With drilling equipment costs likely to increase in 2014 and beyond, contractors need cost effective solutions and alternatives to ensure that they have the right machine for the job without breaking the bank.
Why are equipment purchase costs expected to rise? One reason is a significant change in tax incentives. Internal Revenue Code (IRC) 179 currently allows deductions for equipment purchases made in 2013. According to section179.org, contractors can deduct the full price of equipment up to $500,000 from gross income, with a $2-million limit on capital spending for new and used items. There is an additional 50 percent bonus depreciation on new equipment (it is like getting a free refund). However, with these tax benefits expiring Dec. 31, 2013, and interest rates likely increasing in 2014, the price of equipment will also rise. In addition, 2014 will see Tier 4 emission standards take effect. Some industry experts estimate that the new emissions standards could increase drilling equipment costs by 10-15 percent. The good news for those requiring equipment in 2014 is that there are still some very economical options available.