Petroleum Strategies Inc.

Issue Fall 14


Having facilitated 1031 like-kind exchanges for corporate energy clients for more than 20 years, Petroleum Strategies Inc. (PSI) is one of the nation’s oldest and most trusted Qualified Intermediary (“QI”) providers. When it was founded in Midland, Texas in 1991, there was no other company like it in the state. Today, the company remains the leading QI service provider that specializes in oil and gas transactions.

“Most QIs focus on real estate transactions rather than energy assets,” Vice President Mark Nierenberg says. “We help clients keep Uncle Sam out of their oil patch transactions. Energy assets are more complex than real estate assets, as they are often producing oil and gas properties, with many categories of assets being sold as a package.”

Partner of Choice
Companies that are selling assets for a profit need PSI to set up their 1031 like-kind exchange deals. Technically, PSI is the QI, which is the neutral third-party facilitator that is required by the IRS to serve as the QI when a seller opts to defer capital gains taxes by structuring their sale as a like-kind exchange. The benefit of structuring the sale as an exchange is that any capital gains taxes can be deferred.

“In this marketplace, there are many low-basis properties being sold for huge gains, making the 1031 tax deferral tool extremely useful,” Nierenberg says. “This tax strategy has saved corporate clients of ours more than $200 million on a single transaction. We have facilitated a handful of billion dollar exchange transactions in the past year.”

PSI has differentiated itself thanks to its oil and gas experience, which brings added value to clients and results in saving more tax dollars. “No other QI knows the energy specific tax nuances,” Nierenberg says. “We help clients navigate their options, and structure a 1031 like kind exchange that provides the most advantageous tax savings.”

The company offers the full suite of 1031 service capabilities that corporate clients look for in a QI. It routinely structures forward exchanges and simultaneous exchanges. PSI is also adept at facilitating reverse exchanges, which are the most complex.

“This is when the purchase of the replacement property closes before the sale of the relinquished asset,” Nierenberg says. “This requires us to set up a new special purpose entity to acquire and take title to this asset until the relinquished property is sold.”

Hot A&D Market
Many deals are ripe for 1031 tax treatment, as property values have shot up, and many companies are looking to diversify their assets. PSI takes a partnership approach to working with clients, and works to provide strategic exchange solutions for any sized transaction.

“We have grown with these busy times, adding new employees in Texas and recently opening an office in Denver,” Nierenberg says. “The Denver office has resulted in several new clients and provides increased exposure at Colorado conferences. In addition to opening the new office, we have added new banking partners to accommodate the larger deposits. As demands increase, we will continue to expand to meet the needs of our clients.”

In the end, PSI has the industry expertise to handle the most complex energy asset tax issues. It was founded by CPAs and has two licensed attorneys on staff. PSI has facilitated more than $30 billion of exchange transaction proceeds. This is why large corporate energy clients choose PSI as a trusted partner.

In the years to come, PSI will continue to work to maximize tax deferrals, guiding clients through the reinvestment process while taking every measure to protect clients’ exchange proceeds. PSI utilizes banks that are willing to sign third-party agreements, and it will set up qualified trust accounts for an added layer of funds security. It will negotiate with banks to provide a preferred interest rate for exchange clients.

In addition, PSI will provide proven exchange documents that have been vetted by accounting and legal partners. It will never commingle funds and will always set up segregated client exchange accounts, and will ensure full compliance with IRC regulations.

“We are solutions oriented, and tax and legal advisors appreciate how we issue spot and problem solve in a collaborative manner,” Nierenberg says. “Petroleum Strategies has had the same customers for decades, because we provide world-class customer service. We listen to our clients’ tax strategy, help spot issues for their tax and legal advisors, and then put together a strategic exchange structure for their unique 1031 like kind exchange transaction.”


Petroleum Strategies Inc.