| The basic definition of an Independent Oil and Gas | | | | states in their Annual Energy Outlook 2007, |
| Company is a non-integrated company which | | | | “Despite the rapid growth projected for |
| receives nearly all of its revenues from production | | | | biofuels and other non-hydroelectric renewable |
| at the wellhead. They are exclusively in the | | | | energy sources and the expectation that orders |
| exploration and production segment of the | | | | will be placed for new nuclear power plants for |
| industry, with no downstream marketing or | | | | the first time in more than 25 years, oil, coal, and |
| refining within their operations. The tax definition | | | | natural gas still are projected to provide roughly |
| published by the IRS states that a firm is an | | | | the same 86-percent share of the total U.S. |
| Independent if its refining capacity is less than | | | | primary energy supply in 2030 that they did in |
| 50,000 barrels per day on any given day or their | | | | 2005.” In this report the EIA also predicts |
| retail sales are less than $5 million for the year. | | | | consistent growth in U.S. energy demand from |
| Independents range in size from large publically | | | | 100.2 quadrillion Btu in 2005 to 131.2 quadrillion Btu |
| held companies to small proprietorships. Many | | | | in 2030. |
| independents are privately held small companies | | | | Maturing production areas in the lower 48 states |
| with less than 20 employees. The Independent | | | | and the need to respond to shareholder |
| Petroleum Association of America (IPAA) | | | | expectations have resulted in major integrated |
| recorded in a 1998 survey that “a large | | | | petroleum companies shifting their exploration and |
| percentage of independents are organized as C | | | | production focus toward the offshore in the |
| Corporations and S Corporations at 47.6% and | | | | United States and in foreign countries. |
| 27.7%, respectively. A total of 91.4% of | | | | Independent oil and gas producers increasingly |
| responding companies are classified as | | | | account for a larger percentage of domestic |
| independent (versus integrated) for tax purposes. | | | | production in the near offshore and lower 48 |
| More than one fifth of responding companies | | | | states. Independent producers’ share of |
| reported their stock is publicly traded. “ | | | | lower 48 states petroleum production increased |
| Independent producers derive investment capital | | | | form 45 percent in the 1980’s to more than |
| from a variety of sources. A 1998 IPAA survey | | | | 60 percent by 1995. Today the IPAA reports |
| reports that 36.2% of capital is generated through | | | | that independent producers develop 90 percent of |
| internal sources followed by banks 27.8 % and | | | | domestic oil and gas wells, produce 68 percent of |
| outside investors (oil & gas partners) at 20.3 %. | | | | domestic oil and produce 82 percent of domestic |
| Supplying Future Energy Needs | | | | gas. Clearly, they are vital to meeting our future |
| The U.S. Energy Information Administration (EIA) | | | | energy needs. |