Understanding Tangible Drilling Costs (TDC) in Oil & Gas Investing

Tangible Drilling Costs (TDCs)

Expenditures on physical equipment for a well (casing, wellhead, tanks, etc.) that have salvage value. These costs are capitalized and recovered through depreciation over time.

Intangible Drilling Costs (IDC)

Non‑salvageable drilling expenses.

Intangible Drilling Costs (IDCs)

Exploration and drilling expenses with no salvage value (e.g., labor, fuel, drilling fluids), which are typically deductible for tax purposes, often largely in the first year.

Directional Drilling

Horizontal Drilling

A drilling technique where the wellbore is steered to run horizontally through the reservoir, greatly increasing the well’s contact with the productive rock formation compared to a vertical well.