S/V Drilling Partners, Snyder Armclar Gas Company, Tax Matters Partners - Page 4




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               In 1993 and 1994, S/V sold 32,410 BOE’s of natural gas                 
          produced from the wells to public utilities.  During these years,           
          15,483 BOE’s of natural gas sold by S/V were produced from a                
          tight formation that was not Devonian shale, and 16,927 BOE’s               
          were produced from a tight formation that was also Devonian                 
          shale.                                                                      
          BOE’s of Natural Gas Produced by S/V From Nonconventional Sources           
                            (rounded to the nearest BOE)                              
                              Produced from a          Produced from a                
                              tight formation but      tight formation                
          Year      Total     not Devonian shale       and Devonian shale             
          1993     15,137          7,343                    7,794                     
          1994     17,273          8,140                    9,133                     
          Total   32,410      15,483                   16,927                         
          B.   S/V’s Tax Returns                                                      
               On its 1993 and 1994 partnership returns, S/V claimed a                
          credit under section 29 for 15,483 BOE’s of natural gas it                  
          produced from a tight formation that was not Devonian shale and a           
          double credit (one equal to $3 per BOE, and one equal to $3                 
          (indexed) per BOE) for the 16,927 BOE’s produced from a tight               
          formation that was also Devonian shale.  On its 1994 tax return,            
          S/V based its computation of the Devonian shale credit on the               
          1995 inflation adjustment factor.                                           













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