Glossary of Oil and Natural Gas Terms
The following is a description of the meanings of some of the oil and natural gas industry terms that are commonly used.
bbl. - Barrel, 42 U.S. gallons of liquid volume, used in reference to crude oil or other liquid hydrocarbons.
bcf. - Billion cubic feet of natural gas.
boe. - Barrels of crude oil equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.
boe/d. - Barrels of crude oil equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.
Btu. British thermal unit. - A measurement of energy equivalent to the heat needed to raise one pound of water one degree Fahrenheit.
Completion. - The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
Development well. - A well drilled within the proved area of a natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.
Drilling locations. - Total gross locations specifically quantified by management to be included in the Company’s multi-year drilling activities on existing acreage. The Company’s actual drilling activities may change depending on the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, drilling results and other factors.
Dry hole. - A well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
Exploratory well. - A well drilled to find and produce natural gas or oil reserves not classified as proved, to find a new reservoir in a field previously found to be productive of natural gas or oil in another reservoir or to extend a known reservoir.
Field. - An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.
Formation. - An identifiable layer of rock named after its geographical location and dominant rock type.
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Lease. - A legal contract that specifies the terms of the business relationship between an energy company and a landowner or mineral rights holder on a particular tract of land.
Leasehold. - Mineral rights leased in a certain area to form a project area.
mbbls. - Thousand barrels of crude oil or other liquid hydrocarbons.
mboe. - Thousand barrels of crude oil equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.
mcf. - Thousand cubic feet of natural gas.
mcfe. - Thousand cubic feet equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.
mmbbls. - Million barrels of crude oil or other liquid hydrocarbons.
mmboe. - Million barrels of crude oil equivalent, determined using the ratio of six mcf of natural gas to one bbl of crude oil, condensate or natural gas liquids.
mmbtu. - Million British Thermal Units.
mmcf. - Million cubic feet of natural gas.
Net acres, net wells, or net reserves. - The sum of the fractional working interest owned in gross acres, gross wells, or gross reserves, as the case may be.
Overriding royalty interest. - Is similar to a basic royalty interest except that it is created out of the working interest. For example, an operator possesses a standard lease providing for a basic royalty to the lessor or mineral rights owner of 1/8 of 8/8. This then entitles the operator to retain 7/8 of the total oil and natural gas produced. The 7/8 in this case is the 100% working interest the operator owns. This operator may assign his working interest to another operator subject to a retained 1/8 overriding royalty of the 8/8. This would then result in a basic royalty of 1/8, an overriding royalty of 1/8 and a working interest of 3/4. Overriding royalty interest owners have no obligation or responsibility for developing and operating the property. The only expenses borne by the overriding royalty owner are a share of the production or severance taxes and sometimes costs incurred to make the oil or gas salable.
Plugging and abandonment. - Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of all states require plugging of abandoned wells.
Present value of future net revenues (PV-10). - The present value of estimated future revenues to be generated from the production of proved reserves, before income taxes, of proved reserves calculated in accordance with Financial Accounting Standards Board guidelines, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation, without giving effect to hedging activities, non-property related expenses such a general and administrative expenses, debt service and depreciation, depletion and amortization, and discounted using an annual discount rate of 10%.
PV-10. - Pre–tax present value of estimated future net revenues discounted at 10%.
Production. - Natural resources, such as oil or gas, taken out of the ground.
Productive well. - A well that is found to be capable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
Project. - A targeted development area where it is probable that commercial oil or gas can be produced from new wells.
Prospect. - A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.
Proved developed producing reserves. - Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved reserves. - The estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable from known reservoirs under current economic and operating conditions, operating methods, and government regulations.
Proved undeveloped reserves. - Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.
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Recompletion. - The process of re-entering an existing well bore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production.
Reserves. - Oil, natural gas and gas liquids thought to be accumulated in known reservoirs.
Reservoir. - A porous and permeable underground formation containing a natural accumulation of producible nature gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.
Royalty interest. - A share of production or the value or proceeds of production, free of the costs of production, when and if there is production. A royalty interest is usually expressed as a fraction such as 1/8.
Secondary recovery. - A recovery process that uses mechanisms other than the natural pressure of the reservoir, such as gas injection, water injection, or water flooding, to produce residual oil and natural gas remaining after the primary recovery phase.
Shut-in. - A well that has been capped (having the valves locked shut) for an undetermined amount of time. This could be for additional testing, could be to wait for pipeline or processing facility, or a number of other reasons.
Standardized measure. - The present value of estimated future cash inflows from proved oil and natural gas reserves, less future development, abandonment, production and income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. Standardized measure differs from PV-10 because standardized measure includes the effect of future income taxes.
Successful. - A well is determined to be successful if it is producing oil or natural gas, or awaiting hookup, but not abandoned or plugged.
Undeveloped acreage. - Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
Water flood. - A method of secondary recovery in which water is injected into the reservoir formation to displace residual oil and enhance hydrocarbon recovery.
Water re-pressurization. - A method of secondary recovery in which water is injected into the reservoir formation to increase reservoir pressure and enhance hydrocarbon recovery.
Working interest. - The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations.
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