U.S. Energy Development Corporation (U.S. Energy), an exploration & production (E&P) firm which provides direct investments in energy, has announced the acquisition of 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 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 CEO, U.S. Energy. “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.”

Energy projects located in opportunity zones, like the Shetland project, provide additional tax benefits to investors. Opportunity zones allow qualified investors to defer short or long-term capital gains, receive 10% of their deferral tax free, while also qualifying for tax-free gains on investments held longer than 10 years. This is in addition to the traditional tax benefits oil and gas projects receive.

“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 all the way 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. For individuals who already paid the tax in prior years, a simple amendment will provide a refund.

“Oil and gas direct investments have long been recognized for substantial tax benefits, but the opportunity zone tax provisions have raised the bar in terms of what investors can expect from their energy investments,” commented Matthew Iak, executive vice president of U.S. Energy. “The combination of opportunity zones and oil and gas investments couldn’t have happened at a better time. The only thing better for investors than cash flow, is cash flow that is potentially tax free.”