Success in the oil and gas industry demands a team of professionals who understand the complexities and challenges of the industry.

1. PriceKubecka a Dallas CPA Firm
16775 Addison Rd.
Suite 500
Addison, TX 75001 Innovative Accounting. Empowering Business.
972-888-0950

2. Oil and Gas Property Accounting Types
Success in the oil and gas industry demands a
team of professionals who understand the
complexities and challenges of the industry.
16775 Addison Rd.
Suite 500
Addison, TX 75001 Innovative Accounting. Empowering Business.
972-888-0950

3. Oil and Gas Depletion from a U.S. GAAP
perspective
• Companies engaged in the exploration and
development of oil and gas have the choice of
choosing between 2 accounting methods. These 2
methods differ in the treatment of costs incurred in
exploring for, acquiring and developing reserves.
• Full Cost
• Successful Efforts
16775 Addison Rd.
Suite 500
Addison, TX 75001
972-888-0950
Innovative Accounting. Empowering Business.

4. Full Cost Method
• Easiest to use, groups all properties together by country.
• All property costs including acquisition, exploration and
development are capitalized, regardless of the outcome.
• The net unamortized capitalized expenses less related
deferred income tax can not surpass a ceiling consisting of a
calculated present value of expected future cash flows, after
income taxes, from the proven reserves.
16775 Addison Rd.
Suite 500
Addison, TX 75001
Innovative Accounting. Empowering Business.
972-888-0950

5. Successful Efforts Method
• With this method, acquisition and development
costs are capitalized. Exploration costs, such as G&G
costs and unsuccessful exploratory wells are
expensed.
• Capitalized costs are accumulated either by property,
field, or reservoir.
• This method is most closely aligned with IFRS
accounting rules.
16775 Addison Rd.
Suite 500
Addison, TX 75001
972-888-0950
Innovative Accounting. Empowering Business.

6. Tax Methods
• For tax purposes there are 2 types:
• Percentage depletion
• Cost depletion
16775 Addison Rd.
Suite 500
Addison, TX 75001
Innovative Accounting. Empowering Business.
972-888-0950

7. Percentage Depletion
• This method is available for individuals who own property in
the U.S. for their own economic interest.
• It is not available if own a refinery or you are a retailer.
• The deduction for the recovery of one’s capital investment is a
fixed % of the gross income from the sale of the oil or gas.
Percentage depletion is calculated using a rate of 15% of the
gross income based on the average daily production, equal to
the depletable oil or gas quantity.
• An attractive element is that the cumulative depletion
deductions may be in excess of the capital amount spent to
acquire the property.
16775 Addison Rd.
Suite 500
Addison, TX 75001
972-888-0950 Innovative Accounting. Empowering Business.

8. Cost Depletion
• This is an accounting method in which costs of the
natural resources are distributed to depletion over the
life of the asset.
• A taxpayer can recover the actual capital investment
throughout the period of income production.
• Every year, the taxpayer can deduct a portion of the
original investment, minus previous deductions, that is
equal to the fraction of the estimated remaining
recoverable reserves that have been produced and sold
that year.
• The total amount recovered under this method can never
exceed the taxpayer’s original capital investment.
16775 Addison Rd.
Suite 500
Addison, TX 75001
972-888-0950 Innovative Accounting. Empowering Business.

9. We understand the oil and gas industry and how to assess and
accomplish your financial opportunities and risks. You can
consider us a long-term partner devoted to your success.
Call us today at 972-888-0950.
16775 Addison Rd.
Suite 500
Addison, TX 75001
972-888-0950 Innovative Accounting. Empowering Business.