Newsletter No. 153
Good afternoon,
Volatility, geopolitics, and tax efficiency are reshaping portfolio strategy, and energy is once again central to the discussion.
This week, we’re introducing Energy Market Perspective, a new section designed with RIAs in mind, and valuable for any investor. It will cover oil and gas market trends, macro drivers, moves to watch, King-specific updates, our upcoming RIA-focused events and other insights on energy’s growing relevance in today’s markets.
We’re also launching Ask the "Tax Guy", featuring practical Q&A from our EVP of Tax, Rex Gifford, addressing real advisor questions around structure and tax considerations. You will continue to receive our core oil and gas news and updates from King, now with deeper institutional insight.
This Week's Headlines
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Charles Schwab Platform Availability
- Webinar: "Invest at the Wellhead"
- Why Oil and Gas is One of Today's Most Talked About Investments
- Oil Jumps Nearly 4% as Geopolitical Risks Escalate
- U.S. Warns It May Exit IEA Over Climate Focus
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Are We Early or Late in the Energy Cycle? Oil & Gas Investing in 2026 with Robert Thummel
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Ovintiv Sells Anadarko Assets for $3B to Refocus Portfolio
Energy Market Perspective
Charles Schwab Platform Availability
King Operating Corporation’s sponsored offering, King Operating Partners ADV I LP, is now available for reporting on the Charles Schwab platform, facilitating RIAs and financial advisors in allocating, reviewing, and administering eligible client accounts. For firms utilizing Charles Schwab as their clearing platform, this functionality supports:
- Simplified client allocation and onboarding
- Streamlined custody and administration
- Familiar reporting and operational workflows
If energy investments or tax-advantaged alternatives are part of your client conversations, we welcome the opportunity to share how King Operating may fit within a diversified portfolio.
-1.png?upscale=true&width=1104&upscale=true&name=Untitled%20design%20(1)-1.png "Oil Prices Surge Amid Geopolitical Tensions")
Ask the "Tax Guy"
Tax treatment can significantly influence how energy investments fit within a client’s broader strategy. In this section, our EVP of Tax, Rex Gifford, addresses practical questions we’re hearing from advisors and investors, with straightforward, code-based insight.
Q: For oil and gas working interest ownership, direct or indirect, are net loss deductions treated as active or passive under IRC Section 469?
A: Under IRC Section 469(c)(3) and (4), net losses from a working interest in oil and gas are treated as active (non-passive) losses, whether owned directly or indirectly, provided the taxpayer’s liability is not limited. Material participation is not required for this special treatment.
A working interest means the owner shares in exploration, drilling, development, and operating costs — unlike royalty interests, which are passive.
For indirect ownership through a partnership, the investor must hold a General Partner interest to avoid limited liability. If the working interest is owned through an LLC (which provides limited liability), the special exception generally does not apply. In that case:
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The activity falls under passive activity rules.
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Losses are passive unless the member materially participates (e.g., 500+ hours annually or meeting other IRS tests).
To maintain active loss treatment for indirect ownership, the investor must be a General Partner. Under IRC §469(c)(3)(B), once active treatment applies, losses retain that character in future years even if GP status later converts to LP status.
Primary deductions generating active losses include:
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Intangible Drilling Costs (IDCs) – IRC §263(c)
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Bonus depreciation (IRC §168(k)) on tangible drilling and completion costs
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Lease operating expenses
This working interest exception exists to encourage domestic oil and gas development.
Have a tax question you’d like covered in a future issue? Email it to theupside@kingoperating.com.
DISCLOSURE: For educational purposes only. Not tax, legal, or accounting advice. Please consult your tax professional before making any investment or tax-related decisions.
Oil and Gas News
Oil Jumps Nearly 4% as Geopolitical Risks Escalate
Oil prices climbed more than 4% Wednesday as rising tensions between the U.S. and Iran and stalled Russia-Ukraine peace talks heightened fears of supply disruptions. Brent crude rose 3.5% to $69.80 per barrel, while WTI gained nearly 4% to $64.72.
Markets reacted to reports of Iranian naval drills and a temporary closure of the Strait of Hormuz, an essential global oil transit route, alongside increasing speculation about potential U.S. military action against Iran. Analysts say traders are pricing in added geopolitical risk, particularly the possibility of disrupted exports.
Meanwhile, peace talks in Geneva between Russia and Ukraine ended without progress. Ukrainian President Volodymyr Zelenskiy described negotiations as “difficult,” fueling concerns that tighter restrictions on Russian exports could further impact global supply.
U.S. Warns It May Exit IEA Over Climate Focus
The United States has again threatened to withdraw from the International Energy Agency (IEA), accusing the organization of prioritizing green energy advocacy over objective energy forecasting and security analysis.
Energy Secretary Chris Wright said the U.S. would remain supportive if the IEA returns to its traditional role as a data-driven energy security agency focused on major energy issues and critical minerals. However, he warned that if the agency remains “dominated and infused with climate stuff,” the U.S. would exit.
Tensions have grown between the Trump administration and the IEA, with Republican lawmakers arguing the agency has strayed from its original mission following its net-zero and energy transition push earlier this decade. Although the IEA recently adjusted its oil demand outlook, dropping prior expectations of an imminent demand peak, U.S. officials say broader reforms are still needed. Secretary Wright reiterated that the U.S. prefers reforming the IEA but is prepared to withdraw if changes are not made.
Happening at King
Are We Early or Late in the Energy Cycle? Oil & Gas Investing in 2026 with Robert Thummel
In this week's episode of The Jay Young Show, my co-host Jordan Soto and I sit down with Robert Thummel, Senior Portfolio Manager at Tortoise Capital, to break down where oil and gas investing stands heading into 2026. Are we early, mid, or late cycle in energy?
Watch it on LinkedIn, Rumble and YouTube (@JayRYoungOfficial).
Moves to Watch
Ovintiv Sells Anadarko Assets for $3B to Refocus Portfolio
Ovintiv has agreed to sell nearly all of its Anadarko Basin assets in Oklahoma for $3 billion in cash, including about 360,000 acres producing roughly 90,000 barrels of oil equivalent per day. The move allows the company to streamline operations, reduce debt, and focus capital on higher-margin assets in the Permian Basin and Montney Formation.
The sale follows Ovintiv’s recent acquisition of NuVista Energy, strengthening its position in liquids-rich Canadian assets. Overall, the transaction reflects a strategic shift toward core, higher-return basins and improved balance sheet flexibility.
If you'd like to talk to someone about King and are an accredited investor, you can fill out your information here or schedule a Zoom conversation with one of our SVPs here and someone will reach out.
All the best,
Jay
