Why Invest in Oil and Gas: Benefits, Returns & Tax Advantages
Get to Know BassEXP
Takes about a minute. A member of our team will reach out to start a conversation.
Investor Tool
Investment Comparison
See how direct oil and gas participation compares to stocks, bonds, and real estate.
Compare Investments→Here's What You Need to Know
- /Global energy demand isn't slowing down. The EIA projects nearly 50% growth by 2050, and oil and gas will supply more than half of it.
- /Direct participation in oil and gas is a distinct asset class: tangible ownership, unique pass-through tax treatment, and return behavior uncorrelated to public equities. Individual outcomes vary widely by well and program.
- /You own the physical asset, not shares of a company. That means monthly production income and pass-through tax benefits that public shareholders never touch.
Ever watched your portfolio drop 20% in a week because Wall Street got spooked? There's a reason we've spent our careers in oil and gas instead of chasing stock tickers. Direct participation in American energy production gives you something most investments can't: real cash flow, massive year-one tax deductions, and an asset that doesn't care what the Dow did today. Most portfolios are overloaded with stocks and real estate. A well-placed position in domestic energy changes that equation entirely.
Below, we'll walk you through exactly why we keep putting our own capital into oil and gas: the real returns, the tax advantages your CPA will love, and how the whole process works from the geology to the monthly checks.
3rd Generation
Family Owned
100+
Years Combined Experience
150+
Qualified Investors
The Case for Oil and Gas Investment in 2025 and Beyond
Here's something that gets lost in the headlines about solar panels and electric cars: the world is going to use a lot more energy, not less. The EIA projects global energy consumption will jump nearly 50% between 2020 and 2050. Population growth, rising middle classes in Asia and Africa. People want electricity, transportation, and modern life. And oil and natural gas are forecast to supply more than half of that energy the entire time.
Now flip to the supply side. The big international oil companies spent years diverting capital to renewables divisions and stock buybacks instead of drilling new wells. OPEC+ has been squeezing output. The result? A structural supply gap that isn't going away anytime soon. And that's very good news if you're a domestic producer with an active drilling program, like us.
The shale revolution made America the world's top producer. That's the good news. The reality check? The best drilling locations in premier basins are getting harder to come by. Operators who already hold proven acreage in places like Oklahoma's Anadarko Basin and the Permian (the formations our family has drilled for generations) have a real competitive edge. Those wells still produce strong results. But the inventory of top-tier prospects is shrinking, which means the operators who have them are sitting in an increasingly valuable position.
What does all this mean for you? Sustained commodity prices, strong cash-flow potential, and economics that make new drilling pencil out nicely. Stack the tax advantages on top (the ones that are exclusive to oil and gas) and the after-tax return profile is honestly hard to beat with anything else.
Benefits of Investing in Oil and Gas
Why do smart investors keep writing checks for oil and gas? Simple. Nothing else gives you front-loaded tax deductions, built-in inflation protection, and an asset you can actually drive out and put your hands on. Here's how it breaks down.
Substantial Tax Deductions
This is the feature of the asset class that gets the most attention. Under the federal tax code, intangible drilling costs (IDCs) in qualifying oil and gas programs are fully deductible in the year incurred; the percentage depletion allowance covers 15% of gross production revenue for the life of the well; and tangible equipment depreciates over 7 years. Congress put these incentives in place to encourage domestic energy production. How much of any specific program qualifies for each deduction depends on the program's cost structure and the investor's tax situation. Explore the full tax benefits guide →
True Portfolio Diversification
Your financial advisor talks about diversification. Let's be honest though: stocks, bonds, and REITs all tend to tank together when things get ugly. Oil and gas production revenue doesn't follow that pattern. When equities sell off, energy commodity prices often do their own thing, or move the opposite direction. And unlike an energy ETF, direct investment strips out the stock market exposure entirely.
Natural Inflation Hedge
Energy prices are literally a component of the CPI. When inflation climbs, oil and gas prices are usually leading the charge. Own production, and your revenue climbs right along with it. Bonds can't do that. Most stocks can't either. During high-inflation periods, oil and gas has historically outperformed just about every other asset class.
Tangible, Hard Asset Ownership
You own something real. The wellbore, the surface equipment, the gathering lines, the oil sitting thousands of feet underground. No corporate board can dilute your shares or restructure your ownership away. It's recorded through legal instruments and backed by physical infrastructure that holds value regardless of what the stock market is doing.
Passive Monthly Income
Once the well comes online, you start getting checks. Monthly. Based on your ownership percentage and what oil and gas are selling for. And those checks keep coming for the productive life of the well, often 20-30 years or more. Think of it like rental property income, except nobody's calling you at 2 AM about a broken toilet. No tenants, no maintenance headaches, no property tax bills.
American Energy Independence
This one's personal. Every barrel we produce in Oklahoma is one less barrel imported from overseas. Your investment creates jobs in American communities and strengthens domestic energy security. For a lot of the people we work with, that matters just as much as the returns.
One question we get all the time: how to own oil wells as an individual investor, and the answer is absolutely yes. You might also want to see how profitable oil wells can be.
Run the Numbers Yourself
Our free tools let you model well economics and estimate your potential tax savings before you invest a dollar.
Oil and Gas Investment Returns: What to Expect
Let's talk about how returns actually work in this asset class. We're not going to sugarcoat it. Outcomes depend on real variables: well productivity, where commodity prices land, operating costs, and the tax bracket of the individual investor. Any discussion of return potential is illustrative of the economics, not a projection of what any specific program will deliver.
In proven formations, a well might produce 50-200 barrels of oil equivalent per day early on and then taper along a natural decline curve. Revenue from a well depends on how many barrels it produces, what oil and gas sell for on a given month, and operating expenses. Return outcomes across the industry vary widely from well to well, and past performance in any basin is never a guarantee of future results.
The tax side of direct participation is where the asset class really stands apart. The relevant provisions are written into the federal tax code: IDC deductions, the percentage depletion allowance, and the working-interest exception to passive-activity rules. A common illustrative example: a high-bracket investor puts $100,000 into a qualifying drilling program. If roughly 75% of program costs are intangible (industry-typical), the IDC deduction in Year 1 is approximately $75,000, which at a 37% marginal rate saves roughly $27,750 in federal tax that year. This is how the tax code treats qualifying oil and gas investments generally — it is not a projection for any specific offering. Run the math for your situation with our well ROI estimator or investor tax calculator.
Monthly Distribution Model
Most investments pay quarterly, if you're lucky. Oil and gas working interests typically pay monthly. We collect the production revenue, deduct operating costs, and distribute the net to investors based on ownership percentage. Our investors tell us they love the monthly cadence. It's consistent cash flow they can reinvest or just live on.
Now, the fine print that we don't want you to skip: returns aren't guaranteed. Individual wells vary. Commodity prices move. Geology surprises you sometimes. We manage these variables through conservative underwriting and decades of experience, but every oil and gas investment carries real risk. You should know that going in.
Tax Advantages That Multiply Your Returns
Ask any CPA who works with high-net-worth clients about oil and gas tax benefits. They'll tell you these are some of the most powerful wealth-building tools in the tax code. Congress put them there to encourage domestic drilling, and they're not going anywhere. Here are the big three:
Intangible Drilling Costs (IDCs)
This is the foundational tax feature of the asset class. IDCs cover labor, chemicals, mud, fuel, basically everything that goes into drilling a well that can't be salvaged afterward. Across the industry, IDCs typically make up a substantial share of total well costs and, when the program qualifies, are deductible in the year incurred. The exact IDC share and deductibility for any specific program depends on the program's cost structure and each investor's tax position — figures here are educational, not a projection.
Percentage Depletion Allowance
This one keeps paying off year after year. Exclude 15% of gross production revenue from federal income tax for the entire life of the well. Over time, your total depletion deduction can actually exceed your original investment. Not a typo. No other asset class does that.
Active Income Offset
This is the one that gets high earners on the phone. Hold a working interest, and you can use net losses to offset your active income: W-2, business income, all of it. Most investments lock loss deductions behind passive activity rules. Oil and gas working interests are specifically exempted.
Want the full picture? We've put together a detailed walkthrough covering tangible cost depreciation, Section 199A treatment, and worked examples. read our full Tax Benefits Guide.
Direct Investment vs. Public Energy Stocks
We get this question a lot: "Why wouldn't I just buy ExxonMobil stock?" Fair question. Both give you energy exposure. But the structural differences are night and day:
| Factor | Direct Participation | Public Energy Stocks / ETFs |
|---|---|---|
| Tax Deductions | IDC deductions, percentage depletion allowance, and the working-interest exception to passive-activity rules (qualifying programs) | Standard capital gains/loss treatment only |
| Income Type | Production revenue with favorable tax treatment; can offset active income | Dividends taxed as ordinary or qualified income |
| Return Potential | Tied to individual well production, commodity prices, and operating costs; outcomes vary significantly and are not guaranteed | Historically 8-12% total return (price + dividend) |
| Correlation | Low correlation to equity markets; tied to commodity prices and well performance | High correlation to overall stock market movements |
| Ownership | Direct ownership of physical assets and production revenue | Shares in a corporation; no direct asset ownership |
| Liquidity | Illiquid; capital committed for the project duration | Highly liquid; buy and sell on public exchanges |
| Risk Profile | Geological and operational risk; mitigated by operator expertise | Market risk, corporate governance risk, sector rotation risk |
The one honest edge stocks have is liquidity. You can sell them tomorrow. Can't do that with a working interest. But if you're in an upper tax bracket and you care about after-tax returns, the math on direct participation is hard to argue with. Front-loaded deductions and ongoing depletion create a return profile that buying shares of an energy company can't touch. For a detailed breakdown of ownership structures, see our working interest vs. royalty interest comparison.
Oil and Gas Exploration Investment: How It Works
People ask what actually happens after they write the check. Fair question. This isn't like buying a stock where you click "buy" and walk away. Here's how a project goes from "we think there's oil down there" to monthly revenue in your account:
Ongoing
Prospect Identification & Geology
The geology comes first. The team reviews seismic data, well logs from offset wells, core samples, and formation maps to pick targets where the data says there's oil. In the Anadarko Basin, decades of surrounding production history give us a real edge.
30-90 days
Leasing & Permitting
After a prospect clears geology, we secure mineral rights with landowners, pull drilling permits from state regulators, and handle surface access, environmental review, road agreements, and pad construction. All before a rig shows up.
15-45 days
Drilling
A rig mobilizes to the site and drills to the target formation, anywhere from 5,000 to 15,000 feet. Modern directional drilling and MWD tools let us steer the wellbore precisely through the producing zone.
1-3 weeks
Completion & Stimulation
We install casing, cement it in place, perforate the production zone, and in most wells hydraulically stimulate to enhance flow. Completion costs are the tangible component of the investment and depreciate over the well's productive life.
First check: 60-90 days
Production & Revenue
The well comes online. Oil and gas are gathered and sold at market. The team monitors production, maintains equipment, and tunes output. Net revenue after royalties and operating costs is distributed to working-interest participants monthly.
Ongoing
Prospect Identification & Geology
The geology comes first. The team reviews seismic data, well logs from offset wells, core samples, and formation maps to pick targets where the data says there's oil. In the Anadarko Basin, decades of surrounding production history give us a real edge.
30-90 days
Leasing & Permitting
After a prospect clears geology, we secure mineral rights with landowners, pull drilling permits from state regulators, and handle surface access, environmental review, road agreements, and pad construction. All before a rig shows up.
15-45 days
Drilling
A rig mobilizes to the site and drills to the target formation, anywhere from 5,000 to 15,000 feet. Modern directional drilling and MWD tools let us steer the wellbore precisely through the producing zone.
1-3 weeks
Completion & Stimulation
We install casing, cement it in place, perforate the production zone, and in most wells hydraulically stimulate to enhance flow. Completion costs are the tangible component of the investment and depreciate over the well's productive life.
First check: 60-90 days
Production & Revenue
The well comes online. Oil and gas are gathered and sold at market. The team monitors production, maintains equipment, and tunes output. Net revenue after royalties and operating costs is distributed to working-interest participants monthly.
Want to see what this looks like with real wells? Browse our current drilling projects to see what we're working on right now.
Risk Factors and How Smart Investors Manage Them
We'd rather be straight with you upfront than have you surprised later. Oil and gas investing has real risks. Anyone who tells you otherwise is selling you something. Here's what you should understand:
Geological Risk (Dry Holes)
Sometimes you drill a hole and it doesn't produce enough to be worth operating. It happens. Even with the best geological analysis, the earth can surprise you. That's why we drill in proven formations where we have extensive offset well data, use modern logging and seismic tools, and spread investor capital across multiple wells. One underperformer shouldn't sink your whole program.
Commodity Price Volatility
Oil prices move. Anyone who remembers 2020 knows that firsthand. A sustained price drop can squeeze your revenue below expectations. We manage this by keeping our operating costs lean, hedging production when it makes sense, and only pursuing projects that pencil out at prices well below where we are today. If a well only works at $80 oil, we don't drill it.
Operational and Regulatory Risk
Drilling is heavy industry. Equipment breaks. Weather shuts you down. Regulations shift. All of that can increase costs or push back first production. That's why your choice of operator matters so much. An established operator with a strong safety record, proper insurance, and deep service-company relationships handles these problems as routine, not as a crisis.
Illiquidity
This isn't a stock you can sell on Monday morning. Your capital is committed for the project duration, though you're receiving monthly production revenue the whole time. We always tell prospective investors: make sure you have plenty of liquidity elsewhere before committing capital here. This is a long-term play, and it should be sized accordingly.
Want to dig deeper into how we think about risk? Check out our Investment Insights . We don't hold back.
Why Choose Bass Energy & Exploration
Our family has been in Oklahoma oil for generations. We didn't start BassEXP in a boardroom. We started it in the field. The idea was straightforward: give investors the same honesty and skin in the game that we'd demand if the roles were reversed. Our money goes in every well right next to yours.
Family Legacy & Operator Expertise
We've been drilling wells in Oklahoma's Anadarko Basin for decades. Hands-on, in-the-field, making decisions at the wellsite. We're not a fund. We're not middlemen. We operate our own wells, and our family's capital is right there next to yours.
Proven Basin Focus
We drill where we know the rock. Our Oklahoma operations target formations we've studied for years, formations with documented production histories and well-characterized reservoirs. We're not wildcatting in unproven territory. We go where the data tells us to go.
Radical Transparency
You'll get detailed monthly production reports, access to our investor portal with real-time data, and a direct line to our operations team. No runaround, no gatekeepers. We've found that informed investors make better partners, and we want partners, not just capital.
Investor-First Structure
We structured things so we only win when you win. No hidden fees. No layers of intermediaries taking a cut before you see a dime. Direct participation in the wells we drill and operate. It's that simple.
Don't take our word on any of that though. The only responsible way to evaluate an operator is to put them through a real framework. Run us (or anyone) through our operator-evaluation buyer's guide and hold the answers side-by-side.
Continue Your Research
We've put together guides on every piece of this: step-by-step getting started, tax strategy deep dives, and real project details. Take your time and do the homework. We're not going anywhere.
Glossary Terms
Run the Numbers
Understand the economics before you commit capital. These guides break down real costs and return expectations.
Written by
Preston Bass
CEO
Preston Bass is the founder of Bass Energy & Exploration (BassEXP) and a third-generation oil and gas operator. He helps qualified investors evaluate working-interest energy projects with a focus on disciplined execution, cost control, and transparent reporting. Preston also hosts the ONG Report (Oil & Natural Gas Report), where he breaks down complex oil and gas investing topics—including tax considerations and deal structure—into clear, practical insights.
Read Full Bio →Disclaimer: The information provided in this article is for informational purposes only and should not be considered legal or tax advice. We are not licensed CPAs, and readers should consult a qualified CPA or tax professional to address their specific tax situations and ensure compliance with applicable laws.
Ready to Talk Oil & Gas Investment?
Give us a call. We'll cover our current drilling opportunities, share the investor materials, and have a straight conversation about whether direct participation in oil and gas fits your portfolio.
Start Investing Today