Be very carefull when dealing with Shale or Apache. I had not known about the deadline cut off, I was 4 days late. So everyone else in are grop signed on time. Some of the others pitichend for me untell Shale sent me an e-mail offering to lease if I just confermend that I wanted the lease in a reply e-mail. So I did and of course they didnt honer that offer of a lease. So be cairfull or you could be like me and be the only one with no lease now.
Bill, if Apache actually decides to drill on acres spaced with yours, I’m sure they think they can just lease you at that time. They don’t need to lease everyone, all they need is to lease enough acres so they can block someone else drilling the spacing.
Like them fileing for a temp Spacing Unit with the Board of Oil & Gas. Also when Shale sent the lease to me it was September 28th and no menchin of the October 1st deadline in just a few days. Just not very professional of them at the very least.
Bonnie, you are allowed to deduct 15% of your royalty payments on oil produced from your federal tax as depletion allowance. It’s about the same as owning a commercial building and taking a depreciation deduction on the building. The operator takes depletion also, depreciates pumps and other surface equipment and I believe that they can deduct flared gas as a loss, while the lessor can’t because the lessor doesn’t have any ownership in any part of the well ,surface equipment or flared gas, just a royalty interest in product sold.
j. Sepke, when I received my money in 2011 I did not have to pay Montana state tax, I am pretty sure you only pay taxes in the state you receive it in,for example you may receive a pay check from out of state but you pay the state taxes where you live.
I think the courts say that bonus payments are advanced royalties but I think taking depletion for them would be frowned upon because nothing was depleted just for the bonus payment.
RW, I’ll let you know when (or if) I receive a corrected 1099. If I don’t, I can use the copies of the checks/deposit slips for my taxes and file a tax fraud case against them. I’m not going to lose any sleep over it. Thanks for all the information.
Taxes, taxes, taxes! I have not read the board in a while nor have I received a 1099 from Shale. With their slowness with payment I figured the missing 1099 was more of the same. After consulting my lawyer CPA friend I began to work on doing my taxes. On the federal I was sure to take my 15% oil depletion allowance. My proof of payment in lieu of a 1099 is my COPY of my payment check. I do not live in Montana and my state does not tax income from out of my state. My question is this: do I need to file state income tax in Montana? Does Montana even have a state income tax?
Oh my gosh!!! What in the world is a 15% oil depletion allowance?? Is your income royalty or from the leasing of mineral rights? My head is spinning!
While I can’t tell you if you have to file in Montana (I’m thinking no for lease payment…maybe yes for royalty payments), I looked it up and Montana does have state income tax according to Google.
I have been wondering eversence I found out Apache is the largest Oil Company, and thats why they sent Shale to Daniels CO. to by leases. I would bet if Apache tryed to start buying leases insted of Shale that we could of got payed 3 times the amount we got. I just wonder what the diference would of been having the worlds largest Oil & Gas Company wanting to buy are minerals their in Daniels CO. That could also be whats taking so long for some to get paid with Apache’s Stock taking a nasty hit last year and the problems they got in Afirica.
For what it’s worth, here are my suggestions/comments etc on handing the tax accounting for the lease option payments from Shale. Note that I’m a CPA practicing tax in the Seattle area and have done returns this year that deal with Shale money…
- The lease option payment is treated as rent, a kind of passive income, and so gets reported on Schedule E page 1 for an individual and on a 8825 form for partnerships and S corporations. Note that LLCs are going to be treated for tax accounting purposes as something else (e.g., as a partnership)… Here’s an article at my website that explains tax accounting rules for LLCs:
http://www.llcsexplained.com/llcsexplained-taxation.htm
- You shouldn’t take depletion on the lease option money. Note that you would take this deduction if you end up getting actual royalties. For more information on the details, you might want to look at this IRS publication for IRS agents who come out and audit tax returns with oil and gas income and deductions:
http://www.irs.gov/pub/irs-mssp/oilgas.pdf
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Note that you might have other deductions that go on Schedule E page 1 or the form 8825: money paid to an attorney for reviewing lease, money paid to accountant for providing tax planning for money, travel expenses to visit Scobey because you had mineral rights in Daniels County, etc.
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The income and other deductions related to the lease option money (and if it happens any future royalties) do get sourced to Montana. So you’ll have to file a nonresident MT tax return if you live, say, in California, etc. and you received leae option money.
Hope that helps.
For what it’s worth, here’s link to Apache’s four quarter operations report which (I think) become available this morning. The most interesting thing in this document (unfortunately?) is that it provides no info that I can see or spot regarding Apache’s Bakken (Daniels County) activities:
http://www.apachecorp.com/Resources/Upload/file/investors/Apache_Ea…
You know what? This might be a better link:
http://www.apachecorp.com/investors/quarterly_earnings.aspx
BTW, I don’t see anything about Apache’s Bakken (or Williston basin) stuff in any of these documents. But I’ll also note that there’s a conference call it looks like someone can dial into and then a webcast this afternoon. It’s always possible that some investment analyst might ask about the Apache Bakken thing…
Lee,
Just listened to the webcast with my wife/your cousin… she had the same question after the webcast… It does indeed raise a question in one’s mind…
OK…I’ll bite…what question did it raise?
We thought the way they talked about Bakken (roughly at minute 22 briefly and then at end apparently per Lee–though I didn’t hear everything clearly) and then all the talk during the webcast about selling assets makes one wonder if Apache won’t sell their Bakken interest.
I.e., some of the behavior (moving rig to Texas) and the delay (in action and in information disclosures) could just be because their Daniels County stuff is for sale or will be soon.
I guess I am wondering is why would anybody buy if there is no oil?
Surely whoever they would sell to would be privy to that information wouldn’t they?
It’s all a guessing game at this point. I don’t have any inside information. Yet based upon Apache’s actions, Stephen’s speculation is probably right. If they “hit the big one” they would be accelerating things not dragging their heels.
Why would anyone buy? In the big scheme of things, Apache has something attractive here; A huge block of acres (300/400,000) tied up in five year leases (most with additional five year extensions). They hold this at a relatively low average cost (under $500/ac after paying Shale). While their drilling may have disproven the Bakken potential, it is likely their cores have some “show” in other formations. So even if their results have been disappointing it does not mean there is NO oil present. In all they’ll probably be able to find a buyer (though perhaps at a loss to Apache). My best advice is, if anyone is still awaiting their lease bonus payment make sure and push to receive it as soon as it is due. Now let’s just sit back and see where this goes. That is all we can do.
Stephen , I listened to Apache webcast this afternoon. the last questioner did ask about the “Montana Bakken” . the apache executive sidestepped the question and diverted his answer to another area of exploration and development. In my opinion.
they talked of selling 2 billion in assest, some productive and some not. to service debt. It raised a question in my mind.