Ican 2025 Advanced Taxation Question 2

Dandy Producing Company Limited operates in both onshore and offshore in the riverine areas in Nigeria. It has been in the oil prospecting business for many years. The company applied for and was granted a petroleum prospecting licence (PPL) on January 1, 2023 after studying the provisions of the Petroleum Industry Act, 2021. The company’s financial records for the year ended December 31, 2023 are as follows: Revenue earned: Value of crude oil sold 486,000 Value of condensate from associated gas sold 128,000 Value of natural gas liquid from associated gas sold 112,500 Income from refinery operations 25,100 Gross revenue 751,600 Expenses deducted: Production cost 330,400 Cost of gas reinjection wells 1,600 Drilling cost incurred 6,650 Depreciation of plant, machinery and fixtures 2,010 Decommissioning and abandonment cost 2,500 Repairs and maintenance 4,200 Royalty cost incurred and paid 171,500 Niger Delta Development Commission charge 340 Finance cost and bank charges 615 Terminaling cost 2,345 Donations to approved charity homes 195 Concession rentals 74,110 Host community fund 23,200 Local government municipal levy 250 Environmental remediation fund 2,800 Cost incurred in seeking information for oil deposits 540 Net profit 128,345 Additional information made available: (i) Losses brought forward from previous year was N380 million. (ii) Repairs and maintenance: Repairs of plant and machinery 970 Repairs or alteration of production utensils 3,230 (iii) Drilling cost incurred comprised: Tangible drilling cost for first exploration well 3,990 Drilling of the first two appraisal wells 2,660 (iv) Production allowance after commencement of the Petroleum Industry Act, 2021 amounted to N6,401 million. (v) Capital allowances computed and agreed: For the current year 2,750 Unrecouped brought forward 1,350 (vi) Exchange rate agreed with the CBN was N752 to a USD ($).