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Federal input screens

Screen OGWell - Oil and Gas Well Information (1065)

Overview

Use this screen to enter oil and gas well information.
The application uses the information in this screen to automatically generate the reports and schedules listed in the following table.
Report
Description
Oil and Gas Well Schedule
Worksheet of each well's net income and depletion calculation
Well and Lease Income Report
Well net income calculation
Federal Depletion Report
Cost and percentage depletion calculations
Partner's Oil and Gas Summary Schedule
Partner's summary of well net income
Partner's Well Net Income Report
Partner's report of individual wells

General Information

Enter the cost center number with which this well is associated. The cost center you select determines the overhead expense allocation for this well. For information about entering the cost center, see the OGCost Screen. This field is mandatory.
Enter a unique well or lease number. You must not have already used this number on another unit of this screen that uses the same cost center number. This field is mandatory.
Enter a unique well description. The description is printed on all reports to distinguish this well from others. This field is mandatory.
You can specially allocate well activity in total or individually. For total allocation of well activity, enter the allocation scheme data using the Ptr Alloc button in the heading of this screen. For individual allocation, enter the allocation scheme data using any or all of the other Ptr Alloc buttons in this screen. Items that are not specially allocated will default to the profit percentage. You cannot mix total and individual allocations within an activity.
You may use only the percentage or units allocation methods for oil and gas well amounts when you specially allocate this wellโ€™s information in total, because the application uses the one allocation for multiple income and expense amounts.
If you specially allocate this well's information (in total or individually), the net income (loss) of the well associated with Page 1 moves to Schedule K, Other income (loss).
The application uses the date you enter for reporting purposes on the oil and gas well schedule and to calculate cost depletion using an alternate method when beginning reserves and accumulated depletion are unknown.
Enter the production type code. If you leave this field blank, the application defaults to primary production. The production type you enter determines the type of percentage depletion the application calculates for each well.

Lease Income and Expenses

Enter the gross income or royalties received. The application uses the amount you enter, less royalties paid, to calculate percentage depletion based on the production code in the
Production type
 field.
If royalties were paid out in the current year, enter the amount. The application subtracts this amount from gross income to calculate percentage depletion.
If the partnership received lease bonus income in the current year, enter the amount. The application does not include lease bonus income as gross income when calculating percentage depletion, but does include it as other income on the Oil and Gas Well and Lease Income Reports.
Use the statement to enter any other income for this well. If a sale of well property occurred, enter the gain or loss for use in calculating well net income. The application does not include other income as gross income when calculating percentage depletion, but does include it as other income on the Oil and Gas Well and Lease Income Reports.
Enter the guaranteed payments of the well for the current year. Any amount you enter here is included in the statement on Page 1, Other deductions; Form 1125-A, Other costs; or Schedule K, Other deductions. The application also includes this amount on Schedule K, Guaranteed payments.

Cost Depletion

Use this section to enter amounts for calculating cost depletion. The Oil & Gas module offers an alternate method of calculating cost depletion for those clients who do not know the accumulated depletion, beginning reserves, or current year production amounts. If you enter a number in the
Expected production life of well or lease
 field and an amount in the
Average price per barrel in current year
 field, the application uses the alternate calculation. This alternate calculation is described in the
Expected production life of well or lease
 field.
Enter the cost or basis of the depletable property. The application uses this amount as the starting point in calculating the cost depletion deduction. This field is mandatory when using the alternate cost depletion method.
Enter the accumulated depletion. The application subtracts this amount from the leasehold cost to determine the adjusted basis. The application automatically limits the cost depletion deduction to the adjusted basis. If accumulated depletion is unknown, the application provides an alternate method of calculating cost depletion. This method is described in the
Expected production life of well or lease
 field.
Enter the amounts in barrels. If these amounts are unknown, the application provides an alternate method of calculating cost depletion. This method is described in the
Expected production life of well or lease
 field.
The application automatically calculates the cost depletion deduction based on entries in this section. To override the calculated cost depletion deduction, enter the appropriate deduction. If you enter an amount, the application still compares it with the calculated percentage depletion deduction to determine the greater of the two.
The application provides an alternate method for calculating cost depletion when beginning reserves and/or accumulated depletion are unknown.
The only amounts that need to be known are the leasehold cost, gross income, production life of the well, and average price per barrel of oil. When you enter an expected life and the average price per barrel, the application calculates cost depletion using the following formula.
  1. Leasehold cost times number of years in service to date / expected production life = accumulated depletion.
  2. Leasehold cost less accumulated depletion (calculated above) = adjusted basis.
  3. Gross income / average price per barrel = current production.
  4. Expected production life times current production (calculated above) = beginning reserves.
  5. Adjusted basis (calculated above) / beginning reserves (calculated above) = unit cost.
  6. Current production (calculated above) times unit cost (calculated above) = cost depletion deduction.

Depreciation

The application automatically transfers depreciation from the asset module to this well if you select the well in the
Oil & Gas
 association field. Enter an amount, including 0 (zero), to override the calculated amount.
The application automatically transfers section 179 expense from the asset module to this well if you select the well in the
Oil & Gas
 association field. Enter an amount, including 0 (zero), to override the calculated amount.
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