invest.

It is not a substitute for core holdings, an income guarantee, or a place for capital a client may need. Used well, it is a small, deliberate allocation at the edge of a portfolio — not the center of it.

Questions

Oil & gas exploration FAQs

It is an investment in which you take a working interest in a program that drills for and develops oil and natural gas — funding part of the cost of finding and producing energy and sharing in the revenue from any production. Unlike an energy stock or ETF, which give equity exposure to companies, a working interest is a direct stake in the producing assets themselves.

These programs are generally offered only to accredited investors, and even then they suit a narrow profile: clients who want real-asset diversification and the tax characteristics of a working interest, who can commit capital for several years, and who can absorb the loss of the entire amount invested. Confirm current eligibility requirements directly with StrategIQ.

Returns come from the oil and gas a program produces and sells, net of operating costs, shared according to your working interest. Income is variable and never guaranteed — it depends on how much is produced and on energy prices, both of which change over time, and some projects produce little or nothing.

Working interests carry some of the most distinctive tax features in private markets. A large share of a well's cost (intangible drilling costs) is generally deductible in the year incurred; tangible costs are typically depreciated; a depletion allowance may shelter a portion of production income; and because a working interest is generally treated as active rather than passive, certain losses may offset other income. These are general features of the asset class, not tax advice — treatment depends on the program structure and your situation, so confirm everything with a qualified tax advisor.

It is a speculative investment, and you can lose your entire stake. Exploration can come up dry; revenue depends on volatile oil and gas prices; the investment is illiquid, with no public market and a multi-year horizon; and returns depend on a limited set of projects and on the operator executing well. It is not appropriate for capital a client may need or cannot afford to lose.

Direct oil & gas is illiquid. There is no public secondary market, and capital is typically committed for years — through drilling, completion, and the producing life of the wells. Investors should expect to hold for the long term and should not rely on being able to exit early.

Structure, eligibility, and minimums are discussed directly, because they depend on the specific program and your situation. The first step is a conversation: reach out and we will walk you through how a program works, what it requires, and whether it is a fit for the clients you have in mind. There is no commitment for that conversation.

Better strategies for your clients — and your practice.

Talk to the team to learn more about how our strategies can help you deliver better outcomes for your clients and grow your practice.

Talk to the teamSee the strategies