Frequently Asked Questions


 

What are Royalties or Gross Over-Riding Royalties (GORR's)?

Royalties are a percentage ownership entitlement in the gross production from oil and gas wells that provide income to investors. What is attractive about royalties is that they are paid off of top-line revenue prior to any operating responsibility or expenses that occur when managing the oil or gas wells.

 

Why buy units of a Maple Leaf Oil & Gas Royalty Income Limited Partnership rather than publicly traded shares of energy companies?

Maple Leaf Oil & Gas Royalty Income programs also eliminate exposure to capital market risks (i.e. the volatility typically associated with owning shares of publicly traded oil and gas companies.)

Buying units of a professionally managed Maple Leaf Oil & Gas Royalty Income Limited Partnership, rather than shares in oil & gas companies, can provides investors with ‘top-line’ revenue through direct ownership of oil and gas production that are generally available only to institutional investors. At the same time, an investment in a Maple Leaf Oil & Gas Royalty Income Limited Partnership allows investors to convert income into a more favorable capital gains tax position.

 

How do Maple Leaf Oil & Gas Royalty Income programs compare to traditional flow-through funds?

Maple Leaf Oil & Gas Royalty Income programs provide investors with a monthly income generating investment and tax deductible alternative to traditional flow-through limited partnership programs. Click here to see a comparison table.

 

What are some of the risks?

Perhaps the most significant risk is commodity (oil and natural gas) price volatility, and to a lesser extent, risks associated with engineering and production activities.

 

Who manages the joint ventures that Maple Leaf Oil & Gas Royalty Income programs invest in?

Our Calgary-based Oil & Gas Investment Management team is led by Adam Thomas, CFA, CIM, Managing Director, and Dan Gundersen, P.Eng., CFA, Managing Director. Together, Mr. Thomas and Mr. Gundersen provide Maple Leaf Oil & Gas Royalty Income Limited Partnerships with expertise in sourcing and negotiating agreements with oil and gas companies, which will entitle the Partnerships to its share of production revenue from the oil and gas properties.

 

Are the tax benefits legitimate?

Yes! The tax benefits are well accepted in Canada and have been in place through legislation for over 30 years. Further, Maple Leaf Oil & Gas Royalty Income programs ensure that the funds invested stay in Canada and be used to create genuine and valuable economic activity and growth within Canada’s energy sector.

 

WHAT CORPORATE ACTIVITIES QUALIFY FOR THE TAX DEDUCTIONS?

The Canada Revenue Agency (CRA) has stringent requirements that must be met in order to determine whether an activity is development or exploration in nature. The key difference is the amount of write-off allowed. To encourage exploration and certain development activities, the CRA allows for up to a maximum of 100% tax deduction in the year the capital is invested. Maple Leaf Oil & Gas Royalty Income programs' core focus is on development drilling projects, which provide up to a 100% tax deduction (over time).

 

What is an ACB (Adjusted Cost Base)?

The adjusted cost base or ACB is generally what you originally paid for your investment. However, once you realize the tax deductions from the Limited Partnership, you are deemed to have an adjusted cost base (ACB) of nil (a nil adjusted cost base means that when you sell your investment, you get to claim capital gain which gets preferential tax treatment in comparison to otherwise paying tax on income) which is due to the receipt of the tax deductions that will approximately equal your original investment amount.

 

How much is the tax deduction for investors in the year of investment and when is the full 100% tax deduction achieved?

Maple Leaf Oil & Gas Royalty Income programs have been structured to provide investors with up to a 100% tax deduction over a period of 5 years. Maple Leaf estimates that the tax deductions for the initial year of investment will be approximately 30–40% of the amount invested, with the balance deductible predominantly over the subsequent 4 years (it is important to refer to the prospectus or offering memorandum of the Limited Partnership to which you are in consideration for a full description of these calculations).

 

What about capital losses from other investments?

If you sold investments and created a capital loss that you have not yet claimed, it can be carried back three years and forward indefinitely. This allows you to offset other capital gains against these losses, thereby reducing the tax you pay. Any capital gains resulting from the sale of your investment can be offset against any unused capital losses you may have.

 

Why do Maple Leaf Oil & Gas Royalty Income Limited Partnerships occasionally have CEE tax deductions if they are typically not involved in exploration projects?

In the event that a development well isn’t successful, it will be reclassified from CDE to CEE, thereby becoming a tax deductible Canadian Exploration Expense.

 

How and when do I receive my T5013 Tax Slip?

Prior to the end of April of the year following the purchase of your investment, you will be mailed a T5013 federal tax receipt form from your investment dealer's back office.

 

WHEN IS THE LIQUIDITY EVENT EXPECTED AND WHAT WILL I RECEIVE AT THAT TIME?

The investment life cycle of a Maple Leaf Oil & Gas Royalty Income Limited Partnership through to liquidity is expected to be approximately 2.5 - 3 years after the final closing of the offering.   Generally it takes about 12–15 months for new wells to settle into a reliable production range and once the wells have been on stream for 12–15 months, Maple Leaf Oil & Gas Royalties will then commence the process of packaging them for sale.

 

The General Partner currently expects the liquidity event will be the sale of the investments (royalties and similar entitlements) held by the Partnership to a public company in exchange for cash and/or listed securities on a tax-deferred basis.

The Partnership would then dissolve and distribute these listed securities to the former investors.  In the event of receiving shares of  a publicly traded company,  a tax event is typically deferred until the securities are sold.

 

Are there enough quality oil & gas companies willing to issue GORR's?

Yes! Many oil & gas companies are willing to issue GORR’s because they are a friendly source of capital which helps finance the development of their proven reserves. This increased production from proven reserves can significantly help oil & gas companies by providing cash flow to the companies without the companies having to finance the development through dilutive equity issues, or through debt which can impair their balance sheets. This option further protects oil & gas companies from exposing themselves to unfriendly competition through working interest joint venture partners. Further, the oil & gas companies are entitled to book any new reserves developed which can enhance their companies’ share value.

 

Can corporations benefit from buying flow-through?

Yes, corporations have the same advantages buying flow-through as does the individual investor. Please see Corporate Tax Advantages on our website for further information.  

 

Investment Lifecycle

Investment Lifecycle

Maple Leaf Oil & Gas Royalty Income programs can provide investors up to a 100% tax deduction (over time), monthly income, liquidity and the opportunity to convert income into capital gains.

View Investment Lifecycle

 

Development Drilling Focus

Multi-Zone Development Drilling Opportunities
Development drilling means drilling into existing and producing oil and gas pools, and these pools generally have an 85% average rate of success.

Understand how development drilling works