U.S. Energy Development Corporation, an exploration and production firm and sponsor of direct oil and natural gas investments, has purchased $7 million in interests in the Shetland and WarWink oil development projects. Both assets are core Permian projects located in the Delaware Basin close to the Texas and New Mexico state lines.
Located in an opportunity zone in Eddy County, New Mexico, the Shetland project contains an interest in 14 producing wells and six recently proposed oil wells targeting initial production in mid-2021.
The WarWink project is located in Winkler County, Texas, and contains an ownership interest in two oil wells also targeting initial production in mid-2021.
The recent acquisitions come on the heels of U.S. Energy deploying more than $100 million in new projects over the past 12 months. The firm said that it “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 chief executive officer. “These projects offer favorable valuations, desirable locations and strong projected returns. They rank amongst the most attractive projects we have seen in our 40-year history.”
Opportunity zones allow qualified investors to defer short or long-term capital gains, receive 10 percent of their deferral tax free, while also qualifying for tax-free gains on investments held longer than 10 years.
“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.
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 go back to October 5, 2019 and invest in an opportunity zone and defer capital gains tax. The extension applies to opportunity zone investments made through March 5, 2021.
U.S. Energy Development Corporation is a privately held oil and gas operator established in 1980 which provides direct investments in energy. The firm has invested in, operated and/or drilled more than 2,400 wells in 13 states and Canada and deployed more than $1.5 billion on behalf of its partners.