U.S. Energy Development Corporation expands its projects in the Permian Basin


U.S. Energy Development Corporation today announced its acquisition of interests in the Shetland and WarWink oil development projects. According to the company, both assets are core Permian projects located in the Delaware Basin. Furthermore, the exploration and production firm looks to continue providing direct investments in energy to the region.

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U.S. Energy Development Corporation: new projects in the Delaware Basin

This Tuesday, U.S. Energy Development Corporation announced it acquired interests in the Shetland and WarWink oil development projects in the Delaware Basin. In fact, both assets are close to the Texas and New Mexico state lines.

The Shetland project contains an interest in 14 producing wells and six recently proposed oil wells. Indeed, this asset will target initial production in mid-2021.

On the other hand, the WarWink project in Winkler County, Texas, contains an ownership interest in two oil wells. Besides, it will be targeting initial production in mid-2021.

Indeed, the recent acquisitions come after U.S. Energy deployed more than $100 million in new projects over the past 12 months. Moreover, the firm continues to actively search for additional investment opportunities and joint ventures in 2021.

“The Shetland and WarWink projects are instrumental in U.S. Energy’s continued growth and expansion in the Permian Basin,” said Jordan Jayson, chairman, and CEO, U.S. Energy Development Corporation. Furthermore, “these projects offer favorable valuations, desirable locations, and strong projected returns. Besides, they rank amongst the most attractive projects we have seen in our 40-year history.”

Future Benefits

Energy projects like the Shetland project provide additional tax benefits to investors. So, opportunity zones allow qualified investors to defer short or long-term capital gains. Moreover, they can receive 10% of their deferral tax-free while also qualifying for tax-free gains on investments held longer than ten years. In fact, this is in addition to the traditional tax benefits oil and gas projects receive. 

“Some of the best areas for oil and gas production are located in opportunity zone census tracts,” noted Matthew Iak, executive vice president of U.S. Energy Development Corporation.

Recently, the IRS passed Notice 2021-10, which extends the deadline investors have to participate in an opportunity zone fund. As a result, investors can, since October 2019, invest in an opportunity zone and defer capital gains tax. Furthermore, the extension applies to opportunity zone investments made through March 5, 2021. Also, for individuals who already paid the tax in prior years, a simple amendment will provide a refund.

“Oil and gas direct investments are recognized for substantial tax benefits, but the opportunity zone tax provisions raised the bar in terms of what investors can expect from their energy investments,” commented Matthew Iak, executive vice president of U.S. Energy.

Therefore, “the combination of opportunity zones and oil and gas investments couldn’t have happened at a better time. In brief, the only thing better for investors than cash flow is potentially tax-free cash flow.”

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