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. 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.