Bbl – One barrel of crude oil, condensate or other liquid hydrocarbons equal to 42 United States gallons.
Bcf – One billion cubic feet of natural gas.
BOE – Barrel of oil equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Commercial Well or Producing Well – An oil and natural gas well that produces oil and gas in sufficient quantities such that proceeds from the sale of such production exceed related costs directly associated with such production and taxes.
Completion – The installation of permanent equipment for the production of oil and gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
Development Well – A well drilled within the presently proven productive area of an oil and natural gas reservoir as indicated by reasonable interpretation of available data, with the objective of completing in that reservoir. A well drilled within the proven area of an oil and natural gas reservoir to the depth of a stratigraphic horizon known to be productive. Development wells are drilled to efficiently drain the reservoir and have limited risk once the reservoir is delineated.
Exploitation – The development of a petroleum reservoir. See "Development Well".
Exploratory Well – A well drilled to find and produce oil or natural gas reserves not classified as proved, to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir, or to extend a known reservoir beyond the limits classified as proved reserves.
Farm-in – An arrangement whereby one oil operator buys in or acquires an interest in a lease or concession owned by another operator on which oil or natural gas has been discovered or is being produced. Often farm-ins are negotiated to assist the original owner with development costs and to secure for the buyer a source of crude oil or natural gas.
Field – An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.
Finding Cost – An amount per Mcfe or BOE equal to the sum of all costs incurred relating to oil and gas property acquisition, exploration and development activities divided by the sum of all additions and revisions to estimated proved reserves, including reserve purchases.
Formation – A sedimentary bed or series of beds sufficiently alike or distinctive to form an identifiable geological unit.
Independent Producer – (1) A person or corporation that produces oil for the market, having no pipeline system or refinery. (2) An oil-country entrepreneur who secures financial backing and drills his own well. (3) A company involved in the exploration for, as well as the development and production of, oil and natural gas that is not a Major Oil Company.
Infill Drilling - Wells drilled to fill in between established producing wells on a lease; a drilling program to reduce the spacing between wells in order to increase production from the lease.
Lease – The instrument by which a leasehold or working interest is created in minerals.
Major Oil Company – An integrated oil company that engages in exploration, production, transportation, refining and marketing; or one of the original "Seven Sisters" consisting originally of Exxon, British Petroleum, Chevron, Gulf, Mobil, Texaco and Royal Dutch Shell.
MBbl – One thousand barrels of crude oil, condensate or other liquid hydrocarbons.
Mcf – One thousand cubic feet of natural gas; the standard unit for measuring volumes of natural gas.
Mcf/d – One thousand cubic feet of natural gas per day.
Mcfe – Mcf of natural gas equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Mcfe/d – Mcfe per day.
Mmcf – One million cubic feet of natural gas.
Natural Gas – Gaseous forms of petroleum consisting of mixtures of hydrocarbon gases and vapors, the more important of which are methane, ethane, propane, butane, pentane, and hexane; gas produced from a gas well.
Natural Gas Liquids or NGLs – Liquid hydrocarbons which have been extracted from natural gas (e.g., ethane, propane, butane and natural gasoline).
Net Profits Interest – An interest in an oil and natural gas property entitling the owner to a share of the gross revenues from oil and natural gas production less all operating, production, development, transportation, transmission and marketing expenses, as well as production, sales and ad valorem taxes attributable to such production. It does not include any rights to explore for, develop or produce oil and gas from the lands subject to the interest.
Non-operator – Subject to all cases of drilling, completing and operating a well, the working-interest owner or owners other than the one designated as operator of the property; a "silent" working-interest owner.
Offset Well – (1) A well drilled on the next location to the original well. The distance from the first well to the offset well depends upon spacing regulations and whether the original well produces oil or gas. (2) A well drilled on one tract of land to prevent the drainage of oil or gas to an adjoining tract where a well is being drilled or is already producing.
Operator – The individual or company responsible for the exploration, development and production of an oil or gas well or lease.
Operating Costs – The cost of operating a producing well or a group of producing properties.
Pipeline – A tubular system, usually made of steel pipe with welded connections, used to transport oil, gas and other fluids.
Possible Reserves – Possible reserves are less certain than probable reserves and can be estimated with a low degree of certainty, insufficient to indicate whether they are more likely to be recovered than not.
Probable Reserves – Probable reserves are less certain than proved reserves and can be estimated with a degree of certainty sufficient to indicate they are more likely to be recovered than not.
Producing (Productive) Well or Property – A well that is found to be capable of producing hydrocarbons in sufficient quantities such that the proceeds from the sale of such production exceed production expenses and taxes.
Production – (1) The removal of hydrocarbons from a subsurface reservoir by wells. (2) Oil and/or natural gas produced from wells. (3) The part of the petroleum industry that is concerned with bringing oil and natural gas to the surface and separating, gauging, storing and preparing it for transport.
Proved Developed Non-producing Reserves or PDNP – Proved developed reserves that can be expected to be recovered from zones behind casing in existing wells, or from zones that are shut-in for market conditions, pipeline connections or mechanical reasons and are capable of production, but the timing is uncertain.
Proved Developed Producing Reserves or PDP – Proved developed reserves that are expected to be recovered from completion intervals currently open in existing wells and able to produce to market. Reserves that can be recovered through wells with existing equipment and operating methods. Additional oil and natural gas to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the forces and mechanisms of primary recovery will be included as "proved developed reserves" only after the improved recovery project is in operation.
Proved Reserves – The estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made). Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.
(i) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and (B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known occurrence of hydrocarbons controls the lower proved limit of the reservoir.
(ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the "proved" classification when successful testing by a pilot project or the operation of an installed program in the reservoir provides support for the engineering analysis on which the project or program was based.
(iii) Estimates of proved reserves do not include the following: (A) oil that may become available from known reservoirs but is classified separately as "indicated additional reserves;" (B) crude oil, natural gas and NGLs, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors; (C) crude oil, gas and NGLs that may occur in undrilled prospects; and (D) crude oil, natural gas and NGLs that may be recovered from oil shales, coal, gilsonite and other such sources.
Proved Undeveloped Reserves or PUDs – 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. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have proved effective by actual tests in the area and in the same reservoir.
Proved Undeveloped Location – A site on which a development well can be drilled consistent with spacing rules for purposes of recovering proved undeveloped reserves.
Proved Reserves – Oil that has been discovered and determined to be recoverable but is still in the ground.
PV10 – When used with respect to oil and gas reserves, PV10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect at the determination date, without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.
As the basis for calculation of PV10, reservoir engineers develop a reserve report for each existing well, whether producing or shut-in, and for each proved undeveloped well location. The reserve report takes into account:
(i) current rate of production (or estimated initial rate of production of a proved undeveloped location);
(ii) the rate at which production, assuming no further reserve additions, is expected to decline;
(iii) future production costs unique to each well;
(iv) development costs associated with the proved undeveloped reserves; and
(v) any production taxes that must be paid. To calculate the estimated future gross revenue to be generated from the production of proved reserves, engineers must apply an expected price to be received from the sale of such production. Such expected price typically equals the price in effect at the determination date either held flat or escalated at some appropriate rate.
Recompletion – The completion for production of an existing well bore in another formation from that in which the well has been previously completed.
Reservoir Engineering – The application of scientific and engineering principles to the production from a developed reservoir for maximum economic return. Reservoir engineering is the "art of development and production for high-economic recovery."
Reservoir – A porous and permeable underground formation containing a natural accumulation of predictable oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
Royalty Interest – An interest in an oil and natural gas lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner's royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
Standardized Measure of Discounted Future Net Cash Flows – The estimated future net cash flows from proved oil and natural gas reserves computed using prices and costs, at the date indicated, after income taxes and discounted at 10%.
Seismic – The use of shock waves generated by controlled explosions of dynamite or other means to ascertain the nature and contour of underground geological structures.
3-D Seismic, 3-D Imaging or 3-D Data - Seismic data that are acquired and processed to yield a three-dimensional picture of the subsurface. Advanced technology method of detecting accumulations of hydrocarbons identified by the collection and measurement of the intensity and timing of sound waves transmitted into the earth as they reflect back to the surface. The method by which a three-dimensional image of the earth's subsurface is created (through the interpretations of reflection seismic data collected over a surface and 3-D seismic surveys) allows for a more detailed understanding of the subsurface than do conventional surveys and contributes significantly to field appraisal, development and production. Data generally acquired simultaneously along multiple parallel lines are used to generate a three-dimensional picture of subsurface geological strata, rather than a mere cross-section. To provide this 3-D picture, much more data must be acquired and more computer time and man-hours must be dedicated than for a two dimensional cross section, so 3-D data is significantly more expensive than 2-D data. However, the use of 3-D data can significantly improve drilling results.
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 gas, regardless of whether such acreage contains estimated, not proved reserves.
Upstream Sector – The sector of the energy industry engaged in activities including exploration, development, production, gathering and processing of crude oil and natural gas.
Wildcat Well – A well drilled in an unproven area, far from a producing well; an exploratory well in the truest sense of the word.
Working Interest – An operating interest in an oil and natural gas lease thatgives the owner of the interest the right to drill for and produce oil and natural gas on the leased acreage and the responsibility to pay a share of the costs of drilling and production operations. The share of production to which a working interest owner is entitled will always be smaller than the share of costs that the working interest owner is required to bear, with the balance of the production accruing to the owners of royalties. For example, the owner of a 100% working interest in a lease burdened only by a landowner's royalty of 12.5% would be required to pay 100% of the costs of a well but would be entitled to retain 87.5% of the production.
Workover – Operations on a producing well to restore or increase production. Tubing is pulled and the casing at the bottom of the well is pumped or washed free of sand that may have accumulated.