An operator's expense for wages, fuel, repairs, hauling and supplies incurred in the preparation and drilling of oil and gas wells.
The outlays associated with drilling an oil or gas well, which upon completion of the well have no physical value such as labor, geologist expense, core analysis, etc. Most of these costs are tax deductible in the year they are incurred.
Expenditures made for wages, fuel, repairs, hauling and supplies necessary for the drilling or recompletion of an oil or gas well and the preparation of such well for the production of oil or gas, but without any salvage value. These expenditures are generally accepted in the oil and gas industry as being currently deductible for federal income tax purposes. Examples of such costs include: ground clearing, drainage construction, location work, road making, temporary roads and ponds, surveying and geological works; drilling, completion, logging, cementing, acidizing, perforating and fracturing of wells; hauling mud and water, perforating, swabbing, supervision and overhead; renting horizontal tools, milling tools and bits; and construction of derricks, pipelines and other physical structures necessary for the drilling or preparation of the wells.