Questions Worth Asking.
It's normal to have questions when evaluating any investment. If you're reviewing Trellis Energy Partners or TEP Fund 2026 LP, this page provides answers to questions we hear most often.
Of course, we always recommend reaching out to us directly to have a conversation.
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TEP Fund 2026 LP is a non-operated oil and gas limited partnership open to accredited investors. The fund acquires direct working interests in development wells being drilled by top-tier U.S. operators across multiple basins. It targets a 2x return over approximately five years, with distributions beginning in 2028 and a planned asset sale and full exit between 2030 and 2033. The minimum investment is $50,000.
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The fund is open to accredited investors as defined under Regulation D, Rule 506(c) of the Securities Act. Accredited investors generally include individuals with a net worth exceeding $1 million, excluding their primary residence, or annual income exceeding $200,000 individually or $300,000 jointly for the past two years. Your financial advisor or the offering documents can help confirm your eligibility.
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The minimum investment in TEP Fund 2026 LP is $50,000. This structure was intentional. The non-operated oil and gas strategy Trellis uses has historically required minimum commitments available only to institutional investors. Trellis was built to change that.
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The first step is a conversation. Reach out through the contact form on our Fund page or schedule a call directly with the Trellis team. From there, you will receive access to the offering memorandum, due diligence reports, and subscription documents. Securities are offered through Crescent Securities Group, Inc., member FINRA/SIPC.
The Basics
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"Non-operated" means Trellis owns a working interest in oil and gas wells without serving as the operator. The operator, an oil and gas company, manages all drilling, completion, and production activities. Trellis participates financially in the wells by funding its proportionate share of costs and receiving its proportionate share of revenue. This structure gives investors exposure to high-quality energy assets without the liability and overhead that come with operating them directly.
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A "working interest" is a direct ownership stake in an oil and gas well. Working interest owners participate in the costs of drilling and completing the well and receive a proportionate share of the revenue the well generates. This is different from owning a royalty interest, where the owner receives revenue without bearing costs, and different from owning stock in an energy company, where returns are tied to corporate performance and market sentiment rather than the wells themselves.
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When you buy shares of an energy company or an energy ETF, your return is tied to how the market values that company, not directly to the oil and gas the company produces. Stock prices are affected by management decisions, debt levels, dividend policies, and broader market sentiment, none of which you control. A direct working interest in a well means your return is tied to the actual production and eventual sale of the asset.
For example, the prior Trellis-affiliated fund, Split Rock, eventually closed in 2024 and in total returned $300 million in distributions on $86 million of equity raised, while an equal investment across major energy stocks would have returned approximately $130MM in distributions over the same period.*
*Past performance is not a guarantee of future results.
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Single-year drilling funds are structured to maximize Intangible Drilling Cost deductions in year one, which makes them attractive from a tax perspective but often limits total returns over the life of the investment. Trellis is structured differently.
Tax benefits are real and built into the fund, but they are a feature of a well-structured portfolio, not the primary objective. By recycling cash flows back into additional wells over a three-year investment period and targeting a defined asset sale exit, Trellis prioritizes total returns over the fund life rather than year-one tax savings.
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Trellis maintains active non-operated experience across most major U.S. onshore basins. Current fund activity is concentrated in the DJ Basin, Permian, Eagle Ford, PRB, and Haynesville, with additional opportunities pursued across the Bakken, Gulf Coast, Appalachia, and Anadarko.
Trellis works alongside established, publicly traded operators across major basins, evaluated on a deal-by-deal basis against Trellis underwriting standards.. The team evaluates every operator on a deal-by-deal basis and will not participate in a program unless the operator meets Trellis' underwriting standards.
The Strategy
Returns and Structure
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TEP Fund 2026 LP targets a 2x return over approximately five years. Investors also receive an 8% preferred return, compounded annually, before any carried interest is paid to the general partner. However, there can be no assurance that the targeted return or preferred return can be met. Investing in oil and gas funds is highly speculative and investors may lose all or part of their investment.
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Distributions are targeted to begin in 2028. During the first two to three years of the fund, cash flows are recycled back into additional well investments rather than distributed. This recycling structure is designed to increase overall returns, extend tax benefits across multiple years, and cost average into the price of oil and gas over the investment period.
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Rather than distributing cash flows as they are generated in the early years of the fund, Trellis reinvests those cash flows into additional working interest acquisitions. This allows the fund to build a larger, more diversified portfolio from the same initial capital base, extend IDC tax benefits into years two and three, and average the cost of entry across different price environments.
Distributions begin once the portfolio has reached sufficient maturity, targeted for 2028.
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The fund targets a full exit through asset sales, with a planned exit window between 2030 and 2033. The asset sale provides a full exit for investors, with capital having been returned through distributions prior to that point. The fund term is seven years from the effective date, with three one-year extensions available upon approval if market conditions warrant a delayed exit.
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The preferred return is a minimum return threshold that investors must receive before the general partner participates in profits. TEP Fund 2026 LP carries a preferred return, compounded annually. Unlike most funds that pay a simple preferred return, Trellis's preferred return compounds, meaning any unpaid preferred return from prior periods continues to grow and must be satisfied in full before the carried interest split applies.
In practice, all cash flows go to investors until they have received their full investment back plus the compounded preferred return. This can result in a 1.47x cash-on-cash return to investors over 5 years, assuming no distributions during that period. Only after that threshold is met does the 80/20 carried interest split apply, with 80% to investors and 20% to the general partner. There can be no assurance that the preferred return can be met.
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"Intangible Drilling Costs", or IDCs, are the expenses associated with drilling and completing an oil and gas well that have no salvage value. This includes labor, chemicals, and fuel.
Under U.S. tax code, IDCs are 100% deductible in the year they are incurred. In a typical well, IDCs represent 80% to 90% of total drilling and completion costs.
TEP Fund 2026 LP targets 75% IDCs in year one, meaning a $100,000 investment could generate approximately $75,000 in tax deductions in the first year alone.
You should consult your tax advisor before making any investment decisions based on tax considerations.
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"Depletion" is a tax deduction that functions similarly to depreciation on a physical asset. As an oil and gas well produces, the resource is gradually depleted.
U.S. tax code allows working interest owners to deduct 15% of gross revenue from the well as a depletion allowance each year. This deduction continues throughout the productive life of the well and provides ongoing tax benefit beyond the initial IDC deductions.
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Investors in TEP Fund 2026 LP can choose to participate as either a General Partner (GP) or a Limited Partner (LP). GP participation allows investors to deduct IDCs against active income, which is generally more valuable for high-income earners. LP participation allows deductions only against passive income.
Mechanics are available to convert from GP to LP status after the initial investment period. Your tax advisor can help determine which structure is more beneficial for your specific situation.
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K-1s are delivered by March 31st each year, covering the prior tax year. Trellis has a consistent history of timely K-1 delivery.
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No, and we would tell you that directly.
The tax benefits of oil and gas investing are real and meaningful, but they should be a feature of a sound investment decision, not the reason for it. Trellis evaluates every deal on the basis of total returns first. The IDC deductions and depletion benefits follow from a well-structured portfolio.
Tax
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Investing in oil and gas funds is highly speculative. Primary risks include commodity price volatility, drilling and completion cost increases, operational risks associated with the wells themselves, and the illiquid nature of the investment.
There is no public market for fund interests and investors should expect to hold their investment for the full fund term. A complete discussion of risk factors is available in the confidential private placement memorandum.
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Trellis underwrites every acquisition at current strip pricing and will not acquire an asset with a projected loss at today's prices. The fund's break-even is structured to provide a margin of safety against price declines. That said, sustained low commodity prices can affect the timing and magnitude of distributions and asset sale proceeds. To counter this, Trellis utilizes a hedging program that is constantly monitoring fund performance and market dynamics to protect against severe downside movements.
The diversification across basins, operators, and product mix, including both oil and natural gas exposure, is designed in part to reduce dependence on any single commodity price.
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No. Interests in TEP Fund 2026 LP are not registered securities and there is no public market for their transfer or resale. Investors should be prepared to hold their investment for the full fund term of seven years, with potential extensions. This investment is appropriate only for investors who can bear the financial risk of the investment for an indefinite period of time.
Risk
For Existing Investors
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Yes. TEP Fund 2026 LP is a separate offering that operates independently of Fund 2024. Many investors in Fund 2024 are participating in Fund 2026 to maintain their oil and gas tax deductions across multiple years and to continue building exposure to the non-operated strategy.
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Return investors from TEP Fund 2024 LP are eligible for an additional 3% incentive on their Fund 2026 investment. Additional incentives may also be available based on investment size. Contact us for current incentive details and eligibility requirements.
Incentives are subject to offering document terms.
This page is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy interests in any fund. Securities offered through Crescent Securities Group, Inc., member FINRA/SIPC. Investing in oil and gas funds is highly speculative. Investors may lose all or part of their investment. Past performance is not a guarantee of future results. Please consult your financial and tax advisors before making any investment decision.