More than 18,000 independent producers drill 95% of US oil and natural gas wells, and account for 67% of US production. The average company size is 11 employees. Independent producers typically invest more than 100% of their revenue into finding new domestic energy sources. Independent oil and natural gas producers are in the exploration and production segment of the industry.
Independent producers have only one profit center: the wellhead. Similar to “energy farmers,” independent oil and natural gas producers are paid a market price (which is completely beyond their control) for their commodities.
Independent oil and natural gas producers are in the exploration and production segment of the industry. Major oil companies operate in many different segments of the energy business, including exploration and production, transportation (pipelines), refining, and marketing (selling finished products such as gasoline). The major oil companies drill the vast majority of their wells outside the United States.
These distinctions are important because President Obama has proposed eliminating $4 billion in tax provisions for the oil and natural gas industry, and has said these provisions are unnecessary because of high profits being reported by the major oil companies.
But two of the tax provisions being targeted by the Administration – intangible drilling costs (IDCs) and percentage depletion – are limited to drilling activity in United States and primarily impact independent producers, not the five major oil companies that drill most of their wells overseas.