The Only Opportunity Zone Mineral Interest Fund
Overlap: Oil & Gas and Opportunity Zones
ELITE’s purchases of Oil & Gas rights in Qualified Opportunity Zones are in accordance with the Tax Cuts and Jobs Act of 2017.
While most Opportunity Zone Funds develop urban areas, ELITE brings jobs and liquidity to economically underdeveloped rural areas.
ELITE’s activities in these zones are in accordance with both the spirit and letter of Opportunity Zone legislation.
ELITE’s target states Texas, Louisana and Pennsylvania contain 15% of all opportunity zones and produce 45% of all domestic oil & gas.
There is significant overlap between existing active oil & gas fields and opportunity zones within these target states.
Tax Deferral and Tax Free Growth
Under the program, an investor can defer capital gains tax on realized gains, with a 10% basis step-up, if the gains are invested in a Qualified Opportunity Fund within 180 days of the sale. In most cases the investor has until September of the year following the gain to invest. If the investment in the QOZ is held for 10 years, the capital gains realized upon exit are tax free. These features make the QOZ’s the most generous and flexible tax incentive ever devised.
Unlike 1031 exchanges, QOZ’s capital gains realized from the sale of any property are eligible for the incentive, including stocks and other real or personal property. The “like-kind” rule doesn’t apply when investing in a Qualified Opportunity Fund.
Intermediaries and middlemen are eliminated with the QOZ incentive as investors can take possession of the capital gains they seek to defer and deploy some or all of those gains in a Qualified Opportunity Fund.
There are certain deadlines approaching to maximize the tax benefits of Opportunity Zone Funds.
September 11th, 2021 Final date for investors to place capital into a Qualified Opportunity Fund and be eligible for the 10-percent basis step-up, which grants the taxpayer a 10 percent reduction in the amount of capital gains recognition on the original capital gains.
December 31st, 2021 is the final date for capital gains in a Qualified Opportunity Fund to be eligible for the 10-percent basis step-up, which grants the taxpayer a 10 percent reduction in the amount of capital gains recognition on the original capital gains.
ELITE has higher returns and lower risk when compared with other Opportunity Zone Funds. Investors in the ELITE Opportunity Fund benefit from returns exceeding publicly traded Mineral Interest funds generating an excess of 25% IRR with cash flow from day 0.
Unlike other Opportunity Zone Funds ELITE does not have exposure to operational, political, market, and environmental and other risks. When oil and gas are being extracted ELITE gets cash flow.
Oil & Gas Strategy
Royalties Provide Risk Insulation and Upside
Vastly Improved Margins
Royalties generate a 92% gross margin compared to the 34% gross margin of traditional oil and gas companies.
Minerals last forever providing exposure on future development activity and benefit from technology advances.
Returns and Scalability
ELITE’s team combines decades of experience sourcing mineral opportunities with the latest data science to interpret geological, geophysical and engineering data.
An ELITE purchase of mineral rights must meet the following criteria:
- Current production (PDP) and cash flow
- Target IRR of at least 30%
- High likelihood of increased future production supported by excellent rock quality, the presence of undrilled locations and favorable development economics for the operator
ELITE’s mineral rights selections provide insulation from market risk, never expire, regenerate themselves, always cash flow and require no capital & expense outlays after acquisition.
If ELITE purchases mineral rights expecting a 30% IRR and the price of oil falls by 50% with production remaining flat, the investment still produces a 15% IRR.
ELITE still enjoys free cash flows even under adverse market conditions. Operators must continue to cover production costs or risk losing their property. ELITE simply takes a cut of production.