How direct participation in oil and gas development can fit an institutional allocation, what it asks of you, and what Summit provides for your diligence.
Most energy exposure reaches an office through public markets or pooled funds. Direct participation alongside an operator offers something different, and it asks more of your diligence, structure and governance.
| Mandate | Every allocation answers to a mandate | Real-asset exposure has to fit the office's liquidity needs, time horizon and governance, not just its interest in energy. |
| Access | Direct exposure is hard to find | Most routes into energy are listed companies or funds. Project-level participation alongside an operator is less common. |
| Diligence | The bar for evidence is higher | Committees expect engineering assumptions, cost histories and sponsor alignment in writing. |
| Structure | How you hold it changes the result | Entity choice affects liability, reporting and whether the working-interest rule reaches your principals. |
Your structure shapes what you need
Pick the one that describes you. Each has different decision processes, reporting needs and questions to put to a sponsor.
Serving one family's goals directly
A single-family office can align an allocation closely with the principals' goals, tax position and time horizon, including holding across generations.
The key design question is usually structural: holding through an entity protects the family but can change how deductions reach the principals, so tax and liability need to be weighed together.
What to ask Summit for
- The engineering basis for each project's estimates, and who prepared it
- The expected split of costs and timing of funding
- A sample of the reporting JV members receive
Allocating across families with different needs
A multi-family office has to fit one opportunity to several families with different tax profiles, liquidity needs and appetites for operational risk. Not every family will be a fit, and that is a feature of good process.
A consistent diligence file and reporting that consolidates cleanly matter as much as the asset itself.
What to ask Summit for
- Documentation suitable for a standard diligence file
- Reporting format and frequency, for consolidation
- How interests are held, verified and transferred
Committee-driven allocation at scale
Capital groups typically run a formal committee process and look closely at governance terms, sponsor alignment and exit pathways before committing.
Project-level participation gives a committee specific assets to evaluate, rather than a manager's future selections.
What to ask Summit for
- JV governance rights and decision thresholds
- How Summit's own capital sits alongside yours
- Exit pathways considered for each asset
Assign each part of the balance sheet a purpose, then judge each exposure only against that purpose. Direct operating ownership is the narrowest layer by design. Select a layer to see what it does and what it gives up.
Cash, Treasury bills, money market funds
The money that has to be there no matter what happens in markets.
Diversified stock and bond funds, retirement accounts
For most people, this is the engine of long-term wealth and is built first.
Real estate, private funds, business interests
Assets whose value is tied to something physical or to a private business rather than a stock price.
Including working interests in oil and gas wells
Owning a share of an operating business directly, with its costs, decisions and outcomes. A direct working interest in oil and gas wells sits here.
Layer widths are illustrative, not a recommended allocation. The right mix depends on your circumstances and should be set with your own advisers.
Offices usually reach energy through listed equities or funds. Direct participation differs in what you hold, who selects the assets, what governance you get and which tax attributes reach you.
| Attribute | Listed energy equitiesPublic markets | Private energy fundsPooled, manager-selected | Mineral & royalty interestsShare of revenue | Direct working interestHow Summit JVs are structured |
|---|---|---|---|---|
| What you hold | Shares in listed companies | Limited partnership interests in a fund | A share of production revenue | A direct share of specific wells |
| Asset selection | Your choice of companies | The manager selects, often after you commit | Specific properties | Specific projects, evaluated before you commit |
| Governance | Shareholder voting | Limited partner rights | None | JV governance rights and participation in material decisions |
| Sponsor economics | Fund or trading costs only | Typically a management fee and carried interest | Built into the purchase price | Set out in each venture's documents |
| Liquidity | Daily | Tied to the fund term, often ten years or more | Limited; usually a private sale | Limited; generally held for several years |
| Tax attributes that reach you | Dividends and capital gains | Passed through, generally usable only against similar income | Depletion on royalty income | Drilling deductions, depreciation and depletion |
| Liability | Limited | Limited for limited partners | Limited | Not limited in the same way, unless held through a limited-liability entity |
| Eligibility | Open to anyone | Varies | Often limited to accredited individuals | Accredited individuals, verified before any commitment |
The core rules are the same for everyone. For an office, how the interest is held decides who receives the deductions, how liability is contained and which limits apply.
| IRC §263(c) | Intangible drilling costs (IDCs) | Labor, fuel and drilling services can be deducted in the year they are incurred. On a new well, they are typically a large share of the cost. |
| Depreciation | Tangible drilling and equipment costs | Casing, wellheads and tanks are capitalized and depreciated over time. Accelerated depreciation may apply. |
| IRC §613A | Percentage depletion | Once a well produces, qualifying owners may deduct 15% of gross income from the property each year. |
| IRC §469(c)(3) | The working-interest rule | Working interests held without limited liability are exempt from the loss limits Section 469 applies to individuals, trusts and closely held corporations. |
Summit focuses on redeveloping proven fields, which can combine new drilling, work on existing wells and acquisitions of producing assets. Select a project type to see which attributes typically matter most. This is a qualitative guide, not a projection.
| Intangible drilling costs | 3 | Typically significant | Most spending on a new well is drilling-related. |
| Equipment depreciation | 2 | Can be meaningful | Casing, wellheads and surface equipment are capitalized. |
| Depletion | 2 | Once producing | Begins only after the well produces. |
| Early production income | 1 | Delayed | Revenue waits for drilling and completion. |
| Intangible drilling costs | 2 | Depends on the work | Recompletions and new zones can generate IDCs; routine repairs are treated differently. |
| Equipment depreciation | 2 | Can be meaningful | New pumping or surface equipment is capitalized. |
| Depletion | 3 | Typically significant | Wells are already producing, so depletion applies. |
| Early production income | 2 | Existing plus added | Existing production continues while new work comes online. |
| Intangible drilling costs | 1 | Usually limited | The drilling already happened; little of the price is drilling cost. |
| Equipment depreciation | 2 | Can be meaningful | Part of the price may be allocated to equipment. |
| Depletion | 3 | Typically significant | Much of the price is recovered through depletion. |
| Early production income | 3 | From acquisition | Production is already flowing at purchase. |
The limits that matter for an office
These are the structural and tax points that most often change the outcome for an office. Each belongs in the diligence file, reviewed with tax counsel.
Direct ownership means sharing in the operational risk of a real business. These are the considerations a committee should weigh as carefully as the tax treatment.
A plain-language walkthrough of working interests, the JV structure and the questions to ask before committing.
Yes, if it is accredited under SEC Rule 501. Common entity tests include having more than $5 million in total assets and not being formed for the purpose of the acquisition, being a family office with at least $5 million in assets under management (along with its family clients), or having only accredited equity owners. Because Summit relies on Rule 506(c), it verifies status before any commitment.
It can. The working-interest rule applies to interests held directly or through an entity that does not limit liability. Holding through a limited-liability entity contains liability but can bring the usual loss limits back for the principals. Tax counsel should weigh the tradeoff for your structure.
Ask for the engineering basis of each project's estimates and who prepared it, cost estimates and the expected timing of funding, the JV documents, a sample of member reporting and, for eligible participants, the offering documents.
Summit commits its own capital alongside JV members. Ask how that capital sits relative to yours in each specific project, and how and when Summit is compensated.
JV members hold governance rights and take part in material decisions. The specific rights and decision thresholds are set out in each venture's documents.
JV members receive regular reporting on production, costs and performance. Request a sample to confirm the format and frequency fit your consolidation and committee reporting.
It is possible, but working-interest income is generally unrelated business taxable income for a tax-exempt holder, and the deductions are of limited use. Exempt entities usually need tax counsel's advice on structure before considering direct participation.
Treat it as committed for several years. There is no public market for a working interest, and an exit on a particular timeline cannot be assumed. Summit's Exit Right discipline reviews each asset continuously to decide whether to hold, optimize or exit.
This website is provided by Summit Ventures for general informational and educational purposes only. It does not constitute an offer to sell, or a solicitation of an offer to buy, any security or interest, and no such offer or solicitation will be made except through definitive offering documents provided directly to verified accredited participants.
Participation in a Summit Ventures joint venture is limited to individuals and entities that qualify as accredited under Rule 501 of Regulation D, and Summit Ventures takes reasonable steps to verify that status before any commitment is finalized, consistent with Rule 506(c) of Regulation D.
Direct working-interest participation in oil and gas development involves risk, including commodity price volatility, operational and geological risk, illiquidity, and the potential loss of some or all committed capital. Past performance of any Summit Ventures program, and the experiences described by any individual participant, are not indicative of future results and should not be viewed as typical or guaranteed.
Tax information referenced on this website is general in nature and reflects tax law believed current as of publication. It has not been prepared for any specific individual or transaction and is not a substitute for advice from independent, qualified tax and legal counsel.
Statements from program participants reflect their individual experience and are not paid testimonials unless otherwise disclosed. Individual results vary, and no statement here should be construed as a projection or promise of similar outcomes.