What does IDC mean in ACCOUNTING
Intangible Drilling Cost (IDC) is an important term in the oil and gas industry that refers to non-recoverable drilling costs associated with exploration and production of oil and gas. IDC includes all expenses related to the drilling process which are not recoverable from the sale of produced oil and gas. These can include salaries, materials, equipment rentals, and other overhead costs. IDC can be a significant expense for companies in the oil and gas industry and is something that must be taken into consideration when evaluating a potential venture.
IDC meaning in Accounting in Business
IDC mostly used in an acronym Accounting in Category Business that means Intangible Drilling Cost
Shorthand: IDC,
Full Form: Intangible Drilling Cost
For more information of "Intangible Drilling Cost", see the section below.
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Definition
IDC is often defined as all non-recoverable expenses associated with drilling for oil and gas that are not recoverable through the sale of produced hydrocarbons. This includes personnel costs, equipment rental fees, materials purchased, third-party contract services, leasehold improvements necessary for successful operations, site preparation costs, land access approvals or certificates required by local governments or regulatory agencies, demobilization/mobilization expenses incurred with rig moves necessitated by geological surprises or workover scenarios, engineering consulting fees associated with testing or planning decisions regarding well design or completion plans impacting overall performance or safety issues, insurance premiums related to project risk assessment analysis, tax liabilities accrued as a result of ongoing operations (such as severance taxes), any administrative/office expenses necessitated by onsite personnel requirements above normal corporate levels of staffing necessary for budgetary control purposes.
Essential Questions and Answers on Intangible Drilling Cost in "BUSINESS»ACCOUNTING"
What is IDC?
IDC stands for Intangible Drilling Costs, which are costs incurred in the process of drilling a well but do not result in any tangible asset, like land leases or title acquisition fees.
Where does IDC come from?
IDC arises from administrative costs associated with regulatory approvals and environmental permitting, as well as labor related to field services and mobilization of equipment.
How does one calculate IDC?
Calculating Intangible Drilling Cost typically requires an up-front analysis and evaluation of each expected cost involved, beginning with the cost of the drill rig itself. It should also include an analysis of crew size, expected days on site, and other related expenses.
How is IDC different from DD&A?
Intangible Drilling Cost (IDC) differs from Depreciation, Depletion and Amortization (DD&A). While DD&A charges are related to production assets that will provide future benefits over a period of time, IDCs are one-time reversible outlays with no future benefit.
Does my company need to incur periodic intangible drilling costs?
If a company is engaged in new drilling activities then it will likely have to incur periodic intangible drilling costs. Additionally, if a company wishes to expand its operations via increased horizontal or vertical development then it too will require additional investments in intangible drilling costs.
What types of incidental expenses can be included when calculating intangible drilling costs?
Incidental expenses can include start-up fees for contract services such as legal services or engineering support; environmental permitting; engineer certification fees; seismic surveying; geological logging fees; and transportation fees associated with moving rigs or personnel.
What kinds of tax deductions can be taken for intangible drilling costs?
Generally speaking taxes levied by local governments on property rentals or other tangible resources used in oil & gas exploration activities are deductible when calculating income taxes due at year-end. In addition, related third party service provider charges may also be eligible for deduction against taxable income calculations depending on country specific regulations in place.
Can I use past well construction data to estimate current intangible drilling cost projections?
Yes — previous experiences and prior performance data related to well construction efforts can be extremely helpful during the estimation phase when trying to project an accurate total of expected intangible drilling cost figures for any given well location. This data may vary widely due to complexity differences between regions so implementing best practices learned through industry experience can help ensure accurate estimations.
Final Words:
In conclusion Intangible Drilling Cost (IDC) plays an important role in calculating overall production costs for oil and gas projects. Unlike tangible drilling cost which are directly associated with physical assets used in the field such as drill rigs and tools; intangible costs refer to those items that may not be recovered from hydrocarbon sales but still incur value during a project's lifespan such as service contracts, personnel salaries/benefits etc. Ultimately careful review of IDC must take place prior to making any major investments in order to ensure maximum return on investment while minimizing risk factors associated with exploration activities throughout the project's lifecycle.
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