15 JUNE 2024 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Buying, Renting, or Leasing Should a drilling contractor, supplier, distributor, or manufacturer buy, lease, or rent its equipment, vehicles, or facility? Not too surprisingly, the answer depends on the operation’s situation. Renting is often the best option for any drilling business in need of equipment for a short time or uncertain about its future use, especially for one-time use or seasonal contracts. Leasing equipment can be a good option for the owner or owners of a drilling operation with limited capital that needs equipment which must be replaced or upgraded every few years. Purchasing equipment might be a better option for an established business for equipment with a long, usable life. Buying means the operation purchases and owns the buildings, equipment, and vehicles outright. If funds are tight, there are financing tools available - including the offerings of dealers and distributors. Plus, there is also bank financing with or without Small Business Administration guarantees helping overcome the lender’s reluctance. Both loans and leases allow a drilling operation to immediately access equipment and other property, making it possible for those assets to generate revenue while the operation makes small periodic payments. In general, a loan is better if the operation has excess funds for a down payment and plans to keep the equipment for a long time. A lease is better if the operation doesn’t have money to put down, the equipment is only needed for a particular project, or if there is a risk of it becoming outdated. Thanks to a change in accounting rules, both private and nonprofit companies are now required to include all leases longer than 12 months on their balance sheets as assets and liabilities, increasing the visibility of leasing costs and arrangements on the bottom line of every drilling, supply, distribution, and manufacturing business. The new lease accounting standard ASC 842 does not really change how leases are treated for federal income tax purposes, but it does make accounting for leases more difficult - especially when trying to spell out the difference between tax and book income. Although the federal income tax treatment of leases isn’t impacted by ASC 842, the same can’t be said for state-based franchise taxes, sales and use taxes, and net worth taxes, all of which might be impacted. Choosing whether to rent, buy, or lease equipment or property requires careful evaluation of many facts and circumstances. Professional advice to help answer the question might be advisable. Mark Mark E. Battersby may be contacted via e-mail to michele @worldwidedrillingresource.com Mfg., Scree Atlan Inc. en & ntic E-mail: atlantic@ce Atlantic-Screen.c Manufactu 302-684-3197 Manholes j Clear PVC Pipe j Inline Chemical Mixers j ell Rehabilitation Produ jW e.net com urers 7 ucts Milton, DE 19968 142 Broadkill Rd ½” - 24 ranging f Perforated of Slotted Fax: 302-384-0643 more! MUCH And j Bailers Sampling j Locking Caps j Filter Sock j Bentonite j 4” from d Pipe dand 3 Thank you for your personalized service and commitment to the industry. Bill Copeland CVR Energy, Inc. Oklahoma City, OK
RkJQdWJsaXNoZXIy NDk4Mzk=