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In the Hidden Money podcast, you'll learn how you can legally use the tax code to your financial advantage. There’s wealth inside the tax code. Taxes aren’t the enemy.
Most people hate taxes (and pay more than they should). But when you view taxes only as an evil expense, you miss out on legal ways to grow your wealth. Unlock the secrets to saving tax and building wealth with the Hidden Money Podcast! 🎧💰 Hosted by Mike Pine and Kevin Schneider.
A good well that goes down, and you've
got a contractor that's putting you
six days, six weeks, or six months out,
how much revenue are you losing there?
So our ability to pivot and deploy rigs
onto wells that may be down or need
completion or even need drilling, that
gives us total control in our ability
to keep that production up and keep the
flow going and not necessarily have a
backlog of wells that need to be repaired
or drilling, or wait on a contractor
to get to us to get a well back online.
Because downtime of a good
producing oil well costs you money.
Mike Pine: Welcome to this episode
of the Hidden Money Podcast.
This is an interesting
episode, different than normal.
Uh, we are working with a company that
is offering oil and gas investment,
and we break it down both from their
investment perspective and why it's a
good investment or may not be for you.
But then Kevin and I add a ton
of detail as well as on how oil
and gas works with your taxes.
Um, I think you'll find
it very informative.
If you're ever interested in oil and
gas, want to know more about investing
in oil and gas, you get to see right
here an actual investment pitch from
the people that are raising the funds,
um, and what they have to offer, and
get Kevin and I's tax side of things.
So hope you enjoy this is
my partner, Kevin Schneider.
Um, we're actually CPAs.
We, uh, we have a firm called
Revo Taxpayer Advocacy.
And a few years ago, when we saw
bonus depreciation going away, we
needed to help our clients get better
deductions, more tax deductions, and
we kept seeing client after client,
including some bad experiences
ourselves, invest in these funds, and
they never paid off in oil and gas.
Great deductions, but a deduction is not
a good thing in tax if it doesn't pay out.
Um, you gotta get more money in than you
put out, otherwise it's just not worth it.
So Kevin and I started, three years ago,
a fund of funds to try to diversify.
We started off with four
different operators after
interviewing about two dozen.
We walked the fields.
We learned the business.
Um, I say we learned the business.
I am no oil and gas expert.
We have one here that will be talking
about his fund, um , and his operation.
But we started that three years ago,
and, uh, first year, um, we did good.
It's doing great.
We did it again last year with, uh,
three operators, and they're doing well.
This year we decided to go all in
with G2, um, we'll introduce Cotton
and Joe here in a second, because
we're most comfortable with them.
Um, they're not looking for Grand Slams.
There's no wildcating.
There's no, "Hey, earn big money now."
It's a good, safe business plan and
oil operation that they're doing, and
they're gonna tell you all about it.
Um, but that's who Revo Investor is.
We were a fund of funds.
Now, this year we are a fund of
fund going all in, and we're working
directly with Joe and Cotton, um,
to, to increase the tax deduction.
Something we did for the first time
last year, where- We were able to
get close to, well, in this case
we get 91% complete write-off.
Mm-hmm.
We can't guarantee that, although
we'll talk about it here in a second.
There's a lot that, that Cotton and
Joe can do to do, to, to, to massage
that number and keep it up towards
the full deduction of around 91%.
And we're doing that through, um, I
don't wanna get too much into details,
we can talk about it more in Q&A, but
we're doing that through a purchase
price allocation on leases and getting
a lot of bonus depreciation as well
as IDCs, and that total should come
out to be about 91% through our fund.
Um, Kevin
Kevin Schneider: No, yeah, and as a
frame of reference, when we invest
into oil and gas, you know, being tax
strategists is kind of our main focus.
Oil and gas is one of those really
cool opportunities in the year end that
people can passively invest money and
get active tax write-off against their
W-2, against their self-employed income.
So it's just really one of
those cool pockets of the tax
code that allows for that.
And historically, typ- in typical oil
and gas investing, I would anticipate
a 70 to 75, maybe 80% write-off, uh,
on your initial investment through
just IDCs, intangible drilling costs.
But we are really aiming, like
Mike said, the 91%, so we are
really excited about this fund.
We've been partnering with you guys-
A few years now ⦠for years, right?
Mm-hmm.
And we put our own money into this,
the- the- the deals every year.
Um, and we just believe in it.
Mm-hmm.
I mean, we've walked the
fields with you guys.
Mm-hmm.
Any investors that call you up,
Cotton- Mm-hmm ⦠you are so into
it, and I guess we can get into
a little bit of the nitty-gritty,
but you w- you can call Cotton, and
he will take you to those leases
and- Yeah ⦠show you the wells.
Absolutely.
And so they'reâ¦
It's a really cool company.
Um, but yeah, Cotton Graham?
Yeah.
If you wanna introduce Joe and kind of-
Cotton Graham: Absolutely.
Again, my name's Cotton Graham.
I'm the president and owner of G2
Petroleum and Newport Operating.
Um, and this is Joe Stroffolino.
He's been, uh, working with me for
the last several years now and, uh,
really bridged the gap between, uh, the
ability to bring in capital and raise
capital for our projects and, uh, made
an introducion- uh, introduction to
Mike and Kevin several, uh, years ago.
And, like they said, we've been working
together, and it's, uh, been a, a
really blessed partnership, and I'm,
I'm proud and honored to, uh, have them
as partners and to be invited on this
show and continue working, uh, into
this new Texas, uh, 26, uh, Growth Fund.
But, um, you know, the long and short
of the, o- of it is I've been in this
business for about 30 years now, um,
on the finance side and really got
into the operations side or the field
side out of demand, uh, because I was
raising a lot of capital, deploying it
in other areas with other operators.
And similar experience to what Mike
and Kevin have, uh, experienced in the
past, where you don't have any control.
You're at the mercy of the operator,
and, um, so that made me switch
modes into starting Newport Operating
about 10 years ago and going into
this area in North Texas, where
we're having a tremendous amount of
success, uh, going into historically
productive oil fields that have been
producing oil for over 100 years.
We're not trying to wildcat
or reinvent the wheel.
We're just, uh, utilizing in-field-
Offset development to continue
to harvest oil that's in place.
Mm-hmm.
And, uh, by acquiring producing
leases, that's kind of the
foundation of our programs.
We go in and buy wells or leases
that are already online producing
oil and generating income.
So we're sp- we're speeding up very
quick, generating cash flow immediately
from buying producing properties.
And then the ability to go out and
drill and develop those properties,
uh, allows us to incur the, uh, IDCs,
uh, the intangible drilling costs.
So coupled with the bonus depreciation,
the intangible drilling cost,
we're offering a really high, you
know, uh, tax deduction, uh, you
know, close to 91% in some cases.
So all of these factors coming in, um,
I believe this is one of the strongest
opportunities for private investors to,
uh, minimize their tax bill, take the
tax deductions, but step into immediate
income without the risk of hitting
dry holes or losing all your capital,
again, because we're buying production.
We're buying wells that are already online
producing, that generate immediate income.
And then the idea is, as we go in and
rework these fields or utilize some
secondary recovery methods, uh, more
importantly, drill and develop these
in-field offset locations, we're able
to increase that annual return, um, much
greater than, uh, what it starts out at.
But, uh, yeah, so that's just a
brief, uh, introduction to myself.
Joe, you want to share a
little bit about yourself?
Joe Stroffolino: Uh, sure.
Thanks, Cotton.
Um, Joe Stroffolino.
I've been raising private equity for,
well, since the '90s, so I guess 30 years.
Um, I had a friend that invested in
oil and gas maybe five years ago,
and that's when I first learned
about the tax benefits, and I was
like, "Oh my God, this is amazing"-
these IDCs that you can write
off your adjusted gross income.
So that got me, um, interested in, in oil
and gas, and I always also say, you know,
if you live in Texas long enough, right?
You're probably going to end up
in oil and gas at some point.
So, um, but, uh, I, I quickly
realized, though, that a lot of
deals out there, a lot of syndicators
that are just syndicating, uh, toâ¦
Really, they, they only
care about making money.
Uh, they don't really care what, uh, if,
if oil's pulled out of the ground or not.
And once you hand that, that capital
over to a, a separate operator,
you have no control over that.
So when I, when I met Cotton, I really
loved the fact that- He, uh, w- we, we
have G2 Petroleum, but he was also the
operator, so he has a vested interest.
Um, he's got, well, we can talk about rigs
and pipes and a crew, and so everything
out in, in Wichita Falls that you need.
So I really like that.
And then the other thing I really,
really liked is, is the structure.
The, the way that we structure it, I
think, as, as far as I've ever seen, is
one of the most, uh, investor-friendly
structures, uh, where we give the, umâ¦
We, we really focus the
returns out to our partners.
So I, I liked all of that.
And, and, uh, like, like Cotton said,
we began working, uh, I guess it's,
like, three or four years ago now.
Mm-hmm.
And it's, it's been a great partnership.
Mm-hmm.
So- Yeah ⦠I guess with that we canâ¦
Mike Pine: yeah, really quick, before we
start going through the slide deck, I just
wanna point out something that, that I
think really attracted me to you when I
met you five years ago, and also point out
you were saying all these step-out words-
and, and using these technical
terms, and I had no idea what
they were back in those days.
We'll get into that, and we'll dumb
it down, um, so at least people
like me and you can understand it.
But Cotton i- is not been in oil
and gas all over the country.
Cotton's been in oil and
gas in one main area- Mm
for his whole life.
And his geologist also- Mm ⦠for
a, in a long life- Mm ⦠where
he's been working those fields.
Mm.
And he was the original person in a lot of
these cases to be the geologist to drill
those original wells when they didn't
know- Mm ⦠um, that there was oil there,
and he's got that tribal knowledge- Mm
that historical knowledge.
Probably no one knows those wells-
Mm ⦠or at least that, that field-
That area ⦠better, that area in
Wichita Falls better than Barry.
And you know how to operate it.
Mm-hmm.
So, um, with that, let's
get to the strategy- Yes,
sir ⦠and get more details.
so the strategy here-
Mm-hmm ⦠it's not, and, and you,
you got into it at a high level.
Mm-hmm.
It's not to go find new wells.
It's not to go find new oil.
It's going to wells that have
been producing for a long time.
Mm-hmm.
Um, a proven field, where you
and Barry have been into that
in a lot of, in a lot of detail.
Mm-hmm.
So you go and you buy these
operating leases already.
Mm-hmm.
Um, but that's not where we
get our increase in equity.
That's not where we get our
increase in distribution.
You're going and buying them, and
the way you're pricing it, we should
get six, seven percent from year one.
Mm-hmm.
Now, when we say year one, once you buyâ¦
let's say you buy,
December 1st, the lease.
Mm-hmm.
We've got a couple monthsâ¦
well, one month before you collect money.
30 days.
Yeah.
30 days, you, you sell the oil.
Mm-hmm.
Then you get the check.
Mm-hmm.
And then you get the check out to us.
That's right.
So it could be up to 60 days
from the day you buy the lease
before distributions go out.
Mm-hmm.
Mm-hmm.
But you start distributing month one.
Mm-hmm.
Like when we justâ¦
when we were in the fund of funds,
we didn't see our first distributions
from all the new wells, um, funds
until, some of them, it was all
the way to September, October.
Mm-hmm.
Uh, we got our first one from you.
Although we didn't invest until
late December last year, we got our
first one from you February 1st.
Yes.
So that's where that percent comes out.
Mm-hmm.
And that, if y'all didn't do
any more drilling, and just
operated those wells and kept them
clean, we'd have the 6% to 7%.
Mm-hmm.
But where you, you say step out.
Mm-hmm.
So step out is, okay, we know
we have a well producing here.
Mm-hmm.
Step out a certain amount of distance.
300 feet, give or take- 300 feet,
give or take ⦠for a shallow well.
And then drill again- Mm-hmm ⦠and
be able to increase the production
from that same field of oil.
Mm-hmm.
Right?
Absolutely.
Two, there's a lot of wells,
and explain this, when y'allâ¦
when Barry- Mm-hmm ⦠originally drilled
those wells for the big guys- Mm-hmm
back in the day, they didn't always find
every pay grade, or they didn't actually
capitalize on all the, the pay grades.
They opened it up, right.
Can you explain that?
Cotton Graham: Yeah,
absolutely.
In the area that we're drilling, and
you'll see a slide deck earl- uh,
later on in the presentation, just
showing you, uh, the stacked pays that
we, uh, encounter when we're drilling
down to 2,000 feet for shallow wells
or 4,000 feet for the deeper wells.
You know, from zero down to 2,000
feet, you've got anywhere from 7 to
10 separate intervals that you're
able to intersect that produce oil.
Um, when you're drilling down to 4,000
feet, you've got maybe 13 to 14 zones
from the top to bottom that you're able
to, uh, potentially generate oil from.
Um, but like Mike was saying, you know,
originally when wells were drilled in
this area, if an operator hit a lower
pay zone, a deeper pay zone in the well,
he would stop and produce that oil.
If he had uphold production or behind
the pipe pay, uh, reservoirs, most of the
time they would just produce that initial
reservoir and, you know, a lot of the,
these wells in this area can produce for
50, 60, 70 years or longer, uh, actually.
Um, so they would continue producing
that, uh, reservoir and leave
that behind the pipe pay there,
unexposed, untapped, un- It opened up.
So what we've been able to do over,
uh, the last many years, um, and this
is a testament to my geologist, Mr.
Barry Hanks, he's, uh,
a brilliant individual.
He can go in and read those logs,
look at the reports, production
reports, well reports, and expose
those behind the pipe pays that
were never opened up or produced.
So we've been able to go into many
fields and, uh- revive that production
by doing behind the pipe pay reworks-
Sure ⦠going into an old well, uh,
that has not, uh, produced from those
previous zones, and just open those, uh-
So- ⦠zones up, treat them lightly,
and bring that production online.
Mike Pine: I think this will make
more sense when we get to the,
the, the layer cake slide- Okay
so they'll understand it.
But just in, in big terms, uh, macro
terms- Mm-hmm ⦠what it is is
at that time you had big operators
looking for the biggest, easiest flow.
Mm-hmm.
So they would drill down and they'd
get 50, 60, 100 barrels a day-
Mm-hmm ⦠from this one well,
and that's all they focused on.
Mm-hmm.
What y'all do and operate
so cheaply at- Mm-hmm
and be able to make it profitable is
you can go, and even if there's a layer
that hasn't been hit- Mm-hmm ⦠y-
you'll perforate it- Mm-hmm ⦠at
that layer behind the pipe pay,
and you can produce five, eight, 10
barrels a day and do it profitably.
Mm-hmm.
So we'll get into that.
But that's a lot of the
strategy of what they're doing.
Um, the opportunity is great.
You get, walk right into money.
You get to deduct up to 91%
of your original investment.
Um, and now before we get into the
details, talk about your track record.
Mm-hmm.
So you only started raising larger funds
once you met with, with K- with Joe-
Joe Stroffolino: Yeah ⦠a few years ago.
Absolutely.
For many years I would, uh, just put
together a small two or three well package
and go out and raise, you know, a million
dollars, give or take, and just go drill
those three wells with some, uh, exclusive
partners that I had, and we would just
rinse and repeat that process, and, uh,
ultimately developed m- many leases.
Uh, currently we've drilled close to 200
wells in the last 10 years in this area.
Um, so typically I would just do
small programs, small partnerships
with, uh, exclusive groups, and go out
and drill wells and make production,
and then continue developing it.
And, uh, when I met Joe, he
kind of brought a different,
uh, line of fundraising.
Uh, introduced me into, you know, into
Mike and a few others, where we're able
to raise a bigger amount of capital so
that we can really go out and deploy it in
this area by acquiring producing leases,
drilling more wells, and, uh, offering
those benefits to investors through the
tax benefits as well as, uh, the income
and distributions that we're seeing here.
Mike Pine: So- Out of your 30
years experience, 30-plus years of
experience, not counting what you
learned- ⦠from your dad- ⦠your
30 years plus of experience, most
of it was in smaller operations.
Mm-hmm.
Only the last few years have you
gotten into the larger syndications.
Mm-hmm, mm-hmm.
Um, and I, I don't want to put words
into your mouth, but from what I've
understood what you told me, once
you have more money, you get better
terms on these leases you're buying.
Oh, yeah.
Once you have that kind of
money, you get more efficiencies-
Mm-hmm ⦠and y- you're just able
to- Mm-hmm ⦠pump up the ROI.
Mm-hmm.
But you have done full cycle stuff-
Mm-hmm ⦠plenty in your past-
Mm-hmm ⦠on the smaller level.
Yes, absolutely.
We're not yet full cycle on
the one we invested in with
you three years ago- Mm-hmm
but we're getting there.
Yeah.
It's, it's close, but th- thatâ¦
Y'all are gonna have that question,
so we want to just get that out there.
Mm-hmm.
Um, all right.
So that's your track record.
Mm-hmm.
We can get into more detail.
I think we have some slides on
it as well- Sure ⦠if we want
to go through the presentation.
So our fund, again, our fund of
fund into G2 Texas 26 Energy Fund,
um, we're raising $15 million.
That's who we're talking to you about.
Um, raising $15 million or up to, and
what we will do with that money is
invest it directly into these guys-
Mm-hmm ⦠um, and into their fund.
We're not gonna be the only
investors in their fund.
Mm-hmm.
Um, but they're raising 25 million, so
we're gonna be raising 15 of their 25.
Mm-hmm.
We might go higher this year again.
Um, we'll see.
Mm-hmm.
But you also might keep it lower
to ensure the tax benefits.
Can we talk about that for a second?
Cotton Graham: Yeah, that's
a g- that's a greatâ¦
And Joe, if you wanna tap on that, uh,
you know, how we're monitoring the capital
we raise with the production that we are
acquiring because that, again, that bonus
depreciation, uh, that Mike and Kevin
introduced us to is a great benefit.
You know, typically, the IDCs
are 75 to 80%, give or take.
But this new bonus depreciation method of
acquiring these producing leases and the
equipment has really enabled us to deliver
a stronger tax write-off to our partners.
And, uh, so we're monitoring how
much money we're raising and what
production we need to acquire, how
many barrels a day we need to buy to
be able to deliver that, uh, th- that
full benefit of a 91% tax deduction.
Joe Stroffolino: Right.
Well, and that, that's
pretty well said, Cotton.
Uh, and, and it really did come
about with Mike and Kevin's help.
Mm-hmm.
Um, when we were buying this production
and, and buying the leases, they were
like, "Hey, rather than just buy the
production, we should buy the equipment."
Mm-hmm.
And we sh- and then we can, uh, do
a bonus depreciation, have bonus
depreciation on top of the IDCs.
Our IDCs historically have always
been in the kind of 70, 75% range.
Mm-hmm.
So then when we're coming in and, and we
will work with Kevin and Mike as we buy
these leases- Mm-hmm ⦠to look at all of
the equipment that we will be picking up.
And so then on top of those IDCs, thanks
to the big beautiful bill and, and,
um, Trump- The one big beautiful bill
the one big beautiful bill.
Act.
Exactly.
Um- He allows for that bonus depreciation
or he continued that to, uh, it w- I
think it was, uh, slated to end, but
anyway, he continued that so you get
100%, uh, write-off in the first year.
Mm-hmm.
Correct.
So, so that's wonderful.
Now we can add that on top of our IDCs,
but what we wanna do is make sure that
the, the total amount of the fund does
match the amount of, um, production and,
and the amount of bonus depreciation
we're going to get- To hit that
really try to make sure
that we hit that 91% number.
And so l- last year's fund, we did that.
We, we actually came in
a little bit above that.
We'd like toâ¦
we certainly would like to hit that again.
Um, as well as that, the, the production
that we're picking up, as Mike talked
about, is gonna, we're gonna hit that
immediate, um, uh, six, seven, you
know, 8%, whatever it turns out to be.
So, so that's how that works, and
it really was, uh, really, um,
uh thank you to you guys- Yeah,
absolutely ⦠for bringing that to us.
Mike Pine: Thank you for making us money.
Um, before moving to the next slide,
I just wanna point out for the CPAs on
there, if you're wondering, well, how are
we maximizing so much bonus depreciation?
Um, Kevin could ex- s- can explain the
tax law a little bit better than I can,
but we're using IRC, Internal Revenue
Code 1060, the purchase price allocation
of an operating trade or business.
Hasn't been done much in the funds.
I haven't seen where anyone's
done this in the oil well.
I'm certain some- we're not the only
ones to have thought of it, right?
Right.
But I haven't seen that done.
And, and we're finding people, we're
constantly finding people that are willing
to sell their, their leases that have
a lot of equipment on it- Mm ⦠and
they're willing to allocate more of
the purchase price to that equipment.
Mm.
And our, our economic case for that
is the whole reason we're doing this
business model is to buy existing
production, and those wells that are there
do have a huge, high intangible value.
You wanna talk more about that?
Kevin Schneider: Yeah, there's
intangible goodwill, and we can get
into the nuts and bolts on the tax if
there's questions out there, I think.
If, if they have- You think this'll
bore them if we get into it?
Maybe.
Okay.
We don't probably wanna lead with tax.
No, no, no.
We can get there.
Okay.
But there's a lot of strategies that we
are proactively working with, with them on
the purchase of the, these leases to get
that big bonus number, uh, which is gonna
be the benefit of everyone out there.
Now, there's AMT issues.
You gotta work with your CPA.
The CPAs out there, they'll work with
their clients as well just to make sure,
hey, you could invest a lot, get a bunch
of deductions, but it could be a tax
preference item when it comes to AMT.
So just make sure you're doing
your due diligence on the
tax deductibility portion.
But for most people, it's a
straight deduction against
W-2 and self-employed income.
Mm.
Mike Pine: Yeah, one last comment on that,
and then it's y'all's turn to take over.
But, um- The AMT preference is
only related to excess IDCs.
Your CPAs can explain that to you guys.
The bonus depreciation isn't subject to
that preference, so that's a nice part.
You will get that, you should get
that in the first year depending on
how your tax return's structured.
The IDC is mul- almost
every one of our clientâ¦
Well, 95% of our clients and
investors last year didn't have
an IDC, uh, preference adjustment.
But if you do, what it does is
you just have to make an election
to spread it out over five years.
So it's a timing difference.
You still get 100% of that deduction.
Mm-hmm.
Um, you might have to spread it out.
And in some cases, please work with
your CPAs on this because in some
cases you might want to spread it
out even though you don't have to.
Um, but I'll leave it at that,
and we can move to the next
slide, and it's y'all's show.
Tell us about your fun, guys.
Absolutely.
All right.
Cotton Graham: So it's a G2
Texas, uh, 26 Energy Fund.
Again, we're raising a total of
twenty-five million, uh, for drilling
and the acquisition, uh, programs.
We may extend it to thirty-five
million, and again, that is, uh,
uh, predicted on how much production
we're able to acquire to keep that
tax, uh, deduction in balance.
But the description of the
program is really simple.
It's an oil drilling, rework,
and production acquisition fund.
Any assets acquired are held in the
fund, significant tax advantages, and
a projected return of potentially fifty
million to our partners in the next
three to five years through monthly
revenue and lease divestiture at the
end of the-- at, at the end of that term
So when we're going over this slide,
we'll be talking about the strategy.
Conventional wells, those are
vertical wells, not horizontal wells.
Just straight up and down vertical wells.
Again, they're 2 to 4,000 feet in depth.
And, uh, again, we've drilled close
to 200 wells, over 200 wells in
this area in the last 10 years.
I currently operate over
356 wells and growing.
But, uh, it's conventional
wells in Wichita County.
Uh, direct operating control
through our Newport Operating.
Again, you know, with proven geology in
this area, we have lower drilling cost.
How are we able to do that?
Well, because I own the
drilling rigs, right?
Uh, we've got drilling rigs, pulling
units, water trucks, backhoes, bulldozers,
everything that you need to, uh, you
know, begin drilling a well, to complete
a well, and to manage it through
the life cycle of that production.
So we are boots on the ground.
I've got a crew of about 25 people
out there every single day that do all
types of jobs from pumping the wells
to doing roustabout work to working on
the rigs, pulling pipe and repairing,
uh, repairing wells that are down.
So, you know, number one, we've
got, uh, shallow conventional wells.
Mike Pine: Hey, real quick,
Cotton, let me just add to that.
So one of the things I learned three
years ago when we first start, started
our fund of funds is having your own
operation and being able to do the work
yourself can make a huge difference.
That was the year that we had a ton of
rain in the spring in, in, in Texas.
Mm-hmm.
It wasn't a drought year,
or for a while it wasn't.
And we had a ton of rain,
and everything was muddy.
Mm-hmm.
And everyone got behind on drilling.
Mm-hmm.
Mm-hmm.
And our other operators that were
operating here in Texas, they, they were
way behind, like nine months behind on
their plan because the operators that
they had contracted out couldn't finish
the jobs that they had before them.
Right.
So while we were waiting on them
to actually get that drilling
done, um, and start producing, you-
your guys were there because you
prioritize your wells with your guys.
That's right.
That's right.
Cotton Graham: Yep.
And that's a major aspect.
That's what we wanted by starting
the operating company is total
control of that day-to-day
operations and not use contractors.
'Cause again, as Mike said, you know,
if you've got a con- a good well that
goes down and you've got a contractor
that's putting you six days, six
weeks, or six months out, how much
lost revenue are you losing there?
So our ability to pivot and, uh, deploy
rigs onto wells that may be down or need
completion or even need drilling, um,
that gives us total control in our ability
to, you know, keep that production up and
keep the flow going and not necessarily
have a backlog of wells that need repaired
or drilling or wait on a contractor to
get to us to, to get a well back online.
Um, because downtime of a good
producing oil well costs you money.
And with today's prices, we wanna make
every single barrel that we can And, um,
so yeah, you know, we're drilling shallow
conventional wells in a proven area.
Our costs are much lower than drilling
deeper, higher risk, unconventional wells.
And that's talking about wells, uh,
these huge horizontal wells that you see
people promoting or getting involved in.
You know, ten, fifteen, twenty million
dollar wells in a single well bore.
You know, if that well declines
or, uh, goes down, it's incredibly
expensive to pay for that rework.
And, um, that feeds back to the working
interest owners, which are the investors.
So, you know, as opposed to investing
in one huge well that cost a lot and
cost a lot when it goes down, we spread
the capital or parlay the capital over
many wells, many leases, and increase
that production through developmental
drilling, in s- infield offset drilling.
But, um, again, you have a slide here
talking about the direct oversight
from our office to the wellhead.
Our field operations are full control
day-to-day operations is the most
notable factor separating G2 Petroleum
from the rest of the industry.
All of our operations are overseen by
myself, Cotton Graham, the founder of
G2 Petroleum and Newport Operating.
Now again, I s- oversee all the
operations, but I've got an incredible
brain trust or team out in the field that
I consult with on every aspect of this.
But ultimately, I do make the decisions
on where we're going, where we're
drilling, and what we're doing.
But again, uh, I rely heavily
on my brain trust, Mr.
Barry Hanks, Michael Villalba,
and several other, uh, individuals
that are out there in the field
that help us do what we're doing.
Again, drilling history, we've
now drilled over a hundred and
fifty wells in Wichita County.
That number's a little, uh, outdated.
Again, I think we're closer to two
hundred wells now in the last ten
years, uh, that we've actually drilled.
And, uh, the lease acquisition, this
is a blind pool lease acquisition.
Uh, the initial seven million
dollars is going to be allotted to
Wichita Falls and/or West Texas,
um, totaling approximately, uh, one
hundred and forty barrels a day.
So again, we're targeting, if we fully
capitalize this fund to acquire an
initial production of one hundred and
forty barrels of production a day.
That's existing leases, existing
wells that are producing oil right
now that we've been monitoring and,
and, and validating and, and, and
doing and checking on the geology
side, running the mapping, running the
engineering to see how much oil is left.
The leases that we are buying
are straight line production.
So you're not gonna see a
big decline curve, right?
The leases we're buying and going after
have been producing this oil in a straight
line production, uh, chart for years.
So we feel comfortable going out and
buying these leases that as soon as I
buy them, it's not gonna start dropping
by ten, fifteen, twenty percent.
We feel that we can get these
leases, manage the operations
because our operating expenses
are low, um, and deliver strong
returns back to our partners.
So the initial acquisition, again, is
through multiple leases, uh, multiple
wells, but totaling a ballpark of
one hundred and forty barrels a day.
Now this is interesting,
you know, the proximity.
We do have a field office, and again,
I've got my staff and, uh, geologists
and, uh, pumpers and a crew of
about twenty-five people, and all
the equipment out in Wichita Falls.
So we have a field office right there
in Burkburnett, Texas, uh, able to
deploy and get to the field easily.
However, our office for G2 Petroleum
is located in McKinney, Texas, which
is just a two, two and a half hour
drive from my office to the well site.
So any given time, if I get a phone
call, I can jump in the truck and drive
out there and be there in two and a half
hours to take care of any business that
needs to be taken, uh, care of there.
So, uh, in addition to the field
office that's there on site, uh, our G2
Petroleum headquarters is in McKinney,
only two and a half hours away.
Transparency.
You know, uh, I believe this
is incredibly important.
I believe we provide, uh, the most
transparent oil and gas project out there.
Uh, a- and at the end of the day,
anybody that wants to come to the
field, it's a open door policy.
I would love and welcome anybody to
come out and take a ride around with me.
Let me go show you the wells, the field,
the crews working, and everything that
it takes to produce oil in this area.
Joe Stroffolino: You know, I'll,
I'll add one thing to that, Cotton.
And Co- we literally every single week
will provide the production updates for
that week- Mm-hmm ⦠as well as field
operations, what's happening, what wells
we're working on, what we're drilling.
Every single week, uh, we have our
partners that will, um, log in- Mm-hmm
⦠to our back office and, and can see that.
So, uh, extremely transparent.
Cotton Graham: Yeah.
Uh- Absolutely.
Great, great, uh, great add in.
You know, we do provide tho- provide
those detailed reports every single
week, production as well as field
activity, and some of it is very mundane.
You know, we pulled this well
and we pulled this pump out.
It's very detailed, and it goes over
a lot of people's head, but at the end
of the day, we're trying to provide
as much information to our partners
to be as transparent to let you
know what's going on out there every
single day, why we're making more
oil or, or what our progress plan is.
But, you know, this is a
great, uh, great slide here.
But layer cake.
Right?
Layer cake, right?
And, uh, this is a
proven area of operating.
You know, like I said, we're not going
out and, and wildcatting or looking
for the great white rhino, right?
Uh, the next huge pay zone.
Uh, we're going into a historically
productive oil field that's been
producing oil for over 100 years now.
And, um, you know, the reservoirs
are there, and you can see simply
by this first slide, um, you've
got multiple pay zones, uh, as
you drill down to 2,000 feet.
And the slide on the right shows a, a
depth of around 4,000 feet, where you
start intersecting what's called the
KMA zone, zone one, two, and three,
and below that you have the Going Lime.
So what we've done is drill deep
wells, and when you drill those deep
wells, you're able to see everything
uphold in the shallow zones.
So by drilling the deep wells,
you really prove up your shallow
reservoirs, and then you can go in
and just infill offset development.
Continue offsetting producing wells
that you've discovered oil in and
continue developing the fields so
the entire field, the spacing in
that field, is fully developed.
But again, you've got multiple zones
here that you're able to produce oil
from, and a lot of the times we'll go in
and open up two or three of those zones
and, uh, commingle that production so
that, you know, we're hitting wells that
are doing 5, 10, 20 30 barrels a day.
And, uh, you know, I know that
doesn't sound like a lot, right?
5 barrels a day, 10 barrels a day,
especially when people are touting, you
know, 100 or 1,000 barrels a day from
some of these crazy horizontal wells.
But at the end of the day, it adds up.
And a five barrel a day well generates
very aggressive revenue for us
month in and month out, and it's
consistent straight line production.
So this is talking about the
acquisition and the drilling.
Again, we talked about the 140 barrels.
That is our target, uh,
for full, uh, funding.
Um, 140 barrels a day, that'll start
kicking out immediate revenues.
Like Mike said, when we acquire, uh,
acquire a lease or a producing property,
let's say we acquire it November 1st,
and we produce oil for all of December.
At the end of December-- or, uh,
all of November, at the end of
December, we get our first run check.
So it's really 30 days behind that month.
So if we produce oil in November,
we get a check in December,
and it's distributed out to the
partners by the end of the month.
Um, developmental drilling, the 4,300-foot
wells we talked about, those are drilling
down through all of those shallow
reservoirs and then intersecting the
KMA and going limes down to 4,300 feet.
Uh, you know, a 20 barrel
a day well is a great well.
We've drilled wells here very recently
that are averaging better than 30
barrels a day on our previous programs.
Uh, we just drilled a well, uh, a
2,000-foot well that we're expecting,
uh, better numbers than 10 barrels a day.
Talking about the, you
know, number three there.
2,000-foot wells, if we can hit two to
ten barrels a day, it adds up, right?
All of these well adds-- wells add up, put
oil in the tanks, and generate revenue.
So target, uh, investor outcomes for
accredited investors only, right?
$200,000 annual income, million
dollar net worth type of, uh,
individual, but significantly reduce
your tax liability and achieve
monthly distributions in Q4 of 2026.
So this year.
Good talk
Okay, when you're looking at the
acquisition, um, again, we're
seeking, uh, 140 barrels a day.
This is a map directly from
the Texas Railroad Commission.
What you see outlined in green
is a ma- is a, a map of a
lease called the Roller Lease.
Right now, that lease is
generating about five barrels
a day from one producing well.
Uh, we've got a target date to
close on that particular lease in
November and pick up that production.
But we also have the leases
that are outlined in black.
Uh, that total is about 350 acres
in the black outline, and those
are leases that are not producing.
Uh, Barry Hanks, our geologist,
and our staff have, uh, identified,
uh, opportunities to go in and
drill in between those locations.
Um, and we have a good chance of
intersecting multiple zones and
producing from the KMA Zone One,
Two, and Three, and the Going.
Uh, those are leases that we already have
bought, signed, and paid for and that
are already back in the Texas 26 program.
So for all intents and purposes, we're
looking forward to start drilling
probably in December on those leases.
So again, that's a n- that's a, an example
of, uh, in the green outline is a lease
that we're acquiring for production,
but the outlined leases outlined in
black are leases that we are acquire-
acquiring for drilling and developing.
Mm-hmm.
We think we can go out and hit consistent
wells And, uh, continue to make production
Mike Pine: I expect you to.
You've done good so far, Miles.
Yes, sir.
Keep it up.
Yes, thank you.
I, I'm not the pro- I don't
wanna be losing money.
Yeah.
Thank you.
Cotton Graham: Well,
nobody does, especially me.
Thank you, thank you.
And I don't wanna be the guy responsible
for anybody losing their money, right?
Thank you.
I appreciate that.
I mean, that's, that's a
heavy weight that we carry.
'Cause I know where you live.
Yes.
Um,
Mike Pine: so the opportunity is
big first-year tax deductions that
you can utilize to write off, uh,
against your active income, your
W-2 income, your business income.
It's not a passive deduction, it's
an active deduction, and we do that
through the internal revenue code.
Um, you have to invest
as a general partner.
You will be invested in general partner.
It comes with liability of
a general partner, and we'll
talk about that in a second.
Um, but you have to invest as a
general partner with liability to
be able to take these deductions-
Mm-hmm ⦠as an active deduction.
One of the things that our fund's
doing, and it does increase, um,
our operating costs a little bit,
especially the first year, is we areâ¦
and I think we're the
only ones that do it.
Yeah.
We offer general partner insurance.
Um, we don't offer it, we're buying it.
Um, uh, we're doing thisâ¦
Iâ¦
When, when I ha- hired two attorneys to
go research this, when has a true silent
investor in a general partner instance
that's not participating, that hasn't
committed fraud, when have they ever been
sued for their investment in oil and gas?
Thoseâ¦
They came up blank.
They couldn't find them.
I said, "But I, I still
wanna get insurance."
My attorney said, "You're crazy."
Kevin said, "Hey, that's not aâ¦
I mean, that's a waste of money."
And, but at the same time, I've seen
and look at what's happening in our
political environment and interaction.
Mm-hmm.
I mean, we just saw the big guysâ¦
We're seeing Colorado right now,
it's going to the Supreme Court this
term, Colorado's suing a bunch of
oil and gas companies because they
s- they produce carbon dioxide.
Yeah.
And, and, or carbon.
Mm-hmm.
And they're saying that those
companies should have known that
they were creating global warming.
Hmm.
And I think they're claim change it
to climate change now, but whatever.
That's what they're suing them for.
I, I, I suspect it won't win in
the Supreme Court, but who's to
say what happens 20 years from now?
Mm-hmm.
So we are buying, um,
general partner insurance.
As we have the last two years in our fund
Mm-hmm I think we're the only ones that
do it, and it's important because used
to be, five, 10 years ago, if you just
go buy an interest, a general partner
interest directly into a fund, you could
find insurers that would provide you
a decent insurance package for that.
Mm.
Now they won't.
Mm.
Now we've had some of our investors
go and get their own insurance, but
the only reason they were able to
do it is because we had insurance
that covered the general partners.
Mm.
Two, you're only a general partner
till December 31st of 2026.
Mm.
That's this year, right?
Mm.
Yeah, 2026, then we s- automatically
switch everyone to limited partners.
Um, so it's that section of liability
that you have as a general partner.
Um, but there you go.
So we'reâ¦
And we're all in with you guys.
Cotton Graham: Yes, sir.
And we're very glad and proud you are.
Yeah.
Absolutely.
So this number, most people
don't believe it, but you have
a 95% drilling success rate.
Is that true?
Yeah, that is true, and it's a testament
to where we're drilling, right?
I mean, we're drilling in an area that
is saturated with oil at multiple levels,
so whenever we drill a bit, again,
you know, my geologist Barry, or our
geologist, Barry Hanks, has measured it
three times before he cuts once, right?
And we have a good, uh, idea
that we're gonna be able to make
production at some interval.
Um, so yeah, we've got a high percentage
success rate, 95% success rate, for
when we drill a well, we're gonna set
pipe and produce some amount of oil.
You know, whether that's a gusher or, or,
you know, three or four barrel- barrels a
day, every well's a little bit different.
We've drilled, you know, like I said,
almost 200 wells, give or take now, and,
uh, but we do have a high success rate
because of the area that I'm drilling in.
It's highly saturated with oil, multiple
intervals from, you know, 250 feet all the
way down to 4,300 feet, multiple levels.
And, um, yeah, I mean, you're
just in a saturated area.
Mike Pine: Well, you nerd out on this oil
and gas stuff like Kevin and I do on tax.
But here, let's talk about tax real quick.
So what will happen if you put a
$200,000 investment into this fund?
You should get And we're targeting
91% total deduction first year.
Um, that would be $182,000 deduction,
assuming, if, unless you live in the
great state of Texas and you only pay
37% federal tax and no state income
tax, um, assuming you've got another few
percentage in your state, we're assuming
a 40% m- effective tax rate, marginal
tax rate, that will save you $72,000â¦
$72,800.
Um, again, subject to AMT preference
limits and whatever your tax situation is.
So that's, that's big.
Mm.
What you're really doing is getting
a $200,000 investment forâ¦
I'm gonna do the math in my head,
but for- 128 Thank you, sir.
Yeah.
I saw you there.
For $128,000, $127,000.
So- 200 ⦠the government's
helping subsidize that.
Kevin Schneider: Yeah, and
this is one of thoseâ¦
this is why I love these types of
investments is 'cause if I take some
liquid cash and invest into mutual funds,
into, in the stock market or anything
like that, there's still risks in that.
Mm-hmm.
Like, every investment has risk.
Yeah.
And you have to be comfortable
with the risks, but there's
reward on top of the risk.
But i- when you invest into the stock
market, if I took 200K and bought
$200,000 of stock or mutual funds,
I get zero tax deduction that year.
I'm invested, but I just
solidified a basis amount.
This is one of those areas
where I can invest my money
and get active tax deduction.
Mm-hmm.
And so without any material participation.
So on the tax side, it's
so, it's so convenient.
Mm.
It's good.
And, yeah, it is a tried and true- I mean,
Mike Pine: when you consider adding that,
we don't do this in our figures, but
consider adding your immediate write-off,
um, the immediate tax savings, and plug
that into the ROI of, of this investment
or a good oil and gas investment.
After tax ROI, yeah.
After tax ROI.
Yeah.
It's pretty darn good.
Mm-hmm.
And when you're producing- Those checks
that are gonna be coming to us, those
distributions are from oil and gas
working interest, and we get to take
15%- Mm-hmm, mm-hmm ⦠percentage
of, percentage of depletion- Yeah.
Good times ⦠on all of our tax returns.
Mm-hmm.
Um, so it's only 80- $85 of every 100
we receive from you is, is taxable,
but it is taxable ordinary rate.
Mm-hmm.
Now, I think we need to move on because
we've been nerding out too much.
Yeah.
But monthly passive income, you
wanna talk about that, Cotton?
Cotton Graham: Yeah.
Joey, you wanna go ahead
and take that, or Joel?
Joe Stroffolino: Sure.
yeah, so this is what I
was alluding to earlier.
I mean, I just think the way that
we structure it is, is one of
the best you will see out there.
Um, we do not own the land.
We only own the lease, and so therefore
the hydrocarbon's underground.
So you do pay a royalty to the landowner.
Uh, that can be 20, 25%.
Um, we typically only will
pay 20, which is great.
I mean, it's one out of every five barrels
that we pay versus one out of every four.
Mm-hmm.
And then our lease operating expenses,
which Cotton can talk about, but we try
to keep that to b- 10% or below, which
is, again, extremely low for the industry.
I've seen this number at 20, 25% or more.
So if you're paying the landowner 25%
and then your lease operating expenses
for big operators are, are 25%, well now
all of a sudden that's 50% of, uh, your
profits before you even get to the split.
So we like to keep that very, uh, low.
And then when you get to the
split, uh, ours is 90/10.
I've seen 60/40, uh, you know, 70/30.
Maybe you start off at 85 and, but then,
oh, well, once we get your capital back,
then we're gonna hold on to more of that.
You know, our, our
ownership is gonna go up.
We don't do that.
You're at 90/10 for the, uh,
for the entire length of the,
uh, program, of the fund.
And one other thing you'll see
there, we run our projections
off $65 West Texas Intermediate.
You know, I, I always look at a
good range for oil to be on the
low end, kind of high 50s, 55.
If you start getting below that,
then the, the big operators, billion
dollar projects offshore, it starts to
become inec- u- uneconomical for them.
And so then they're gonna stop
drilling, and you're gonna have a
supply and demand issue where supply
is, uh, is getting, uh, cut off, and
so the, uh, based, uh, against demand.
So, uh, you don't reallyâ¦
It won't stay.
Itâ¦
Has it gone below that?
Yes, but it won't stay very long.
It kind of will come
back up into the range.
And then the high end is kind of 85.
Um, if you start getting above
80, 85, then it gets into the
news, and it starts affecting,
um, uh, the, well, uh- Everything
everything.
Everything.
Um, exactly.
Plastics, gas.
Yeah, I mean, uh, right.
Yes.
Inflation, everything.
So, so onceâ¦
If it gets up there, again, we've
seen it recently, 90, $100, but then
they will work to pull it back down.
So, so 55 to kind of 80, 85, we run our
projections off 65, which is conservative.
But your guys' break or even
point's only $30 per barrel.
Even less than $30 a barrel.
Nice.
So, yeah.
So if oil were toâ¦
I mean, during COVID- Yeah ⦠and oil
actually went negative for two days.
Mm-hmm.
I mean, Cotton never
stopped, uh, operating.
Yeah.
And there were some months there where I
think the average was, like, 12 or $15.
Yeah.
Well, I'll tell you, during COVID,
you know, oil prices crashed and went
negative, which was crazy, right?
But then they came back up and,
you know, during that first month,
I think it was probably March, we
actually sold oil for $14 a barrel.
Sold oil for $14 a barrel.
We sold, like, I don't know, couple
of hundred barrels, 300 barrels of oil
for $14 a barrel, and we still sent
out positive distributions- Incredible
even with our operating expenses.
So, you know, uh- I think we need
to speed up just a little bit.
Okay.
Mike Pine: But I want to
clarify one thing on the split.
90/10 is y'all's split.
Yes.
Our fund to fund- Mm-hmm ⦠is, i-
is gonna get, uh, for, until you guys,
until your investors get 2X, until you've
doubled your money, we don't take a split.
Mm-hmm.
But after you've doubled your
money, um, we're gonna get our
carry, and ours are gonna be 30/70.
So- And I think that's- ⦠double
your money with us, um, and then,
then we can make some money, Kevin.
Mm-hmm.
Cotton Graham: And I think that's
incredibly fair and strong- Yeah ⦠that
you're taking it after they- After we go
get their return on capital.
Yeah.
So that's extremely fair.
Mike Pine: All right.
Let's get y'all's track record
and try to move it on- Okay ⦠so
we have some time for Q&A.
Cotton Graham: Absolutely.
Looking at the track record, so
this is myself, Cotton Graham.
Again, I've been in the business for a
while now and, uh, originally started
out, you know, in, in other areas.
Um-
You know, start at Newport, again, to,
uh, to gain tot-total control of the
field and what's happening out there.
Um, but then you come down to Barry
Hanks, and again, I can talk about Mr.
Hanks for, for days, right?
He's an incredible man.
He's a walking histo- history
book about the, uh, Wichita
Falls area, the, the production
from back in the boom town days.
But again, he graduatedâ¦
Born and raised in Wichita Falls, right?
Born and raised in Wichita Falls,
graduated from Midwestern State
University, which is the local
college there, with a Bachelor
of Science degree in Petroleum
Geology and a minor in Biology.
Um, again, he went right to work
in the fields of Wichita Falls
doing, doing geology, mapping, a-
and developing, uh, developing oil.
Uh, he's got over 40 years, over 40
years of experience in this area.
Um, at one point, uh, starting in the
early 2000s, he, uh, formed a company
with a couple of, uh, well-heeled
investors out of Detroit, Michigan,
believe it or not, and, uh, the
company was called BTO Resources.
Uh, over about a 10-year period,
they did the same plan that we're
doing, by production, infield offset
development, behind the pipe pay
reworks, and additional drilling.
Uh, they had production up to about,
I think it was 450, 500 barrels a day,
and in 2012, they sold out $48 million
transaction for selling 450 barrels a day.
Um, at that point, they
cashed out, parted as friends.
Barry, uh, went and traveled
the world a little bit, uh, came
back home, and just started doing
consulting, geology consulting, uh,
because geology is in his blood.
He's one of those guys that, you know,
if he woke up and had nothing to do,
he wouldn't know what to do, so he-
Mike Pine: Yeah, apparently
he tried that, it didn't work.
I just wanna share one
quick story about Barry.
When we went up, I think it was our
first or second time up to your field,
Barry was about to start drilling a, an
exploration hole to do logging, right?
Yes, sir.
And, uh, he had this loggerâ¦
So what they do is they log and
figure out, I, I'm not gonna go into
details, but come up with a really
good scientific idea of what that
ground is and what pay zones might be.
They hadn't drilled the hole yet.
Barry had a log that showed that area,
the, right next to it, what a log had.
Mm-hmm.
It had been logged.
Mm-hmm.
And that was Barry's log from
30 years ago- ⦠when he
was working for the big guys.
So he had already drilled that.
Yeah.
You can't go get those logs
from someone else- Mm-hmm,
mm-hmm ⦠um, unless they've beenâ¦
Yeah, you can't.
Mm-hmm.
He has that knowledge-
Mm-hmm ⦠and he's got a ton of
that, and that's, it's big value.
But
let's move on, 'cause I know we need some
Q&A, but t- talk about Michael real quick.
Cotton Graham: Yeah, Michael V.
has been with me for, I don't
know, seven or eight years now.
He's a graduate of Texas Tech,
you know, petroleum engineer.
He's worked for some pretty big companies,
Acana, Pioneer, Natural Resources.
But again, he's an incredible petroleum
engineer, uh, that can help us
with, you know, waterflood designs,
which is secondary recovery methods
and, and, uh, things like that.
So engineering, uh, how to
get that oil out of the space.
But, uh, he's on our team, a part of our
brain trust, and really helps, you know,
guide us on how we can make more oil.
And, uh, so here we go.
These are actual slides that are pulled
from the Texas Railroad Commission.
Again, the Texas Railroad Commission
is the governing body for oil
and gas production here in Texas.
They monitor everything.
And, um, so if you see here, you
know, we started in, in basically, and
I'm struggling to see this, but you
see back in 2016, that's really when
Newport started, uh, w- was founded
and started drilling in this area.
Our first year, you know, we made
only 750 barrels, give or take.
And as we continued to drill wells and
deploy capital, you see that continued
to crawl up 15,000 for the second year.
Um, but you see we did
take a hit in COVID.
COVID kind of changed the game.
You know, we were producing close to
70,000 barrels before COVID hit, and,
uh, after that hit, again, that ch- kind
of changed the game, and we were just
m- monitoring production, just operating
leases and, and just producing wells.
No real drilling or development
a- activity at that point after
COVID or, or coming through COVID.
Uh, but then we started, uh, putting
capital together, uh, around 2004, 2005.
Started deploying it in
2005 for our last fund.
24, 25.
Yeah, 24.
24 and 25.
24 and 25.
Yes.
And then as you can see,
production is coming up.
And this year to, uh, to date,
uh, 2026, it says we've got about
over 30-- I'm struggling to see
that, but over 30,000 barrels.
And we still have, you know, four months,
five months of reporting production, so
that number is gonna continue to increase.
I would probably expect it close to 45,000
or 50,000 barrels by the end of the year.
But, um, to date-
Mike Pine: I think these, these
reports are the best third-party
verified way to judge you and your
ability to pull oil out of the ground.
Mm-hmm.
Um, anyone can verify this on the
Texas Railroad Commission site, um,
and Cotton will walk you through it.
Cotton Graham: Yeah, absolutely.
And again, it, it is really the
best third-party way to verify it.
It's straight from the governing body
of oil and gas production, so, you
know, you can't fudge those numbers.
And this just talks about our
surety bond or our cash, uh, bond,
uh, with the Railroad Commission.
Right now, we've got a $300,000 cash
bond with the Railroad Commission.
What that allows us to do is operate
oil wells in the state of Texas.
Uh, we could operate over 1,000
wells with that cash bond.
Again, right now, we've got about
356, give or take And again, this
is a, a distribution or a revenue
distribution, uh, statement, uh,
that we put out, uh, every month.
Uh, this would c- uh, follow along
with your revenue check, whether
you get a revenue check or a direct
deposit, which we also facilitate.
But you'll see, you know, what the
gross production was, what the average
price was, what the taxes were, and
what any operating expenses are.
Our typical operating expenses are
really made up of three things.
Uh, electricity, you gotta
have electricity ru- to run the
pump jacks to pump the wells.
Uh, pumper fees.
I've got a pumper and a crew that
goes around to each and every tank
battery and well every single day
to make sure we're making oil and
the wells are pumping efficiently.
And then I've got a small admin
charge for the, uh, the ladies in
the office that process all the
revenue and, and get the paperwork
ready to send out, uh, distributions
to you and the other investors.
Um, a- a- and then that's really
the makeup of our operating cost.
You may have some things, uh, you
know, goods that you have to, to pick
up over the course of the month, like
belts or fuses or something like that.
When it rains, some of these
belts might burn off of the,
uh, pump jack pulley system.
So sometimes those little, you know, 50,
$100 items are, are, are tagged into the
operating expenses, but really it's made
up of three things: electricity, pumper
fee, and then a small admin charge.
Mike Pine: That's enough
nerding out, Cotton.
So how can you participate in our fund?
Um, call Patrick.
So Pa- we're-- the AGC is, is, is
running our investment for this
entire fund of, uh, fund, uh, Rev
Oil & Gas 2026 LP, um, oil and gas.
And, uh, that's how you participate
Patrick: Thank you so much, guys.
Let's move on to Q&A, shall we?
Yeah.
Yeah, absolutely.
Perfect.
I have about 15 questions from
the audience, but I will try to,
uh, speed this along since we
have about 5 to 10 minutes left.
Okay.
Question one, um, can the tax benefit
be used against active income?
Is there any material participation
requirements to offset act- active income?
Kevin Schneider: Um, code section
469(c)(3), it specifically states that
even on a passive basis you get to
take active tax deductions, so long
as you're a general partner, which
you will be, in a working interest oil
and gas operation, which you will be.
No material participation active
tax loss against your W-2 and
your trade or business income.
Mike Pine: But you have to have
that general partner liability.
You can't invest through an LLC
or some other kind of corporate
veil liability protection.
Ergo, that's why we also offer
the in- have the insurance.
Mm-hmm.
Patrick: Thank you so much, Mike.
Thank you so much, Kevin.
Second question is, and I'm gonna
try to paraphrase this, is, uh, most
of the oil and gas funds that I'm
looking into have a smaller deduction.
How are you able to achieve such
a high 91% deduction write-off?
Bonus depreciation.
Uh, using One Big Beautiful Bill
Act, taking bonus depreciation,
but also using IRC 1060.
When we purchase or when they purchase
these leases, we do a purchase price
allocation, and come up with a good
reason and a good allocation where
we're paying more, because that's
what's important to this bond.
We're paying more for the equipment and
the actual wells that are already in
the ground, which when we buy them, when
they buy them as a brand-new owner- Hmm
⦠it's eligible for bonus depreciation.
So again, let's say they get 70,
75, let's just say 70% IDC, probably
gonna get closer to 25% additional
bonus depreciation on that.
Mm-hmm.
And again, for your CPAs out there, that
bonus depreciation is not an AMT add back.
The IDC could be.
Cotton Graham: Does everybody
understand the IDC aspect,
how we're getting, like, 75%?
That's through their drilling and the
work of the rigs- Yes ⦠to find the oil.
Yes.
So just so you know, there's- Okay.
Yeah.
Patrick: Thank you so much, all.
Uh, in terms of depreciation, can
it be recaptured at any point?
Mike Pine: Yes.
It could be.
Mm-hmm.
It can be, um, when the property's
sold, uh, or when the leases are sold,
which is the plan in three to five hope-
definitely no more than seven years.
Mm-hmm.
I can't say definitely,
but up to potentially.
Um, when it's sold, there is potential
for bonus depreciation recapture on the
amount of bonus depreciation we took,
but we also intend to use IRC 1060 at
that point, 'cause we're gonna run the
heck out of those wells producing our
oil before we sell them, to do a reverse
purchase price allocation to the buyer.
Um- Mm-hmm ⦠can't guarantee
that that'll happen, but youâ¦
W- We're gonna push ⦠we're gonna
work on it and, and focus on it, and
if we get these four or 500 barrels
a day, a lot of people are gonna be
wanting to buy it and competing for it.
Mm-hmm.
So we're gonna allocate
more to the intangibles.
Mm-hmm.
We're gonna allocate more to
the land and the lease- Mm-hmm
um, and reduce the bonus depreciation
recapture, but there will be some.
Um, also talk to your tax advisor about,
um, IDC potential recapture, ordinary
income distributions potentially in
the future versus passive, um, income.
Uh, it different everyone's
cases, but it gets complicated.
But yes, there is a possibility.
Are we gonna mitigate it?
Yes.
Worst-case scenario, though, um, if,
if we don't do a purchase price or a
reverse purchase price allocation, I
would say maybe 10% of your investment's
coming back as ordinary income
instead of capital gain, maybe 15.
Patrick: Thank you so much, Mike.
Can you explain how the Revo Fund
is a unique combination of tax
management, strategic drilling,
and immediate production cash flow?
Mike Pine: Yeah.
I think Cotton explained why it's
immediate production cash flow.
Revo this year is only
investing in these guys.
We are workingâ¦
Our tax firm, Revo Taxpayer Advocacy,
is working hand-in-hand with them
on every lease that they're buying
and working and maximizing the bonus
depreciation on the, um, purchase price
allocation when they buy that lease.
Mm-hmm.
That gets us the big bonus depreciation.
Um, monthly distributions immediately
is because we're not buying, um,
wells that need to be drilled.
We're buying ex- they're buying existing
wells- Mm-hmm ⦠leases of existing
wells that are producing right now.
Mm-hmm.
So they just step into the ownership
of those production leases- Mm-hmm
and that's what's bringing in the
distributions- Mm-hmm ⦠from technically
day one, but we don't get the cash for
30, 60 days- 30 days ⦠from day one.
Mm-hmm.
Patrick: Thank you so much, Mike.
Why is vertical integration with
Newport Operating Company important?
Cotton Graham: Well, it
gives us full, full control.
Yeah.
Right?
I mean, we're not subject to being
on a contractor's, uh, wait list,
uh, to get wells back online or
wells drilled or wells repaired.
Um, theâ¦
It gives us the ability to control the
purchase, uh, the day-to-day actions
and any work that goes on in the field.
Total control, so we're not
exposed to anybody that, um, you
know, has a huge wait list as
far as contractors are concerned.
We can get wells back up on- back
online as, as fast as humanly possible.
Mm-hmm.
Patrick: Thank you so much, Cotton.
Yes, sir.
Uh, a few final questions.
Uh, we understand the 91% deduction.
So you put in $100,000, uh,
it's a 91% or $91,000 deduction.
Mm-hmm.
What else in terms of investor benefits
will I receive if I'm an investor
into the Rebel Oil and Gas Fund?
Mike Pine: Cashflow.
Um, cashflow.
That's tax advantage, 'cause only
85% of the distributions you receive
are gonna be, um, taxable income.
Um, and continuing cashflow.
Mm-hmm.
Appreciation.
Um- And growing.
And, yeah, and growth.
Continuing cashflow, growth,
and then eventual exit.
Um- And the insurance.
And the insurance.
I, I, I can't find anywhere else-
Kevin Schneider: The
insurance is a huge sell.
This, the, and to, to harvest
the 91,000 in Patrick's example
as an active deduction, there
has to be something called risk.
You have to have something at risk.
Insurance does not scrub away your tax
deduction, and the LLC structure would.
So there's going to be
personal risk at this, but the
insurance kind of covers that.
If you indivi- individually invest
into any operator and not through our
fund, y- you're not gonna get insured.
It's gonna be very hard, or the premium's
gonna be where it's not make sense.
Yeah.
Cotton Graham: And can we cover
the risk real quick, right?
Like Kevin and B- Mike both said
earlier, everything's risky.
Whether you're investing in stock, real
estate, everything has a degree of risk.
Where I think we hedge against that risk
is because we're buying production, right?
We're buying wells that are
already online producing.
I know what they're producing.
There's straight line production
for, for months or years before.
So we're stepping into immediate cashflow.
We're not gonna lose our money.
Uh, we're stepping into immediate
cashflow from existing wells, and
we're gonna increase that return by
drilling and developing and continuing
to harvest oil that's in place.
So I just wanted to make sure
that we were clear on that.
Mike Pine: So he's talking about the
economic risk, and Kevin was talking about
the actual general partner liability risk.
They're both risk you have to assume
if you want this active deduction.
I think we'reâ¦
This package that we are
offering, it, it mitigates them
as best as I've seen- I think so
and that's why we're all
in with you guys this year.
Yep.
Yes, sir.
Appreciate that.
Patrick: Last two questions.
How long is it expected for us
to double or 2X our investment,
not including the tax benefits?
Mike Pine: So not including the
tax benefits, again, uh, we're
gonna have to have an exit.
They're gonna have to package these
up and sell it, um, for us to not just
depend on the 6, 7% to start and 10 maybe.
I mean, we're not gonna
promise any more than that.
But so far we're seeing higher
than that as they produce more oil.
That would take multiple
years, m- a lot longer.
Mm-hmm.
So what we anticipate, figure if,
if they can exit in five years,
um, which is a good midpoint, I,
please do it in five years, Khanh.
I heard you.
My kids are gonna be going to college.
His will be in college.
So please do it then.
Um- Absolutely.
You know, you might have already received
40 or 50% back in cash distributions.
Mm-hmm, mm-hmm.
And then they sell it, and you
get your big exit out, and we're
liquidated out of the fund.
Mm-hmm.
Patrick: Thank you so much.
And the final question is, what do
you like about oil and gas in this
environment today, and how long or how
are you taking advantage of this fun?
Mike Pine: Hmm.
I think we could all add to that.
Yeah.
I mean, it's not fairâ¦
Today what we like about it
is $100 West Texas crude, man.
I mean, golly.
Who- Yeah ⦠w- w- our c- our
investors think we're genius, we're not.
It- Mm ⦠it's the war.
Um, but we're getting
really good distributions.
What I like about it is it's
good diversification policy.
Mm-hmm.
Um, I'm not like you, I'm not an oil man.
Mm.
Kevin's not like you, but we believe
in diversifying our portfolio and
having a good piece in oil and gas.
I do a little precious metals.
Kevin thinks I'm crazy for that.
Mm.
But look who's laughing right now.
Mm.
Um, and it's just a good
diversification policy.
When, when stock markets are
down, people need oil and gas.
Um, people always are
gonna need oil and gas.
There's, there, there's a guaranteed
demand- Mm-hmm ⦠no matter how fast and
how quickly we try to get to green energy.
Um, and even if we were able
to do that as a nation in the
next three to five years, right?
But let's, let's say we are,
the rest of the world's not, and
they're- Mm ⦠needing oil and gas.
You look at what happened in Europe,
those people, they, they bet it all on
green energy, now they're s- forced to
buy oil from their enemies that they're
terrified of getting in- invaded by.
Mm-hmm.
And now they're buying from us.
Mm-hmm.
So that'sâ¦
I'm done.
Kevin Schneider: Yeah,
I'm in the same boat.
Diversification, um, but
also the tax benefits.
It's just kinda like we do real estate,
you know, we invest in our businesses,
we have oil and all this kinda stuff.
It's just a holistic package where, uh,
you are truly diversified, and there's
great steady income with you guys.
You know, I lost my very first
investment in oil and gas, um, and
we learned our lesson- Mm ⦠which
is the genesis of Bravo Investor-
Mm ⦠is we wanna mitigate those risks.
Mm-hmm.
Cotton Graham: And I'll just say, you
know, oil is, uh, the commodity that
drives the global economy, right?
Yeah.
Everybody has it.
It's in everything.
Your vitamins that you took this
morning, your car that you drove to
work, the tires that you rolled on, the
desk that you're sitting at, the phone
and the computer you're sitting at,
everything has to do with crude oil.
And, uh, it couldn't be a
more patriotic investment.
So diversifying, tax benefits,
cashflow, and again, there's really
not a more patriotic investment than
you could make than American oil.
That's right.
Joe Stroffolino: I mean, you all
said it, but I, I guess I'll end
with something Mike told me a few
years back, which was, it's our
patriotic duty to not pay the IRS.
So we wanna hold onto those dollars.
And, um, and, and then like Cotton
said, I mean, uh, uh, hydrocarbons
are gonna be around forever.
They're in everything, 6,000 products.
Um, so, uh, we'd love to have y'all
participate with us, and we'll go
out there and, uh, we'll, we'll drill
some oil, and we'll make some money.
Thank you for listening to this episode.
Revo Taxpayer Advocacy LLC is not licensed
or registered as a CPA firm with the
Texas State Board of Public Accountancy.
I'm a CPA, Kevin's a CPA.
We have a lot of CPAs on staff that are
licensed and held to the same standards.
However, when we decided to be
revolutionary and change our name to Revo
Taxpayer Advocacy, the state board would
not allow that and let us remain licensed.
They say we have to have one
of our names in the firm for
us to be licensed as a firm.
And guess what?
It's not us that's important.
It's revolutionizing the way you feel
about taxes and saving you money.
We are advocates for you, so we were
willing to drop our firm license even
though we're still individually licensed.