Glossary of Oil and Gas Terms
The following are abbreviations and definitions of terms commonly used in the oil and gas industry.
Unless otherwise indicated, natural gas volumes are stated at the legal pressure base of the state or area in which the reserves are located and at 60 degrees Fahrenheit and in most instances are rounded to the nearest major multiple.
BOE (barrels of oil equivalent) are determined using the ratio of six Mcf (thousand cubic feet of natural gas) to one Bbl (barrel of 42 US gallons of crude oil).
acidizing - technique for increasing the flow of oil and/or gas into a well. Hydrochloric acid is pumped into the oil-bearing rock. The acid dissolves limestone in the producing zone enlarging pores and flow into the wellbore with fewer restrictions.
API – American Petroleum Institute
Bbl – barrel of 42 US gallons of crude oil
bbl - barrel
Bcf - billion cubic feet of natural gas
BCFE - billion cubic feet equivalent, determined using the ratio of six Mcf (thousand cubic feet of natural gas) to one Bbl (barrel of 42 US gallons of crude oil), condensate or natural gas liquids.
bit - bit is the drilling tool that bores or cuts into the earth. There are two basic types: the cable tool bit which moves up and down the hole, striking the bottom, chipping away the rock, and the rotary bit which revolves to grind the rock. The rotary is the modern technique used in most drilling operations.
blowout - an unexpected violent eruption of oil and gas from a well during the drilling phase of operation. This happens when high pressure gas is encountered and the proper precautions have not been taken. The initial eruption is followed by an uncontrolled flow of fluids from the well.
blowout preventer - "BOP" is a large, specially designed valve that is mounted on top of the well during the drilling and completion stages of operation. The operator can close this valve to stop the flow of oil or gas in case of emergency.
BOE - barrels of oil equivalent
BOPD – barrels of oil per day
bottom hole pressure - reservoir pressure at the bottom of the well. When the well is flowed, a decline in pressure occurs. The amount of decline in pressure related to the amount of oil production will give the engineer information regarding the reserves of the well.
BWPD - barrels of water per day
BWOC – affiliated company though which B&R Energy explores and operates
C&E - well completion and equipment cost
casing - steel pipes that screw together—once drilling is complete casing is lowered into the wellbore and cemented to seal off fluids and keep the hole from caving in
casinghead gas - gas produced from a well that primarily produces oil
casing point – when the well has been drilled to its objective depth, the operator is faced with a very important decision, whether to commit additional dollars to "setting pipe" and attempt a completion or to abandon the well as non-commercial. The success or failure of many companies has been dependent on these decisions.
cement – material used to seal casing in the wellbore and isolate a target formation
cement or “set pipe” - process whereby cement is pumped into the wellbore between the walls of the hole and the outside of the casing. Upon hardening, the cement holds the pipe in place and prevents fluid movement in the hole.
choke – constricting a line in order to control flow
commercial well - well which is capable of producing enough products to pay for itself and give a profit to its owners
competition - general term referring to all activities necessary to put a well on production after it has been drilled to casing point, including the installation of permanent equipment for the production of oil or gas
condensate - hydrocarbon based liquids produced by a gas well. It is usually of a higher gravity than liquids produced form an oil well.
crude oil - oil in its natural state of composition. "crude" is classified according to its physical properties:
a. paraffin-base – a refiner’s term for crude with little or no asphalt. It will yield a relatively high percentage of paraffin wax, high quality lubricating oil and kerosene when refined.
b. asphalt-base - a refiner’s term for crude oil that contains little paraffin wax and has a residue of asphalt. It will yield a relatively high percentage of high-grade gasoline and asphalt when refined.
c. mixed-base – a refiner’s term for crude oil that contains both paraffin and asphalt
cutting or samples - pieces of rock cut out of the formation by the bit and circulated to the surface by the mud. Geologists study this rock for signs of oil and gas as the well is drilled.
depletion - reduction in value of mineral deposits as it is produced. Oil is a wasting asset—proceeds from the well represent both income and return of capital.
depletion allowance - allowance granted on taxable income from oil and gas by the Federal and most State Governments. The current Federal rate is 15% of gross income—subject to certain limitations. The law is rather involved and a tax specialist should be used when computing the tax free portion of income. This information is supplied to each partner prior to filing his income tax returns on April 15th of each year.
deposit - accumulation of oil, gas or other minerals which is capable of production
developmental well - well drilled to a known producing formation in an existing oil field
discovery well - exploratory well which encounters production in a previously unknown deposit
division order - contract with a purchaser of oil and gas which directs the payments of oil and gas revenues to the interest owners of a well
drilling - act of boring into the earth
drilling mud – liquid circulated in the hole while drilling to cool the bit, remove rock chips, and control subsurface fluids. Drilling mud coats the walls of the wellbore and transports the cutting up to the surface.
drilling rig - equipment used to bore into the earth. There are two types:
a. rotary drilling rig – a drilling rig that rotates a long length of steel pipe with a bit on the bottom to cut the well. Four major systems on the rig: 1. power; 2. hoisting; 3. rotating; 4. and circulating.
b. cable tool rig – older type of drilling rig that pounds a hole in the ground by raising and lowering a bit on a cable.
The rotary type is more modern and efficient.
D&A - dry and abandoned
D&T - drilling and well test cost
development well - a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive
electric log - electrical survey made on uncased holes. A special tool is lowered into the hole which ejects an electrical current into the rock and records its resistance to the current. The data from the survey is used by the geologist to determine the nature of the rock and its contents.
exploration - general term referring to all efforts made in the search for new deposits of oil and gas
exploratory well - well drilled to find and produce oil and/or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir.
flowing well - well capable of producing oil and/or gas by its own energy without the aid of a mechanical pump. Normally a pump is put on the well after the pressure reduction inhibits the rate of production.
frac - (short for ”fracture simulation”) a way to stimulate production by opening new flow channels in the rock surrounding a production well. Pumping high-pressure liquid down a well fractures the reservoir rock adjacent to the wellbore. Propping agents suspended in the liquid keep the fractures open.
gas well - well that produces natural gas which is not associated with crude oil.
gross - when used with respect to acres or wells, refers to the total acres or wells in which a company, individual, trust, or foundation has a working interest.
horizontal drilling - a drilling technique that permits the operator to contact and intersect a larger portion of the producing horizon than conventional vertical drilling techniques and can result in both increased production rates and greater ultimate recoveries of hydrocarbons.
hydrocarbons – molecules formed primarily by carbon and hydrogen atoms. Crude oil and natural gas are hydrocarbons.
IDC (intangible drilling costs) - all cost incurred while drilling a well other than equipment or leasehold. These expenses are 100% tax deductible even if the well is productive.
IP (initial production) - production from a well is generally broken down into three categories:
a. flush or initial
b. settled
c. stripper
It is important for investors to realize that a well cannot maintain the flow rates it made during the first stages of its life.
log – n: a systematic recording of data, such as a driller’s log, mud log, or radioactivity log. Many different logs are run in wells to discern various characteristics of downhole formation.
v: to record data
MBbls - thousand barrels of oil
Mcf - thousand cubic feet of natural gas
Mcfe - 1,000 cubic feet equivalent—determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
MCFPD – thousand cubic feet per day
MMBbls - million barrels of oil
MMBOE - million barrels of oil equivalent
MMCF - million cubic feet of natural gas
MMcfe - million cubic feet of gas equivalent, determined using the ratio of 6 Mcf of natural gas to 1 Bbl of crude oil, condensate or natural gas liquids
MMCFPD – million cubic feet per day
net - when used with respect to acres or wells it refers to gross acres of wells multiplied, in each case, by the percentage of working interest owned by a company, individual, trust, or foundation
net production - production that is owned by a company, individual, trust, or foundation, less royalties and production due others
non-commercial - well that is not capable of producing enough oil and/or gas to pay for the drilling
NRI (net revenue interest) - that percent of the production revenue allocated to the working interest after first deducting proceeds allocated to royalty and overriding interest
oil - liquid hydrocarbon—means both crude oil and condensate. (See "crude oil")
oil gravity - the most widely used indicator of a crude oil's worth to the producer is its API gravity. Normally, the price which a producer receives for his oil depends on its gravity, the less dense oils (higher API gravity) being the most valuable. This price schedule is based on the premise that the lighter oil contains higher percentages of the more valuable products such as gasoline. API gravity (degrees) = (141.5/sp.gr.) - 131.5.
oil and gas leases – a contract between an oil operator and a landowner which gives the operator the right to drill for oil and gas on his property for a consideration. It is simply a "ticket to hunt".
on-the-pump - an expression meaning “a well is incapable of flowing and that the oil is being pumped to the surface by a ‘pumping unit’”
operating expense - expenses incurred through the operation of producing properties
operator - the individual, company, trust, or foundation responsible for the exploration, development, and production of an oil and/or gas well or lease
packer – cylinder of rubber-like material that is run on a tubular string and compressed to expand and seal the well at that level
payout - when the costs of drilling, producing, and operating have been recouped from the sale of products on a well
perforate - a hole shot in the casing or liner and cement to allow oil and/or gas to flow into the well
permeability - measure of the ability of fluid to move through a formation. Rocks may have holes or void spaces in them (porosity), but if these holes do not connect, the permeability can be drastically reduced.
porosity - measure of the relative volume of void space in rock to the total rock volume. These spaces or pores are where oil and gas accumulate; therefore, a formation containing a high percentage of porosity can contain more hydrocarbons.
pumper - employee of an operator who is responsible for gauging the oil and gas sold off the leases he has been assigned and who is also responsible for maintaining and reporting the daily production
present value of future revenues - the pretax present value of estimated future revenues to be generated from the production of proved reserves, net of estimated production and future development costs. Future net revenues are discounted to a present value of an annual discount rate which is typically 10%.
proved developed reserves - reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery can be included as “proved developed reserves” only after testing by a pilot project, or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.
proved reserves - 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 areas 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 structural 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 natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors; (c) crude oil, natural gas, and natural gas liquids that may occur in undrilled prospects; and, (d) crude oil, natural gas, and natural gas liquids that may be recovered from oil shales, coal, gilsonite, and other such sources.
proved undeveloped reserves - 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 are usually 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 are estimates for proved undeveloped reserves generally attributed to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.
psi - pounds per square inch
recomplete – to plug and abandon one zone in a well and complete in another. This can be done during a workover by either plugging back or drilling deeper.
reservoir – the subsurface deposit of oil/and or gas located in the pores of a reservoir rock
rework operations - any major operation performed on a well after its completion in an attempt to restore or improve its ability to produce
rod pump – common oil well downhole pump driven by a sucker-rod string
royality - an interest in an oil and 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 of production), 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.
3-D seismic - seismic data that is acquired and processed to yield a three-dimensional picture of the subsurface. It is usually displayed on a computer monitor. The record can be rotated and slices (time or horizontal slices) taken out a various levels.
salt water disposal well - many wells produce salt water while producing oil. The disposal of this water is a problem to an operator because of pollution—best solution is to pump the waste back into a formation that is deep enough not to pollute shallow water sands. Many stripper wells (wells that are barely profitable) that are no longer commercial are converted for this purpose.
secondary recovery - a broad term encompassing any method of extracting oil from a reservoir after a well or field has exhausted its primary production.
sedimentary rocks - rock is generally classified in one of three categories:
a. sedimentary;
b. igneous;
c. metamorphic.
The principal sedimentary rocks encountered in oil and gas operations are sandstone, limestone, and shale.
settled production - second phase of production in the producing life of a well. (See IP - initial production)
shut-in – to close the values at the wellhead so the well stops flowing or producing
spudded – day the well drilling was begun
stripper well - the final state in the life of a producing well
structural trap - a fold or break (or both) in the earth's crust which creates an impervious trap for oil and gas. Oil will migrate underground through rock until it is "trapped".
surface casing – the largest diameter and shortest string of a well’s casing—used to protect freshwater aquifers and reinforce the well’s sides
surface pipe - pipe which is set with cement through the shallow water sands to avoid polluting the water and keep the sand from caving in while drilling a well
swab – a tool that is lowered down the pipe on a wire line. The "swab" is then pulled out of the hole. As it travels up the pipe, rubber elements expand so that the fluid in the pipe is trapped above the swab and pushed to the surface. This operation is necessary when the formation pressure is not high enough to blow the fluids in the pipe to the surface.
tertiary recovery - enhanced recovery methods for the production of oil and/or gas beyond those used in secondary recovery. Enhanced recovery of crude oil requires a means for displacing oil from the reservoir rock, modifying the properties of the fluids in the reservoir and/or the reservoir rock to cause movement of oil in an efficient manner, and providing the energy and drive mechanism to force its flow to a production well. Chemicals or energy is injected as required for displacement and for the control of flow rate and flow pattern in the reservoir and a fluid drive is provided to force the oil toward a production well.
tank battery - group of tanks at a well site used to store oil prior to sale to a pipeline company
testing - when each new well is competed, a series of tests are run on the well. The various tests are used to estimate the daily deliverability, payout, and reserves.
tubing - small diameter pipe which is installed in the casing. Oil is produced through tubing because it increases the viscosity of fluid and a well's flow capabilities.
turnkey contract – a contract in which an operator or drilling contractor agrees to furnish all labor and materials necessary to drill a well to a certain depth or stage of completion for a specified sum of money. The operator or contractor assumes all of the responsibility and risks involved in completing the operation.
unload – remove liquid from a well
viscosity - the resistance of fluid to flow. A high viscosity fluid will not flow as easily as a low viscosity fluid (mud will not move as easily as water).
water flooding - secondary recovery method for the production of oil from a formation. When water is injected into some formations, oil will be displaced by the water injected into one well and produced from a second well thereby increasing the amount of production from a well. Some formations will not respond to this type of stimulation.
wildcat well – a well drilled to find new gas or oil reserves. It can be drilled to:
1. test a trap that has never produced (new-filed wildcat),
2. test a reservoir that has never produced in a field and is shallower or deeper than the producing reservoir(s) or
3. extend the known limits of a producing reservoir in a field
(controlled exploratory well)
wellbore – hole made by a drilling rig
working interest - an interest in an oil and gas lease that gives the owner of the interest the right to drill for and produce oil and gas on the leased acreage and requires the owner 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 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 – the method used to maintain, restore or improve a well’s production
workover rig - portable rig with a mast and hoisting system used in working over a well to drill and/or circulate
write-offs - That portion of an oil investment which is deductible for tax purposes. All intangibles are deductible.
Copyright B&R Energy LLC |