NADOA Model Form Division Order
Abandon or Abandoned Well
(1) The proper plugging and abandoning of a well in compliance with all applicable regulations, and the cleaning up of the wellsite to the satisfaction of any governmental body having jurisdiction and to the reasonable satisfaction of the operator. Statutes and regulations in many states require the plugging of abandoned wells to prevent the seepage of oil, gas, or water from one formation of rock to another. (2) A well that is no longer in use because it was a dry hole when it was drilled (no producible oil or gas was present), or because it has ceased to produce. (3) To cease efforts to find or produce from a well or field. (4) To plug a well completion and salvage material and equipment. (5) To discontinue attempts to produce oil or gas from a well or lease and to plug the reservoir in accordance with regulatory requirement and recover equipment. (6) A well no longer in use, whether dry, inoperable or no longer producing, and the previous operator has intentionally relinquished its interest in the well.
(1) The act or process of reducing the intensity of pollution. (2) The use of some method of abating pollution.
A condensed history of the title to land. A document prepared by an abstract or title company and certified by the preparer to contain all pertinent information or copies of all documents affecting title to a given piece of property.
An offshore platform or semi-submersible rig built or adapted to provide living quarters for drilling and production personnel.
(1) Increase the flow of oil from a well by introducing acid into a limestone formation to open passages through which oil can flow into the wellbore. (2) A procedure in which acid (usually hydrochloric acid) is pumped into a reservoir to dissolve calcite so that increased flow from the reservoir will occur.
A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed a document stating that such execution is his or her own free act and deed. An acknowledgment is necessary to entitle some documents to be recorded. The certificate of acknowledgment is attached to the document or incorporated therein. A document usually must be notarized before it can be filed of record in a county clerk’s office.
A well drilled in exchange for a mineral interest in a property. It is also referred to as an “obligation well.”
A land measure (43,560 square feet or 4,840 square yards or 160 square rods). An acre is the primary measurement of land on an oil and gas lease.
Land leased for oil and gas exploration and development; usually descriptive of more than one lease.
A volume of reservoir rock. One acre-foot represents the volume which would cover one acre in area to a depth of one foot thick. One acre-foot equals 7,758 barrels; 325,829 gallons or 43,560 cubic feet.
A well in mechanical condition for production or service use (i.e., in active production).
Acts of God
See Force Majeure.
Ad Valorem Tax
According to value. It is a property tax imposed by various states on property, including recoverable reserves and well equipment. It is calculated as a percentage of value of the property.
A term used generally to indicate special chemicals that may be added to products to improve their characteristics.
Adjacent Estuarine Zones
This term embraces the area inland from the coastline and is comprised of the bays, inlets, and estuaries along the gulf coast.
Costs associated with managing the affairs of another or providing services to another.
Statutory penalty imposed for violation of a rule (i.e., by the Texas Railroad Commission or Oklahoma Corporation Commission).
The person named in a decedent’s will to administer the estate, and who accepts the appointment by qualifying before the clerk. A person appointed by the court to settle the estate of a deceased person. (Also called executor, executrix or personal representative.)
Administrator with the Will Annexed
An individual or a trust institution appointed by a court to settle the estate of a deceased person in accordance with the terms of his or her will when the executor names in the will has refused, is unable to act or has failed to qualify, or no executor has been named in the will.
(1) Ad advance payment made by the owner of an operating interest to the royalty owner for a specific number of units of minerals regardless of whether oil or gas was extracted within the year. The payment is recoverable out of future production. (2) A royalty payment made to the owner of the land or lessor before actual production from the land begins and based on an agreed price. When production occurs, actual payments due on the royalty may be credited against this advance royalty payment. Commonly found in coal and lignite leases. This may be called a minimum royalty. Also, in certain lease forms, advance royalty is used to describe a shut-in royalty. At one time, for federal tax purposes, lease bonuses were considered an advance royalty.
AFE (Authorization for Expenditure)
This is a form used during the planning process for a well about to be drilled. The form includes an estimate of costs to be incurred in the intangible drilling costs category and in the tangible equipment category. Costs are shown in total with accompanying breakdowns. The form represents a budget for the project against which actual expenditures are compared.
A statement of facts relating to the death and heirship of the decedent wherein an individual swears before a notary public to certain facts (i.e.: marital status, siblings, children and other ownership factors) affecting a piece of property. An affidavit does not transfer anything and could be similar to giving testimony in a courtroom. An affidavit is usually executed by someone who knew the decedent, but is not an heir to the estate.
Affidavit of Heirship
A sworn statement providing genealogical information that may be used in support of facts. It is often used when someone dies without a will and the estate has not been probated. An Affidavit of Heirship, made preferably by two disinterested persons acquainted with the decedent, may provide facts about marital history, children’s names and ages, payment of debts and taxes, and other estate facts. Frequently, these are required by oil companies or attorneys when there is some question as to the heirs of a property.
Affidavit of Identity
An affidavit which identifies an individual known by different names as one and the same person. Example: “J. Doe, John Doe, J. B. Doe, John B. Doe, also known as John Baker Doe, are one and the same person who executed that certain oil and gas lease, dated…”
Affidavit of Non-Compliance
An affidavit filed by an owner of land attesting to the failure by a lessee to comply with the provisions of a lease, and the resulting forfeiture of the lease. Used primarily when a lessee has failed to execute and record a release of the lease.
Affidavit of Non-Development
An affidavit stating facts in support of an assertion that an unreleased lease or record has terminated by reason of non-development. This affidavit may contain an additional recitation regarding non-payment of rentals. It may be prepared by an owner but is often prepared by a regulatory agency verifying there is currently no production from the property in question.
Affidavit of Possession
An affidavit given by a knowledgeable person on the use and possession of land for the purpose of establishing possession in the record title owner. Usually prepared and submitted as fulfillment of a title opinion requirement. A Possession Affidavit addresses questions such as who has lived on the property, who has exercised ownership over it, and the incidents of ownership, (i.e., payment of taxes, fences, improvements, growing of crops, etc.)
After-Acquired Title Doctrine
Also called Estoppel by Deed. This doctrine provides that a person cannot assert a later acquired interest in property that is inconsistent with the effectiveness of a previous instrument conveying an interest in that same land.
1) Clause in an oil and gas lease which provides for an agent to be named once an interest is assigned to six or more persons; (2) Provision stating that assignment by heirs cannot enlarge a lessee’s obligations or that no change of division of royalties “shall operate to enlarge the obligation or diminish the rights of the lessee.”
A person authorized by another to act for him or her. The distinguishing characteristics of an agent are that the agent acts on behalf and subject to the control of the principal, does not have title to the property of the principal, and owes the duty of obedience to the principal’s orders.
See Minimum Pay
The value under which items of unclaimed property may be reported in total by a holder without reference to a description of the particular owner of the property. As many jurisdictions are not required by law to advertise for unclaimed owners having unclaimed property below a certain aggregate value, such jurisdictions, in turn, do not require the holder to report the owner to them on an individual basis. Some jurisdictions may not require very small amounts of unclaimed property to be reported.
A rotary drilling technique in which compressed air is used instead of fluids to circulate, or bring to the surface, bits of rock and other cuttings from the drill bit.
An enhanced recovery technique in which air is injected into the petroleum formation to increase reservoir pressure.
A production technique in which an air balance beam pumping unit is used to lift oil to the surface.
Method of raising oil from the formation by injecting air or gas directly into the fluid in the casing.
A refining process for converting light, gaseous olefins into high-octane gasoline components (the reverse of cracking).
Distribution of production from a number of wells in a particular field. Each well is adjusted to produce at its most efficient rate after the total production from the field is determined.
The process by which supply is assigned to purchasers in accordance with a given priority during periods when total sales requests exceed the seller’s total supply.
The amount of oil (or gas) which a well, leasehold, field, or state is permitted to produce under proration orders of a state regulatory commission.
A composition of two or more metals.
The additional or supplemental probate required to legally transfer title when the oil royalties are not located in the same state as the decedent. For example, the decedent’s estate was probated in New Mexico (the decedent’s state of residence), but the oil royalties are located in Oklahoma.
The date, usually one year from the effective date of the lease, by which delay rentals or shut-in gas royalty must be paid to maintain the lease in effect in the absence of drilling or production.
The space between the drill string and the earthen wall of the well bore, or between the production tubing and the casing.
An upfold or arch of stratified rock in which the beds or layers bend downward in opposite directions forming the crest or axis of the fold. Well drilled on the side of it tend to deviate forming crooked holes.
APA (Accredited Petroleum Accountant)
A designation developed by the Council of Petroleum Accountants Societies (COPAS) to provide an independent source of recognition of achievement for petroleum industry accountants. To earn the A.P.A. designation, a candidate must meet the eligibility requirements as specified by the COPAS Board of Examiners, complete the required course of study and successfully pass the examinations for all eight sections (Operations, Law, Financial Reporting, Revenue, Joint Interest, Managerial, Tax and Audit) of the program.
API (American Petroleum Institute)
A petroleum industry association that sets standards for oil field equipment and oil field operations.
API County Code
An indicator developed by the American Petroleum Institute to identify areas such as counties and other subdivision areas identified within state boundaries. Defined by API Bulletin D12A, as amended. This code becomes a part of the API Well Number.
A system of classifying crude oil based on its specific gravity, whereby the greater the gravity, the lighter the oil. Specifically: 141.5 Degrees API Gravity = ———————– – 131.5 Specific Gravity The specific gravity of oil is normally specified not as a fraction in relation to water taken at the figure “1″ but in terms of API degrees. On the API scale, oil with the least specific gravity has the highest API gravity. Other things being equal, the higher the API gravity, the greater the value of the oil. Most crude oils range from 27 degrees to 35 degrees API gravity.
API State Code
The indicator assigned to a state, as defined in API Bulletin D12A, as amended. This code is a part of the API Well Number.
API Well Number
A well identifier assigned as defined in API Bulletin D12A, as amended. The API Well Numbers are assigned by the appropriate state or federal regulator agency.
After payout; a point during the production of an oil or gas well defined by terms of revenue received as set out by contracts and agreements between working interest owners.
The person who, from the books and records of the holder, apparently is entitled to unclaimed property held, issued, or owing by a holder.
Accounts used to accumulate expenses during a period, with the accounts being credited for amounts charged to activities on some predetermined basis.
Drilling carried out following the discovery of a new field to determine the physical extent, amount of reserves and likely production rate of the field.
A well drilled as part of an appraisal drilling program.
The refiner’s shorthand for “atmospheric residual desulfurization,” a refining process the removes sulfur from oils.
Class of hydrocarbons that have at least one benzene ring as part of their structure. Generally describes benzene and benzene derivates. These products are used as components of unleaded gasolines and as feedstocks for petrochemicals such as cyclohexane and paraxylene, both of which are used in end products like nylons and polyesters.
French unit of measurement, equal to 191.833 feet.
Techniques for producing oil after depletion or in lieu of natural drives; includes waterflooding, natural gas reinjection, inert gas injection, flue gas injection and in-situ combustion.
Any of the techniques, other than natural drives, for bringing oil to the surface.
The person receiving the assignment.
An instrument whereby one party sells or transfers an interest or property to another.
A clause in an oil and gas lease which allows or restricts free transfer of lessor’s or lessee’s interest, in whole or in part. The clause may require notice of the assignment or approval by lessor.
The person making or giving the assignment.
Natural gas naturally occurring in a reservoir with oil. The “associated gas” is in a gas cap or dissolved in the oil.
Liquid hydrocarbons found in association with natural gas.
Oil and gas reservoir with a gas cap. Gas production from these reservoirs is generally restricted in order to preserve the gas cap energy thereby increasing ultimate recovery.
American Society for Testing Material which establishes many of the technical standards used in the oil industry.
Trailer or wagon with three pairs of steel wheels. The rear two pairs with caterpillar tractor treads – designed for soft ground and heavy loads.
An affirmation or authentication. Wills in Texas can be attested by two or more credible witnesses over the age of fourteen signing their names on the will in the presence of the testator. Corporate attestation is the signing of a document by the officers or others approved by the corporation’s board of directors. Corporate attestation may also mean affixing the corporate seal, which is generally performed by the corporate secretary.
The party to whom authorization has been given for one person (“agent”) to act or execute an order on behalf of another person (“principal”). Also called “Power of Attorney.” See Power of Attorney.
High-performance petroleum fuels made specifically for piston engine, propeller-driven airplanes.
A device which changes the direction of flow of fluids.
A bail or bailer is a hollow steel cylinder with a dump-valve run inside casing on a wire line for recovery fluids and other material from a well; to bail a well by lowering a bailer to the bottom and recovering bottom-hole samples of fluid, drill cuttings, etc.
Bring up some of the mud in the hole.
A contractual agreement between two or more parties to account for differences between measured quantities of gas and the total confirmed nominations at a point. They have been used to keep track of over/under production relative to entitlement between producers and over/under deliveries relative to confirmed nominations between operators of wells, pipelines, and LDCs. See LDC.
Non-self-propelled marine vessel used as cargo tankers, equipment and supply carriers, crane platforms and support and accommodation bases in offshore drilling, and as submarine pipe-laying vessels.
A standard unit of measure for crude oil and liquid petroleum products. One barrel is equivalent to 42 U.S. gallons. 7.3 barrels is equal to 1 ton.
Barrels per Calendar Day
Industry measurement of actual refinery throughout as opposed to designed capacity. Derived by dividing the number of refined barrels of oil by that actual number of days the refinery was in operation. Abbreviated to “b/cd.”
Barrels per Day
A unit of measurement used in the industry for the production rates of oil fields, pipelines, and transportation. Abbreviated to “bpd,” “b/d,” or “bbl/d.”
Non-sedimentary rock (either igneous or metamorphic) in which oil is unlikely found and which lies under layers of sedimentary rock. Ordinarily, when it is encountered in drilling, the well is abandoned.
Basic Lease Provisions
The basic parts of a lease which identify: Effective Date Parties to the Lease (Lessor and Lessee) Consideration (usually the Bonus, or “Ten Dollars” is sufficient) Specified Term Delay Rental or Paid-up provision Royalty Amount for the Lessor
Basic Sediment and Water (BS&W)
Impurities present in oil as it comes from the well. These impurities include emulsified water, suspended particles from the reservoir formation, etc.
A large natural depression on the earth’s surface in which sediments generally brought by water accumulate. In regard to subsurface structures, it is usually the bed of an ancient sea. These basins are regarded as good prospects for petroleum exploration.
Group or lease storage tanks.
(SWR 14) Any well under the jurisdiction of the Commission for which the surface location is either: (a) located in or on a lake, river, stream, canal, estuary, bayou, or other inland navigable waters of the state; or (b) located on state lands seaward of the mean high tide line of the Gulf of Mexico in water of a depth at mean tide of not more than 100 feet that is sheltered from the direct action of the open seas of the Gulf of Mexico.
The abbreviation for billion cubic feet of gas.
The abbreviation for billion cubic feet of gas per day.
The abbreviation for billion cubic feet equivalent.
The abbreviation for billion cubic meters.
The horizontal portion of an “I” beam pumping unit.
A well from which oil is lifted by using a pumping unit and sucker rods and pump.
Bed (Bed Rock)
A layer of rock, usually sediments, which is homogeneous in composition. One bed is separated from another by a bedding plane.
The addition built onto a cable tool derrick, which covered all the machinery to protect it from the elements.
A person receiving assets of an estate under the terms of the will.
Car with motor removed and pulled with horses in the 1930’s when there was no money to buy gasoline.
An aromatic hydrocarbon present to a minor in most crude oils. Some important products manufactured from benzene are styrene, phenol, nylon and synthetic detergents.
A gift made by a person’s will of real or person property.
An offer for an OCS lease submitted by a potential lessee in the form of a cash bonus dollar amount of other commitments as specified in the final notice of sale.
Petroleum in semi-solid or solid forms. A viscous, tar-like oil that requires non-conventional production methods such as mining or steam-assisted gravity drainage.
Crude oil or heavy fuel oil from the bottom of the refining process as opposed to “white” oil.
The technique of combining two or more petroleum liquids to produce a product with specific characteristics.
Nipple (pipe with threads at both ends) that can be blocked off from formation pressure and give a false pressure measurement.
The Bureau of Land Management.
An acreage sub-division measuring approximately 10 x 20 kms, forming part of a quadrant. E.g. Block 9/13 is the 13th block in Quadrant 9.
A contract with diverse owners of separately leased oil and gas tracts that enables an oil company to drill one or two test wells instead of one well per tract.
The numerical designation assigned to offshore lease and license tracts, or subdivisions of the tracts.
A plastics-forming process that uses compressed air to shape the final product by expanding it to fit the mold.
An uncontrolled flow of oil, gas, water or mud from a wellbore caused when drilling activity penetrates a rock layer with natural pressures greater than the drilling mud in the borehole.
Condensate and gas is produced simultaneously from the outset of production.
Blowout Preventer (BOP)
The equipment installed at the wellhead to control pressures in the annular space between the casing and drill pipe, or tubing during drilling, completion, and workover operations.
A method of equating oil, gas and natural gas liquids. Gas is converted to oil based on its relative energy content at a rate of six Mcf of gas to one barrel of oil. NGLs are converted based upon volume: one barrel of natural gas liquids equals one barrel of oil.
Slang term. To “fake” a report without having performed any work.
The cash consideration paid by a lessee to the owner of the leasing rights, usually upon execution of an oil and gas lease. May take other forms than cash, and some lessors, for tax reasons, may request partial payments the following year(s).
A pump system installed to maintain or increase pressure in pipelines so that liquids and gases keep flowing.
Barrels of oil per day.
The hole created in the earth when a well is drilled or bored.
To reach the objective depth in drilling a well.
The deepest part of the borehole.
The components, together as a group, that make up the lower end of the drill string – comprising the drill bit, drill collars, drill pipe, and ancillary equipment.
Money or property given to an operator for their use in drilling a well on property in which the payer has no property interest. The contribution is payable when the well reaches a predetermined depth, regardless of whether the well is productive or not. Usually, the payer receives geological data from the well.
The internal well pressure that is measured by an instrument lowered into the borehole.
The heavy portions, or fractions, or a crude oil that do not vaporize during distillation; the accumulation of sediments, mud and water in the bottoms of lease tanks.
A head, screwed into the top of the casing, used to confine gas in the well until release through an outlet into a pipeline.
A downhole tool (composed primarily of slips, a plug mandrel, and a rubber sealing element) that is run and set in casing to isolate a lower casing interval while testing an upper section.
Salt water frequently produced with oil.
A well used for injecting fresh water into geologic formation comprised mainly of salt. The injected freshwater dissolves the salt and is pumped back to the surface as a saturated sodium chloride brine solution used as a feedstock in petrochemical refineries and in oil and gas well drilling and workover stations.
British Thermal Unit (Btu)
A measure of the heat value of a fuel. One Btu is the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit.
One who acquires leases and does certain title work for an oil and gas company. A broker is generally acting on behalf of the company and is not an employee. Sometimes interchanged with landman.
See Basic Sediment and Water.
A corporation, limited liability company, joint-stock company, business trust, partnership, or association for business purposes of two or more individuals.
A butane derivative that is one of most widely used raw materials in the manufacture of synthetic rubber.
Refers usually to a mixture of isobutane and normal butane. A flammable, gaseous hydrocarbon, used as fuel.
A pipe connected around a valve or other control mechanism in a flow line for the purpose of maintaining flow during adjustments or repair work.
A substance obtained incidentally during the manufacture or production of some other substance.
Cable Tool Derrick
Had a square open tower, 70-100 feet and 20-22 feet square at the bottom, tapering to 5-7 feet at the top. The four heavy uprights that formed its corners were called “legs.”
A stratum of impermeable or non-porous roof rock.
A well capable of producing oil or gas in paying quantities.
The minute spaces, cracks or pores in rock through which hydrocarbon fluids move in response to natural forces.
Tightly closing a well so that oil or natural gas cannot escape.
The base of all hydrocarbons; capable of combining with hydrogen in almost numberless hydrocarbon compounds. The carbon content of a hydrocarbon, to a degree, determines the hydrocarbon’s burning characteristics and qualities.
A colorless, odorless, gaseous compound of carbon and oxygen (CO) that is a product of incomplete combustion.
An agreement between two or more working interests whereby one party (carried party) does not share in lease revenue until a certain amount of money has been recovered by the other party (carrying party). The carrying party pays costs applicable to the carried party’s interests in the property and is reimbursed out of the revenue applicable to the carried party’s interest.
The party for whom funds are advanced in a carried interest agreement.
The party advancing funds in a carrying interest agreement.
Carved Out Interest
An interest such as an oil payment or overriding royalty conveyed by the owner of a greater interest. Example: The grant of an overriding royalty out of working interest.
Carved Out Oil or Gas Payment
A payment in oil or gas assigned by the owner of a working interest or fee interest. The payment is expressed in dollars, in barrels, in MCF, or as a period of time, to be paid out of a fractional part of the fee interest or working interest. The payment will run for a period shorter than the life of the interest from which it was carved.
The cash money paid in return for a promise or an act such as the execution of an oil and gas lease, also called “bonus.”
Large steel pipe that is placed in the borehole to prevent it from collapsing and to prohibit the flow of drilling fluids into the borehole. Casing pipe is usually 30 feet long and sections are cemented in place by pumping cement into the space between the casing and borehole walls. There may be several strings of casing, one inside the other, in a single well.
The holes made in the liner of a finished well to allow oil or natural gas to flow into the production tube.
The time at which the well has reached the objective depth and the decision is made to either complete the well for production or to plug and abandon it.
Gas pressure in a well that is build up between the casing and tubing or casing and drill pipe.
The steel tubing that lines a well after it has been drilled. It is formed from sections of steel tube screwed together.
A fitting on the top of the casing in a producing oil and gas well that regulates oil or gas flow. It also helps separate oil from gas. See also Christmas Tree.
Natural gas produced in conjunction with the production of crude oil.
Liquid hydrocarbons separated from casinghead gas by the reduction of pressure at the wellhead or by a separator or an absorption plant.
Space between the surface casing and the production casing.
Man who ran cat head on the rig; this was before automatic hydraulics and tightening was done manually with ropes and wires. Spool shaped device attached to a winch around which rope is wound for hoisting and pulling.
The narrow walkway on a drilling rig or on top of a tank battery.
Substance that aids or promotes a chemical reaction between other substances, but does not, itself, enter into the reaction.
Refinery process using a catalyst whereby heavy gas oil is converted to about 50% gasoline and 50% gases and gas oil for recycling.
A hoisting or pulling line powered by a cathead; lifts equipment around the rig.
A hole in the ground 8-10 feet square and 6-20 feet deep, usually linked with planks, sometime concrete. The cellar is to provide space below the derrick floor for jointing and unjointing pipe and for valves and fittings.
The technique of pumping cement into the space between the casing and the well bore wall in order to hold the casing in place.
A range of exploration drilling scenarios from which the following activity levels, based on recent historical experience, are adopted as the central estimates.
Machine in which samples of oil are placed and whirled at high speed to break out sediment.
Certificate of Title
An abbreviated type of abstract wherein the abstractor reports his opinion as to the present owner(s) of the land, unreleased oil and gas leases, mineral or royalty conveyances, and outstanding liens or encumbrances.
Certification of Abstract
A certificate signed by the abstractor reciting that the abstract contains a full and complete abstract of all recorded instruments affecting the title to the described lands for the time periods covered by the abstract. See Abstract of Title.
A copy of an original document that is signed and certified as a true copy by a county clerk or the court clerk.
Certified Professional Landman (CPL)
A landman who has successfully completed the certification exam given by the American Association of Petroleum Landmen (AAPL).
Cessation of Production
The termination of production of oil and gas from a well. For legal purposes, cessation of production is either temporary or permanent. If considered permanent, this terminates the ordinary oil and gas lease.
Chain of Title
Recorded transfers (links) in title from patent to present.
Mineral interests situated in a checkerboard pattern. Generally, this is done to spread the risk or to make sure the producer will have some ownership if production is found.
A type of orifice installed at the surface on the tubing string to adjust and control the amount of oil or gas flowing from a well. It is customary to refer to the production of a well as so many barrels or thousands of cubic feed through a ¼ inch or ½ inch choke, or whatever the size of the opening. The flowing pressure exerted by the well’s production give an indication of the strength of the well and is helpful in determining whether a well is commercial.
A combination of gauges, valves, controls and pipe connections at the top of the casing on a flowing well that controls well flow and resembles a heavily-decorated Christmas tree.
Continuous pumping of drilling mud down through the drill pipe and drill bit and back up to the surface so that rock cuttings are moved away from the drill bit.
Descriptive of drilling muds returning to the surface without rock cuttings.
Clean Out Costs
Costs incurred to clean out a well to maintain its productive capacity or to restore it to original capacity. For example, the cost of removing sand and tubing or opening the pores in the producing formations.
Accounts used to accumulate expenses during a period, with the balance allocated to other accounts on some predetermined basis as the end of the period.
Water passed through the compressor water jackets and out through the cooling water pumphouse. This system had a chromate anticorrosion treatment added to it. Chromate was added as necessary through a pot in the cooling water pumphouse.
Descriptive of a well that is capable of producing, but is not producing at this time.
Cloud on a Title
A claim or encumbrance that, if upheld by a court, would impair the owner’s title to the property.
Compressed Natural Gas.
A fossil fuel formed by the breakdown of vegetable material trapped underground without access to air.
A methane-rich, sulfur-free natural gas contained with underground coal beds.
Coalbed Natural Gas
An unconventional gas resource that is present in certain coal deposits.
An amendment or supplement to a will executed with all the formalities of the will itself. When inconsistent with the provisions of the will, a properly executed codicil takes precedence over the language of the will.
The simultaneous production of electricity and steam from a single process, which requires up to one-third less fuel than separate production.
A long, small diameter pipe flexible enough to be stored on and deployed from a large, truck-mounted roll. Used to replace jointed pipe in certain types of drilling, completion, and workover operations.
Hard carbon and other crude oil impurities that can form inside furnace tubes.
An oil and/or gas field judged to be capable of producing enough net income to make it worth developing.
A well capable of making a profit over the cost of drilling, equipping, completing, and operating it. In some instances, the term means merely a well with sufficient production to cover current operating expenses, without regard to original drilling costs. See Production in Paying Quantities.
Gas from two or more sources which is combined into a single stream.
(1) Combining production from more than one zone in one well or lease in the same storage tank. For accounting purposes, it is often necessary to meter the production from each zone, well, or lease before it enters the tank. (2) Mixing married persons’ separate property which then causes the property to become community property.
An installation, serving two or more leases, which provides services such as gathering, separating, treating, and storing more economically than could several smaller facilities.
A system of law based on court decisions, or judicial precedent, rather than on legislated statutes or executive decrees. Common law began in England and was later used in English colonies. It is still applied in most of the United States; however, Louisiana operates under the Napoleonic Code. Also called Stare Decisis.
A pool or accumulation of oil or gas that is produced in more than one well.
Common Source of Supply
An underground reservoir containing a common accumulation of oil or gas, or both. Each zone of a general structure, which zone is completely separated from any other zone in the structure, is covered by the word “pool” or “common source of supply.”
The act of unitizing federal leases. Federal leases must be communitized because they contain no pooling authority.
An agreement approved to allow separate tracts to be developed and operated in conformity with an established well-spacing or well development program. This type of agreement is necessary whenever the proposed unit contains any or all Federal leases.
A single lease covering two or more separately owned tracts of land.
Property jointly owned by the husband and wife. Unless otherwise set out, all property is considered to be owned jointly in a community property state. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, and Texas all have some type of community property laws. See Estates in Land.
Payments to royalty owners as compensation for losses in income due to failure to adequately develop a lease. See Offset Royalty.
Completion of a Well
The installation of permanent production equipment in order to begin delivery of crude oil.
Increasing the pressure of gas by mechanical means.
An engine used to increase the pressure of natural gas so that it will flow more easily through a pipeline.
The bringing together, as required by law or valid order or regulations, of sufficient separately owned small tracts to qualify for granting of a well permit. Now available in 31 states.
The bringing together, as required by law or valid order or regulation, separately owned tracts into a unit constituting all or some portion of a producing reservoir and the joint operation of such unit.
Usually used in foreign operations and refers to a large block of acreage granted to the operator by the host government for a certain time and under certain government conditions which allows the operator to conduct exploratory and/or development operations. The Concession Agreement assures the holder of certain rights under law.
Hydrocarbons which are gaseous under the reservoir pressure but become liquid at atmospheric pressure and temperature.
Water originally in the producing formation.
Regulation of oil and/or gas production from a reservoir in order to prolong its life and hopefully recover a larger quantity or the oil or gas in place; reinjection of associated gas for future use.
A group of unrelated companies acting together in a specific venture.
A zone separating the emergent continents from the deep sea bottoms.
A broad, gently sloping, shallow feature extending from the shore to the continental slope.
A relatively steep, narrow feature paralleling the continental shelf; the region in which the steepest descent of the ocean bottom occurs.
Any interest in mineral property that lasts for the entire period of the lease contract with which it is associated.
Continuous Drilling Clause
A lease clause which provides that a lease may be kept alive during or after the expiration of the primary term without production by drilling operations (of the type specified in the clause) being continuously pursued. In the case of a farmout, such a clause provides that a farmee has the right to earn acreage under the farmout agreement (sometimes each well must be productive) by the drilling of additional wells and generally under a certain time frame.
An interest which is convertible into an interest of another kind. Example: An overriding royalty which may be converted into a working interest.
To transfer title to property from one party to another, usually by means of a written instrument.
An instrument that transfers title to property. The term includes, but is not limited to, deed, assignments, and gifts.
Simultaneous ownership of realty by two or more persons. Owners may have survivorship (the survivor owns it all) if a joint tenancy. If owners are tenants in common, there is no survivorship. See Estates in Land.
A polymer manufactured from two or more different monomers. An example is butadiene-styrene.
Drilling was done in a predetermined pattern over an area with petroleum potential. A study of the core samples made it possible to construct a graphic log from each core and correlate the strata by their physical characteristics and the fossils contained. Core drilling was an expensive way to map out an area and at times was not always reliable due to the faulted geological formations in the foothills. At this time the geologists were unfamiliar with the landmarking of strata in the samples and made identification mistakes.
Taking rock samples from a well by means of a special tool – a “core barrel.”
A legally-chartered separate business entity that acts similarly to a person in conducting business and owning property. Corporations are created under state corporation acts and their legal instruments must be executed by the corporate President or Vice-President and attested by the Secretary or Assistant Secretary, or by a duly authorized officer or other person under a power of attorney.
A minerals owner’s rights to capture oil and gas existing under a particular property and also beyond the property line. He or she has the “correlative” right to drill and produce oil and gas that might flow toward wells on adjacent land that produce from the same accumulation. There are generally two aspects of the doctrine of correlative rights: (1) as a corollary of the rule of capture, each person has the right to produce oil or gas from his or her land and capture such oil or gas as may be produced from his or her well, and (3) a right of the landowner to be protected against damage to a common source of supply and a right to a fair and equitable share of the source of supply.
Continental Offshore Stratigraphic Test. These tests under the direction of the Minerals Management Service are wells deliberately drilled to provide geological information pertinent to competitive bidding for offshore tracts.
The limit placed on the “carrying value” or mineral assets in the cost center.
The geological, geographical, or legal unit with which costs and revenues are identified and accumulated. Examples are the lease, the field country, etc.
Ownership under which two or more owners have joint title to a property. Governed by state laws.
A promise to do something. Under the lease, there are two types of covenants: (a) stipulated – set out in the lease, (b) implied – interpreted by good business and the courts to be present in the lease whether written out or not. Implied covenants include fully developing the property, diligence in marketing of the production, etc.
A person or company joined with others in a particular venture.
Refinery process whereby large, heavy, complex hydrocarbon molecules are broken down into simper and lighter molecules in order to derive a variety of fuel products.
A large barge, capable of lifting heavy equipment onto offshore platforms. Also known as a “derrick barge.”
A somewhat unscientific method of well-site determination based on the gross natural features of the earth’s surface. The bend of a creek is sometimes believed to indicate a fault or structural trap beneath the surface.
Cross Section Mapping
Maps of cross-section of underground formation.
A multiple assignment of property interests whereby the assignor also receives an assignment from the assignee. Example: “A” assigns to “B” and “B” in turn, assigns to “A.”
Mixture of hydrocarbons that are liquid under reservoir conditions of high pressure and temperature, and remain liquid at atmosphere pressure and temperature. Also simply called “crude.”
Technique utilizing extremely low temperatures to produce natural gas liquids from a raw gas stream.
A standard unit used to measure quantity of gas (at atmospheric pressure); 1 cubic foot = 0.0283 cubic meters.
The documents and/or information gathered to make clear the title to a piece of property.
Once any payment in a series of payments generated from an owner’s interest in unclaimed property has been held for the requisite abandonment period, all subsequent payments due to and held for that owner (the so-called current balances funds) are presently reportable as unclaimed property. Some of the payments may not have been held for the full abandonment period.
Chips of rock that are produced when the drill-bit grinds through the earth’s formations. The cuttings are circulated up to the surface and examined under ultraviolet light for porosity and evidence of hydrocarbons, or “show” of oil.
The cyclic form of hexane; used as a raw material in the manufacture of nylon.
Daily Drilling Report
Twenty-four hourly report indicating all important events which occurred on drilling rig.
Payments made to the landowner by the oil or gas operator for damages to the surface to the growing crops, to streams, or to other assets of the landowner.
Day Rate Contract
An agreement between a drilling rig contractor and an operator wherein an agreed amount of money per day will be paid to the drilling contractor until a well is drilled to an agreed upon depth.
Increasing production capacity of existing facilities through the modification of existing equipment to remove throughput restrictions. Generally increases capacity for a fraction of the cost of building new facilities.
A deceased person.
A unit formed by the lessee acting under the provision of a pooling clause in a lease or other instrument.
To remove from service.
Dedicated (Contracted) Owner
Any interest owner in an oil and gas well who is a party to a contract for the sale of gas produced from that oil or gas well.
A written document transferring ownership in a piece of property.
Deed of Trust
A deed conveying title to a trustee made to secure a loan. Deeds of trust are widely used by banks to secure real estate loans. Threes parties are involved: (1) Grantor (the land owner-borrower), (2) Trustee (person receiving the Deed of Trust), and (3) the lending institution (beneficiary of the Deed of Trust).
To increase the distance below a specified reference datum.
In offshore areas, water depths of greater than 600 feet.
A lease bonus payable in installments over a period of years. The deferred bonus is distinguishable from delay rentals because the deferred bonus payments are due even if the lease is dropped, whereas delay rentals are discontinued with the dropping of the lease. It is also known as an “installment bonus.”
Delay Rental Division Order
A document giving instructions to the owner of a lease concerning the payment of delay rentals to persons having an interest therein.
The payment made to the lessor for the privilege of continuing the lease without drilling on it. This payment is usually made annually if drilling does not take place. Failure to pay delay rentals by the anniversary date can cause the lease to terminate.
A well drilled just outside of the proved area of an oil gas reservoir in an attempt to extend the known boundaries of the reservoir.
Each working interest owner pays his or her royalty owners only when the working interest owner markets his or her share of production. No out-of-pocket loss revenue is realized by the working interest owner.
A collective term for the sum of proved and indicated reserves.
The exhaustion of a natural resource by actual extraction of the mineral or gas, etc. The decrease in value (of mineral or gas rights, timberland, etc.) caused by production operations.
The bank to which payment of delay rental or other sums may be paid to the credit of lessor or his successors in interest.
A specification of the depth below the surface of the ground from which production can be taken. Limitations should be shown on division orders and transfer orders. All leases or conveyances should be checked for limitations.
A frame tower that supports drilling equipment.
Takes care of the big pumps to circulate the mud, also works in the derrick racking pipe when tripping in or out of the hole.
Descent of Property
Hereditary succession. Succession to the ownership of an estate by inheritance, or by any act of law, as distinguished from “purchase.”
Processes by which sulfur and sulfur compounds are removed from gases or petroleum liquid mixtures.
An intensive geological and geophysical exploration of an area of interest.
The phase in which a proven oil or gas field is brought into production by drilling production (development) wells.
A well drilled to a known producing formation in a previously discovered field, as distinguished from a wildcat, or exploratory test , and offset well.
A well drilled at an angle from vertical.
That part of a will that leaves real property.
A person who receives property under the terms of a will.
Removing wax build up in well, which prevents flow or production of well.
Furthest distance between two points on a proration unit.
Diamond tipped bits used on cable rigs for drilling very hard rock.
A mass of rock, usually salt, which has come from a slightly deeper part of the earth’s surface by piercing through overlying layers of sediment through a zone of weakness.
The light oil used in diesel and other compression-ignited engines.
Dilution of Interest
Contract sale of natural gas at the wellhead by a producer to an end user or local distribution company (LDC), usually for a term of a year or longer. Either the producer or purchaser pays the pipeline company for transportation, depending on the point of title transfer.
Intentionally drilling a well at an angle from the vertical.
A find of significant quantities of gas or oil.
Date assigned to discovery of a new field.
Well used for disposal of saltwater into an underground formation.
Gas that can be produced or shut-in at the discretion of the operator. Generally does not include casinghead gas or gas subject to drainage.
A well through which salt water is pumped to subsurface reservoirs.
Natural gas mixed with crude oil in a producing formation.
The distillate or middle range of petroleum liquids produced during the processing of crude oil.
The first stage in the refining process in which crude oil is heated and unfinished petroleum products are initially separated.
Division of Interest (DOI)
An instrument used to indicate the division of various owners’ interests in a particular property. The type of interest (royalty, overriding royalty, or working) is included and interest is shown in decimals and/or fractions.
A document that directs the purchaser to pay the named interest owners for oil and gas in the proportions specified in a particular well. Division orders include the name of the property, name of operator, effective date of the division order, legal description, decimal interest and type of interest. Often division orders contain other clause so see NARO information on Division Orders before signing. A division of interest can usually be submitted instead of a division order.
Division Order Title Opinion
A statement of opinion by a title examiner on the state of the title to land, mineral, royalty, or working interests in a producing tract of land. This opinion, usually in letter form, is the basis of payment to all affected owners and must recite all the owners’ interests. It is generally prepared after production has been obtained in a well. Compare drill site title opinion, title opinion.
U.S. Department of Energy.
A small house on the rig floor used for keeping records, storage, etc.
A roughly symmetrical upfold of the layers of rock in which the beds dip in all direction s more or less equally from a common point; any deformation characterized by local uplift and approximately circular in outline; e.g. the salt domes of Louisiana and Texas.
An individual’s permanent home or principal establishment. Residence is not necessarily the same as domicile since a person can have many addresses but has only one legal domicile, or home address to which he intends to return for prolonged periods. A business domicile is the address where the establishment is maintained or where the governing power of the enterprise is exercised. For tax purposes, it is often a principal place of business.
Two lengths or joints of drill or other pipe joined together.
a term used to describe tools, equipment, and instruments used in the wellbore, or conditions or techniques applied to the wellbore.
Downhole Safety Valve
A valve fitted into the production tubing of a well some distance below the surface. The valve can be closed in a emergency to stop the flow of oil and gas.
The oil industry term used to refer to all petroleum activities from the processing of refining crude oil into petroleum products to the distribution, marketing, and shipping of the products. The opposite of downstream is upstream.
The hoisting mechanism in a drilling rig for handling the drilling tools.
The piece of drilling equipment that rotates to break up rock and soil.
Devices made of extra-heavy steel tubing mounted just above the drill bit to maintain pressure on the bit and keep the drill string in tension.
The small pieces of rock created as a drill bit moves through underground formations while drilling.
Heavy, thick walled, hollow steel pipe used in rotary drilling to turn the drill bit and to provide a conduit for the drilling mud.
Drill Site Title Opinion
The written statement of opinion from a title examiner on the status of the title to a drill site, usually in letter form. This is generally prepared in preparation of drilling the well to assure title. Compare division order opinion, title opinion.
Drill pipe in rotary drilling, or solid shaft in cable tool drilling, to which the bit is attached.
The long assembly of drill bit, drill collars and many lengths of pipe that is turned by the rotary table and cuts through the rock.
The act of boring a hole (1) to determine whether minerals are present in commercially recoverable quantities and (2) to accomplish production of the minerals (including drilling to inject fluids). There are three types of drilling: exploratory – drilling to locate probable mineral deposits or to establish the nature of geological structures; such as wells may not be capable of production if minerals are discovered; developmental – drilling to delineate the boundaries of a known mineral deposit to enhance the productive capacity of the producing mineral property; and directional – drilling that is deliberately made to depart significantly from the vertical.
A person or company whose business is drilling wells. Wells are drilled on several contract specifications: per foot, day rate, or turnkey (that is, upon completion). Most major oil companies do not own drilling rigs. Exploration and development is contract. Personnel manning the rigs work for the contractor.
Any work or actual operations undertaken or commenced in good faith for the purpose of carrying out any of the rights, privileges, or duties of the lessee under a lease.
In those states that regulate well spacing, the authorization from the regulatory agency to drill a well.
An offshore platform used to drill exploration and development wells but lacking the processing facilities of a production platform.
A drilling unit that is not permanently fixed to the seabed, e.g. a drillship, a semi-submersible or a jack-up unit. Also means the derrick and its associated machinery.
The turning device on the derrick floor in which the drill sting is held and rotated. Also called a rotary table.
A ship fitted with a drilling derrick that is used to drill in waters that are too deep for jack-up rigs and semi-submersible rigs.
Gas that contains a negligible amount of water vapor or does not contain dissolved liquid hydrocarbons.
A completed well which is not productive of oil and/or gas (or which is not productive of oil and/or gas in paying quantities).
Dry Hole Contributions
Money or property paid by adjoining property owners to another operator drilling a well on property in which the payors have no property interest. Such contributions are payable only in the event the well reaches an agreed depth and is found to be dry.
The completion of a well into two separate producing formations at different depths, so that each zone is produced simultaneously.
An exploratory well that finds petroleum in two separate reservoirs.
Prudent examination and analysis by accountants, engineers, landmen, and attorneys of title, environmental representatives, warranties, and indemnities in acquisitions and sales of oil and gas properties.
Due Diligence (as it relates to Unclaimed Property)
Furnishing written notice to the apparent owner of unclaimed property (held by the holder at the time prescribed by law) prior to the holder including the name of the apparent owner on an unclaimed property report to a particular jurisdiction. Some jurisdictions have a monetary threshold exempting small amounts from the due diligence requirements.
1. Court generally deals with the problem of overconveyance by warranty deed
by deducting the overconveyance from the grantor’s interest, to the extent that is
possible. Grantor and a third party each owned 1/2 mineral interest. Grantor
conveyed the land to a grantee reserving 1/2 of the minerals. Grantee gets 1/2
and the third party gets 1/2 leaving the grantor with nothing, because all he had
was 1/2. To protect himself, deed should have said reserving 1/2 of the minerals
subject to the third party’s 1/2 mineral interest. (TX, CO, OK, NM, WY, LA, MS.
AL, AR). Also triggers the doctrine of acquired title – estopped from saying still
own minerals after you convey them to someone.
2. A rule of title interpretation developed to deal with the common problem of
overconveyance of fractional interests by giving priority to the granted interest
over the reserved interest. Duhig v. Peavy-Moore Lumber Co., Inc., 144 S.W.2d
878 (Tex. 1940). The rule is not accepted in all states and is generally limited to
conveyances by warranty deed.
Back-up man held rope while the cathead man spun the tongs to tighten drill stem or cable rig.
A dry hole, no oil or gas found.
Exploration and appraisal.
Exploration and production. The “upstream” sector of the oil and gas industry.
A right given to a non-owner of the land for a specific purpose; i.e., an easement to lay a pipeline from a well, cross the land with a road, etc. It can be permanent or temporary. Most oil and gas leases have been interpreted to include an implied easement to use as much of the surface as is reasonable and necessary to explore and develop the oil and gas. Many leases also include express easements.
An economic interest is possessed in every case in which the taxpayer ahs acquired by investment any interest in mineral in place and secures, by any form of legal relationship, income derived from the extraction or the mineral to which one must look for a return on the capital.
Economically Recoverable Resource Estimate
An assessment of hydrocarbon potential that takes into account (1) physical and technological constraints on production and (2) the influence of exploration and development costs and market price on industry investment in OCS exploration and production.
Waste liquid, gas or vapor that results from petroleum and chemical processing.
See Electronic Funds Transfer.
Electric Logging Tool
A tool attached to a cable which is lowered into a well to survey the borehole before it is cased. An electrical impulse is emitted which is reflected from the rock strata. The degree of resistance to the current allows geologists to determine the nature of the rock penetrated by the drill and some indication of its permeability, porosity, an content (gas, oil, or water).
Electrical Well Log (Electric Log)
An electrical survey of an uncased hole which reflects the resistivity of rock strata to electrical current of the spontaneous potential (S.P.) of the rock.
Electronic Funds Transfer (EFT)
A method of depositing funds electronically to owner’s bank or savings account.
Right to take privately owned land for public use.
A lease clause for the benefit of the lessee to make it clear to lessors, or subsequent transferees of the lessor, that inside property lines created by later divisions of the fee ownership or by royalty conveyances will not affect the lessee’s duties of development and operation (i.e., especially will not add additional burdens or obligations).
An interest owner’s share of production. This volume (quantity) may not equal actual sales due to contractual or market conditions.
Each royalty owner is paid monthly for their pro rata share of production just as if the working interest owner who holds the lease were marketing his or her share of production. These are out-of-pocket payments by the working interest owner because he or she is paying the full royalty each month while not selling any gas. The working interest owner will get paid back when he or she begins to market his or her share of gas, plus make-up gas at a later date.
Entitlement vs. Deliveries
The philosophical approach as to the proper way to pay royalty owners when one or more working interest owners are not marketing their share of production.
Environmental Impact Statement
A statement required by the National Environmental Policy Act of 1969 (NEPA) or similar state law in relation to any action significantly affecting the environment, including certain exploration and drilling activities.
EOR – Enhanced Oil Recovery
The use of certain methods such as water flooding or gas injection into existing wells to increase the recovery from a reservoir.
A right to the benefits of property recognized by and enforceable only in a court of equity; not to be confused with legal title.
The removal or dissolution of parts of the seabed by bottom currents, particularly those by storms. Transportation by currents of the removed material can result in significant movement of masses of sand, silt and mud on the sea floor. This migration of sediment can “strand” drilling platform supports of wellhead plumbing by erosion of the surrounding support sediments.
Proceeds due to parties, (generally royalty owners in the petroleum business) which are reverted to the state because owner cannot be located or ownership cannot be determined. Each State’s escheat guidelines vary.
A decedent’s property at the time of his or her death.
Estates in Land
The various types of land ownership are known as estates in land, the most common being: Fee Simple Life Estate Term of Years Co-ownership (co-tenancy) Community Property Separate Property
Estoppel By Deed
See After-Acquired Title Doctrine.
Latin abbreviation used to mean “and others.”
Latin abbreviation used to mean “and wife.”
Latin abbreviation used to mean “and husband.”
A colorless odorless gaseous hydrocarbon with the characteristics of predominant molecule, CH3CH3.
Basic chemical used in the manufacture of plastics, antifreeze and synthetic fibers.
Expected Ultimate Reserves – The estimated cumulative volume of oil and gas reserves that will be recovered during the life of a well or field in a particular reservoir.
The amount of gas that is in excess of the amount of gas that a first purchaser is required to take on a month to month basis. (Example: Operator A dedicates its gas to Pipeline Purchaser B. Pipeline Purchaser B negotiates an agreement with Operator A to release any gas that is unable to purchaser on a month to month basis as allowed by the gas allowables which are regulated by state agencies. Operator A can then negotiate to sell the excess gas to another pipeline purchaser).
Generally referred to the portion of royalty in excess of a “normal (one-eighth) royalty interest (i.e. 1/16th of a 3/16th royalty).
Exclusive Economic Zone (EEZ)
An area contiguous to the territorial sea of the United States, the Commonwealth of Puerto Rico, the Commonwealth of Northern Mariana Islands, and the U.S. overseas territories and possessions and extending 200 nautical miles from the coastline.
Exclusive Leasing Power
See Executive Right.
To complete a legal instrument by the required actions – for example, by signing and delivering the instrument. Execution includes the actual delivery of the signed document to the named grantee, lessee, or assignee.
The power to execute an oil and gas lease on an interest from which the lessor does not usually derive some or all of the usual lease benefits (bonus, rents, royalty). The interest subject to the power is called a “non-participating royalty” if the benefit to accrue under the lease is royalty only; or a “non-executive mineral” if the benefit to accrue under the lease includes bonus or delay rental with or without a further interest in the royalty.
A person or entity named in a will to administer the estate or carry out the terms of the will. The function of the executor is to see that all estate debts are paid and to distribute the property as set out in the decedent’s will. Also called executrix, administrator or personal representative.
The term for a female executor. Also called administrator or personal representative.
An official transcript of a document from public records, made in form to be used as evidence and authenticated as a true copy. Also called “authenticated.” Also see certified copy.
Expense Bearing Interest
A property interest in oil and gas that is subject to the expense of production, such as a working interest or an unleased mineral interest under a well or unit.
Expense Free Interest
A property interest in oil and gas that does not share in the burden of drilling or production expense. Royalty, overriding royalties, oil payments, production payments, net profit interests, and carried working interests are ordinarily expense-free interest, but are subject to production and ad valorem taxes.
Various methods of optimizing oil and gas production or establishing additional reserves from producing properties through additional drilling or the application of new technology.
Engineering related to subsurface geology, the recovery of fluids from reservoirs, and the drilling and development of oil reserves.
The process of searching for minerals preliminary to development. Exploration activities include (1) geophysical surveys, (2) drilling to locate an oil or gas reservoir, and (3) the drilling of additional wells after a discovery to delineate a reservoir. It enables the lessee to determine whether to proceed with the development and production.
Costs incurred in identifying areas that may warrant examination, and in examining specific areas, including drilling exploratory wells and exploratory stratigraphic type test wells.
Drilling carried out to determine whether hydrocarbons are present in a particular area or structure.
A license to explore for oil or gas in a particular area issued to a company by the governing state.
The phase of operations which covers the search for oil or gas by carrying out detailed geological and geophysical surveys followed up where appropriate by exploratory drilling.
A structure used to carry the equipment needed for exploratory drilling.
Permission granted by landowners allowing others to enter upon their property for the purposes of conducting geological and geophysical surveys.
Exploratory Test Well
A well drilled in unproven or semi-proven territory for the purpose of ascertaining the underground presence of a commercial petroleum product.
The reduction in volume and energy content of natural gas resulting from the removal of natural gas liquid.
When a company acquires an interest in a block by taking over all or part of the financial commitment for drilling an exploration well.
An agreement between working interest owners whereby the owner (farmor) not wanting to drill a property agrees to assign all or part to another working interest owner (farmee) desiring to drill; farmee assumes the obligation to drill one or more wells on the property to earn the assignment.
A break in the earth’s crust along which a non-porous layer of rock may be next to an oil-bearing reservoir.
Ownership of both mineral sand surface rights on a tract of land. Also called fee simple.
An estate of inheritance without limitation. This form of estate is not qualified by any other interest and, upon the owner’s death, passes unconditionally to the heirs. See Estates in Land.
Fee Simple Absolute
An estate limited absolutely to a person and to his or her heirs, and assigns forever, without limitations, as to who may inherit.
Crude oil, natural gas liquids, natural gas or other materials used as raw ingredients for making gasoline, other refined products or chemicals.
Feet of Pay
The thickness of a well’s productive formation.
Federal Energy Regulatory Commission.
(1) A person in a position of trust with respect to another’s property. (2) A person who serves, with or without bond, to act for the benefit of another in all matters connected with a specified undertaking, i.e., fiduciary obligations exist between trustees and beneficiaries of a trust. A term used to refer to the executor or administrator.
(1) A specified geographic area underlain by one or more reservoirs. (2) An oil or gas accumulation with commercial production, or the land area associated with the wells in that accumulation. The size of a field varies.
Field Exploratory Well
A well drilled in an area where there was previous production, but outside the limits of the known reserves. It is also known as a delineation well.
Oil and gas production equipment serving more than one lease. For example, separator, extraction unit, etc.
Estimate of the producing capacity of a field during a 24-hour period.
Treating oil and gas before it is delivered to a gas plant or refinery.
Spacing and production rules for the common reservoir in an area.
A court ruling detailing the distribution of assets of an estate.
An earthen dike built around an oil tank to contain the petroleum if the tank ruptures.
Finding and picking up equipment accidentally dropped in a well.
An open flame used to burn off unwanted natural gas.
The steel structure on an offshore rig or at a processing facility from which gas is flared.
Floating Production, Storage and Offloading Unit
FPSO, a moored tanker-type vessel used to develop an offshore oil field. Oil is stored within the FPSO until offloaded to a tanker for transportation to a terminal or refinery.
A secondary recovery method used to increase production in an existing oil field. Water is injected into wells around a field’s perimeter so that a pressure front is created that flushes the oil to the center of the field.
A record of the production of gas measured by a meter.
The surface pipes through which oil moves from the well to the lease tank.
The tank into which oil is stored after being produced.
A piece of equipment which separates oil and gas, heats oil, and treats oil and water.
A well which lifts oil and gas to the surface with natural reservoir pressure.
Pumping fluid into a producing formation to increase or maintain reservoir pressure and, thus, production.
The large flow of production initially made by a well after being drilled.
Footage Drilling Contract
A well drilling contract which provides for payment at a specified price per foot for drilling to a certain depth.
Forby of Fable Board
Similar to Monkey Board. Different way of pipe racking.
(1) A clause in a lease stating that the conditions which prevent the lessee from complying with the terms of the lease shall not cause automatic termination of the leasehold estate and that the performance of the lessee’s covenants shall be excused when such failure of production or performance of covenants is due to causes specified in such clause. It is normally set out as “Acts of God, fire, flood, etc., reasonably beyond the control of the lessee. (2) Force Majeure literally means “greater force”. These clauses excuse a party from liability if some unforeseen event beyond the control of that party prevents it from performing its obligations under the contract. Typically, force majeure clauses cover natural disasters or other “Acts of God,” war, or the failure of third parties–such as suppliers and subcontractors–to perform their obligations to the contracting party. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party. When negotiating force majeure clauses, make sure that the clause applies equally to all parties to the agreement. Also, it is helpful if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, and other major events that are clearly outside a party’s control. Inclusion of examples will help to make clear the parties’ intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.
The right granted under the state regulatory body for a company to include adjacent tracts in its unit, even if the company owning the lease on that tract does not want to be included or the individual owner of the tract does not want to lease. This is only granted when the regulatory agency deems it is in the best interest of conservation. Under a pooling order, certain payments are due the owners of force pooled tracts.
When a decedent owned an asset in one state, but the decedent’s will was probated in another state (i.e., the decedent owned oil royalties in New Mexico, but his will was probated in Oklahoma).
Long handled tool used to tighten pipe joints on a Cable rig.
A layer of rock with distinct features such as texture or mineral composition. The thickness of a formation can range from a few feet to several hundred feet.
The reduction in permeability in reservoir rock due to the infiltration of drilling or treating fluids into the are adjacent to the wellbore.
The pressure at the bottom of a well when it is shut in at the wellhead.
Salt water underlying gas and oil in the formation.
Fuels (coal, oil, natural gas, etc.) that result from the compression of ancient plant and animal life formed over million of years.
High pressure or explosive method of fracturing rock formations.
Oil injected into a well in a fracturing operation which may then be recovered through subsequent production. Also “load oil.”
The division of mineral interest from one to many owners resulting in a smaller share for each owner. The diluted royalty becomes an administrative burden for marginal wells which often makes it economically impossible for the operator to continue to produce the well. Same as Dilution of Interest.
A tall tower, fitted with perforated trays, in which fractional distillation of crude oil or its products is carried out.
The process of breaking natural gas liquids into component parts; e.g. methane, ethane, propane, butane, pentane, and heavier hydrocarbons.
The pumping of crude oil, diesel, water, or chemical into a reservoir with such force that the reservoir rock is broken and results in greater flow of oil or gas from the reservoir.
Free Well Agreement
A form of sharing arrangement in which one party drills one or more wells completely free of cost to a second party in return for one type of economic interest in property.
Fuel and Shrinkage
The difference between the amount of gas produced at the wellhead and the gas that enters a pipeline that can be associated with providing energy to on lease equipment or removal of solution gas. The losses include but are not limited to those from the separation process and field use, as well as fuel, flare gas and plant liquids extraction.
Oil that is heavy-distilled in the refining process. Frequently used for supplying energy to power stations and factories.
A concept under which all costs incurred in searching for, acquiring, and developing oil and gas reserves are capitalized.
Full Share of Gas
The amount of an owner’s gas determined in accordance with the provisions of the Operating Agreement’s leasehold/billing interest.
Full Well Stream
The production from a well as it emerges from the mouth of the well and prior to any separation of the stream’s components.
An obligation to buy or sell a specific quantity of oil or gas at a specified price in a particular month. Futures contracts for crude oil were introduced in 1985 by the New York Mercantile Exchange (NYMEX), and in 1990 for natural gas.
An agreement for the sale of gas by working interest owners to the pipeline or gas plant.
A field containing natural gas but no oil.
A secondary recovery method wherein dry natural gas or carbon dioxide is injected into an oil reservoir to increase pressure around the injection well and, thus, increase flow and oil production from nearby wells.
Gas Lift Gas
Gas is injected into a formation to maintain pressure of for secondary recovery. Reproduced injected gas cannot usually be distinguished from the original formation gas.
Avoidably lost natural gas which is flared or vented.
A medium-distilled oil from the refining process. Often used in diesel fuel.
A production payment payable out of gas produced.
Gas Plant Products
Natural gas liquids removed from natural gas in gas processing plants or in field facilities.
Gas Processing Plant
A plant which extracts liquefiable hydrocarbons or sulfur from natural gas and/or fractionates a liquid stream.
The total original proven recoverable gas in place in a formation, which been proven by production, underlying a lease or unit well.
A well producing natural gas.
The light fuel used to spark ignition engines in cars. Modern gasolines are blends of petroleum liquids that are produced in several different processes are generally contain additives.
The conversion of natural gas to a liquid form so that it can be transported easily. Typically, the liquid of converted back to natural gas prior to consumption.
Includes any pipeline, truck, motor vehicle, boat, barge, or person authorized to gather or accept oil, gas, or geothermal resources from lease production or lease storage.
A small pipeline which moves the oil from several wells into a single tank battery or major pipeline.
A form on which the measurement of oil in lease tanks is recorded.
Geographic Information Systems (GIS)
A computer system capable of assembling, storing, manipulation, and displaying geographically referenced information.
Geological and Geophysical (G&G)
Surveys of topographical, geological, and geophysical nature along with other costs incurred to obtain the rights to make these surveys, and salaries and other expenses of the personnel required to carry out the surveys are often referred to as “G&G” costs.
Geothermal Energy and Associated Resources
(A) All products of geothermal processes, embracing indigenous steam, hot water and hot brines, and geopressured water; (B) Steam and other gases, hot water and hot brines resulting from water, gas or other fluids artificially introduced into geothermal formations; (C) Heat or other associated energy found in geothermal formations; and (D) Any by-product derived from them.
Geothermal Resource Well
A well drilled within the established limits of a geothermal field.
A deed conveying an interest for which the consideration is “love and affection” or similar consideration. A Quitclaim Deed is often used for this type of transfer.
GOR or Gas-Oil Ratio
The number of cubic feet of gas produced per barrel of oil produced. A well may be classified loosely according to its GOR.
Early form of wrapping pipe which utilized gunny sacking material with molten tar, usually by hand.
To give title or some interest by deed or other instrument to another.
The person to whom the grant is made.
Clause in an oil and gas lease that specifies the rights and interests granted by the lessor to the lessee. Other types of documents also have granting clauses.
The person making the grant.
A standard American Petroleum Industry scale which is related to a specific gravity of a petroleum fluid based on a technical formula. On this scale, the greater the density of the petroleum, the lower the API degree. The higher the API gravity, the greater the value of the oil.
Gravity (Specific Gravity)
The measure of oil density that is used in price determination.
An instrument measuring the variations in the gravitational pull.
The total number of acres in a tract or unit for either surface or mineral acres.
As used in connection with gas volumes, the total quantity produced, including reproduced gas lift or injected gas. Often referred to as “total gas produced.”
Total value of hydrocarbon prior to deduction for the expenses or taxes.
Gross Working Interest (GWI)
A working interest owner’s total ownership in production, before deduction of related royalty, overriding royalty, or production payment interest. See Working Interest.
The minimum amount of royalty income a royalty owner is to receive under the terms of the lease agreement, regardless of the royalty owner’s share of actual proceeds from the sale of production. See minimum royalty.
A person appointed by the court to look after a person and the property interest of that person who is either a minor or who has been judged to be unable to rationally handle his/her own affairs. A guardian cannot lease without court approval.
An oil well that comes in under such pressure that it spurts oil up the casing, jams the tools in the hole and “out of control” of the drilling crew.
The clause in a deed or lease setting forth the duration of the grantee’s or lessee’s interest in the premises. The period of time set out is often called the primary term.
HBP – Held by Production
An oil and gas property which remains under lease past the primary term of the lease as long as there is production in “commercial” or “paying quantities” from the property. See Commercial Well.
High-density polyethylene. Used in the manufacture of plastic items, such as plastic pipe, grocery bags, water coolers, and milk bottles.
A pipe within a pipe to allow temperature contact between the circulating water and the cooling water without mixing them.
Thick, black substances that remain in refinery stills after all lighter fractions have been processed out of the feedstock.
Crude oil of 20 degree API gravity or less; often very thick and viscous.
A financial contract entered into to manage commodity price risk.
Person receiving assets of an estate under the terms of the will. One who inherits property, whether real or personal.
Heirs at Law
Persons who would inherit a decedent’s estate if the decedent dies intestate (without a will).
Located in Erath, LA, the Henry Hub is a pipeline interchange and the delivery point for the NYMEX active natural gas futures contracts. Natural gas from the Gulf of Mexico moves through the Henry Hub onto interstate pipelines serving the Midwest and Northeast.
A petroleum liquid found in small amounts of condensates; one of the components of gasoline.
A key feedstock in the manufacture of many high-density and linear low-density polyethylene resins, which are used to make food and drink containers, trash bags, plastic pipe and other consumer products.
Hold Harmless Agreement
See Indemnification Agreement.
Any person in possession of property belonging to another subject to an unclaimed property law, or any person indebted to another on any obligation subject to an unclaimed property law.
A will entirely in the handwriting of the testator. It does not require attesting witnesses as a typewritten will requires.
A zone of a particular formation, such as the reservoir horizon, being that portion of a formation of sufficient porosity and permeability to form a petroleum reservoir.
An assignment of an interest in the minerals above or below or between specified depths, or in a given stratum or horizon.
A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval. Horizontal drilling is widely used in the Austin Chalk formation in South Central Texas.
A clause creating a separable ownership of all, or some portion, of an interest above, below, or between specific depths, or in a given stratum or horizon.
A location where several pipelines interconnect. Also known as a market center.
Compounds containing only the hydrogen and carbon atoms. May be in solid, liquid or gaseous form.
High pressure version of catalytic cracking the presence of hydrogen.
A toxic, colorless gas that is odorless at high concentrations but smells like rotten eggs in low concentrations. Hydrogen sulfide is produced during the decomposition of organic matter and occurs with hydrocarbons in some areas. It is a serious and potentially lethal hazard in several regions of hydrocarbon exploration and production. It is also corrosive, requiring costly special production equipment such as stainless steel tubing.
A refinery process to remove sulfur and nitrogen from crude oil and other feedstocks.
Rock that is formed directly from the molten state.
A stratum through which one either cannot drill or has extreme difficulty in drilling, which difficulty would make continued operations totally impractical.
Technology for increasing or prolonging the productivity of oil and gas fields. This is a special field of activity and research in the oil and gas industry.
In Lieu Letter
A Letter in Lieu of Transfer and/or Division Orders. Companies having many transfers often request such a letter rather than a separate division order or transfer order for each property.
In Situ Combustion
The setting afire of some oil in the reservoir to create a burning front of gases which will drive oil ahead of it to the well bore.
Increased Density/Infill Well
A well drilled in addition to the number of wells permitted under initial spacing regulations, used to enhance or accelerate recovery, or prevent the loss of proved reserves.
An agreement whereby one party agrees to indemnify or hold the other party harmless against loss or damage arising from some contemplated act on the part of the person providing the indemnity or from the claim or demand of a third person. It can be in various forms, such as a letter or a paragraph inserted in a division order or lease to protect against possible liability. See hold harmless agreement.
Independent Oil Company
A term now used to describe any oil company in the U.S. that is not one of the largest integrated oil companies.
A non-integrated oil and gas producer with no refining or retail marketing operations. It is defined in IRC section 613A(d) as a producer who does not have more than $5 million in retail sales of oil or gas in a year and who does not refine more than 50,000 barrels of crude on any given day during the year. An exemption from the denial of percentage depletion is provided in IRC section 613A(a) for independent producers if production is within the limits of the average production of oil and gas set in IRC section 613A(c).
For one’s self.
A tax on the right to receive property by inheritance. To be distinguished from an estate tax.
Gas from an outside source put into a reservoir for purposes of cycling, maintaining reservoir pressure, displacing liquids, or storage.
A plastics-forming process in which molten plastic is forced into a mold under pressure and allowed to solidify.
A well used for pumping water or gas into the reservoir.
In-Kind or Delivery In-Kind
When an owner takes his working and/or royalty interest in gas or oil rather than dollars, he is said to take it “in-kind.”
Inlet Separation Facilities
A written document; a formal or legal document in writing, such as a contract, deed, will, bond, or lease.
Intangible Drilling Costs (IDC)
Any cost which in itself has no salvage value and is necessary for and incident to the drilling of wells and getting them ready for production. IDC can also occur when deepening or plugging back a previously drilled oil or gas well, or an abandoned well, to a different formation.
A company engaging in all phases of the oil and gas industry, from exploration for oil deposits to retail sale of the oil and gas products.
Inter Vivos Trust
Inter vivos: “between living persons.” A trust created during the settlor’s lifetime and is the same as a living trust. A living personal trust which becomes operative during the maker’s lifetime.
When a person dies without leaving a will. The property then passes by the laws of descent and distribution.
An estate to be administered with a will.
(1) A detailed list of real and personal property of a person or estate. (2) An account made by an executor, administrator or personal representative of all personal and real property of a deceased person. (3) An itemized list of goods or valuables, with their estimated worth.
A trust which by its terms cannot be revoked by the settlor or can be terminated by settlor only with the consent of everyone who has an adverse interest in the trust.
A normally gaseous branched-chain hydrocarbon. It is a colorless paraffinic gas that boils at a temperature of 10.9 degrees Fahrenheit and is extracted from natural gas or refinery gas streams.
Maps showing variations in the thickness of a particular sedimentary bed and also can show the interval or spacing between one bed and another.
All persons who have descended from a common ancestor; a broader term than children.
An oil well pumping unit that operates with an up-and-down, or seesawing motion; also called a pumping jack.
The lower section, or “legs,” or an offshore platform.
An offshore platform constructed entirely of steel. Such platforms generally are held in position by long steel piles driven deep into the seabed.
A type of mobile offshore platform with retractable legs that stand on the seabed to help support the drilling platform.
Cable tool driller on old standard rigs.
Steel links in a string of drilling tools the leeway of which permits jerking or jarring of the tools without damage.
Generally taken to mean that the operator of a property is sharing the revenue received from the sale of production with non-operators, who are not individually marketing their share of production. Often documented only by the division order or transfer order that is in place.
Joining or coupling together, uniting with another person in some legal step or proceeding.
A single length of drill pipe, casing, etc. usually from 20 to 30 feet in length.
Joint Interest Audit
An audit performed by or on behalf of the non-operator working interest owners to determine if the operator is conforming to the provisions of the operating agreement and accepted accounting procedures.
Joint Operating Agreement (JOA)
An agreement governing the operations of most jointly-owned properties/facilities.
Equal ownership of property by two or more persons in which the property goes to the surviving tenant.
A partnership for a specific development, such as a well or a lease. The joint-venture owners do not usually operate the lease, but are responsible for their share of the costs of production. The lessee is usually the operator of the lease, but occasionally one of the other owners handles the operations.
Certificate of officer or person before whom writing was sworn to. For example, in states where Notary Public has sworn to the truth of the statement made under oath. Usually included on an affidavit.
Provision in gas processing agreements that essentially allows the producer to receive at least an amount equal to proceeds the producer would have been entitled to had he sold the gas at the wellhead without processing.
Hollow 40 foot long square stem attached to drill pipe and turned by rotary table during drilling.
Drilling rig equipment that fits inside the rotary table and is also used as a reference point on logs to calculate depth.
A medium-light distillate from the oil refining process; used for lighting and heating, and for the manufacture of fuel for jet and turbo-prop aircraft engines.
A well is said to “kick” if the formation pressure exceeds the pressure exerted by the mud column.
Kill a Well
To bring high well pressure under control by the use of mud or water so that the well may be completed, etc.
Branded copolymer resin used to produce clear packaging materials, cups, water bottles, toys and shower doors.
LACT Unit (Lease Automatic Custody Transfer Unit)
Automated metering device that records volume, temperature, gravity, and degree of purity of oil as it moves from the lease gathering system to the pipeline.LDC – Local distribution company.
The individual in an oil and gas company or a broker who negotiates oil and gas leases with mineral owners, cures title defects, and negotiates with other companies on agreements concerning the lease. See Certified Petroleum Landman.
The termination or failure of a right or privilege through neglect to exercise it within some limit of time, or through failure of some contingency. For example, where a devise or legacy cannot take effect because the devisee or legatee has predeceased.
A description of the location of the apparent owner of unclaimed funds sufficient for the purpose of the delivery of mail.
A barge that is specially equipped to lay submarine pipelines.
Low-density linear polyethylene. A strong, clear film ideal for packaging.
A large set of tongs used in jointing pipe.
(1) A legal instrument executed by a mineral owner granting to another the right to explore, drill, and produce oil and gas from a piece of land; (2) Used in conjunction with the actual location of a well(s) or unit.
An agreement between two or more parties by which a lessee is given the right to enter a property, survey and locate a well site, perform drilling operations, and remove any minerals found.
Lease and Well Equipment
Capital investment in items of equipment having a potential salvage value and used in a well or on a lease. Such items include the cost of casing, tubing, well head assemblies, pumping units, lease tanks, treaters, and separators.
The consideration paid by the lessee to the lessor for executing the lease.
A facility such as a dehydrator, compressor, or separator installed to serve a single lease.
An MMS proceeding by which leases of OCS tracts are offered for lease by competitive sealed bidding and during which bids are received, announced, and recorded.
The interest owned by the lessee. When the lessee takes a lease from an owner, he has 100% leasehold interest as to the percentage owned by that owner. Leasehold interest is associated with the working interest.
That part of a will that leaves personal property.
An adequate description of land which enables a surveyor to located a tract of land. A legal description is essential in deeds, land contracts, mortgages, wills and leases. Two systems of land surveys exist in the United States: (1) the metes and bounds system describes the boundaries of a parcel of land, (2) the rectangular survey system describes land parcels using equal-sized townships, sections and fractions thereof.
A quarter-quarter section of land (1/16 of a section or 40 acres). Divisions of land which result from application of ordinary methods used in making of a government survey.
A person mentioned in a will who is to receive real or personal property under its terms. The person who receives a legacy.
The person who is granted the lease; sometimes called the tenant.
The person who grants the lease; sometimes called grantor or landlord.
A share of the gross production of minerals free of costs, arising under an oil and gas lease. See Royalty.
An agreement between parties to do certain things. As it pertains to the lease, it may be an agreement to participate in the acquisition and maintenance of the lease and cost of drilling a well on the property. A letter agreement is rarely filed of record.
Letters of Administration
The formal instrument of authority and appointment issued by the Court naming an Administrator to handle the estate of someone who dies without a will.
Letters of Guardianship
The formal instrument of authority and appointment issued by the Court naming a guardian to handle the affairs of a minor or some other person who is incapable of handling his own affairs.
A written decree or formal instrument of authority and appointment of the court whereby the executor is named empowering them to carry out the will of a deceased person.
An agreement in which a national government gives an oil company the rights to explore for and produce oil and/or gas in a designated area.
A section of continental shelf area in a particular national sector bounded by latitude and longitude lines, generally at one-degree intervals; a license block is usually subdivided into smaller areas.
A state in the allocation of offshore licenses in which a state places a number of specified areas in its sector on offer to oil companies at one time.
A charge or security or encumbrance upon property for the satisfaction of some debt or duty ordinary arising by operation of law. A mortgage is an example of such a lien.
A limited right to receive proceeds from real property during one’s lifetime. The person with the lifetime right is known as the life estate tenant. The person who owns the interest after the demise of the life estate tenant is known as the remainderman. See Estates in Land.
The cost of producing oil from a well or lease.
Crude oil with a high API gravity due to the presence of a high proportion of light hydrocarbon fractions.
Unloading cargo from large marine tankers into smaller tankers that can enter shallow-water ports.
Usually a dark brown substance that is the lowest rank of coal.
The man who walked along oil lines looking for leaks.
An aggregate of crude oil and natural gas liquids; also known as hydrocarbon liquids.
Liquid gas (like propane for barbecue grills) that is made at a refinery from crude oil.
A trust that becomes operative during the lifetime of the settlor. Also called an inter vivos trust.
Linear low-density polyethylene. A strong, clear film ideal for packaging and one of the fastest growing plastic lines in the world.
Liquefied Natural Gas. Natural gas liquefied either by refrigeration or by pressure.
The well site.
Compensation paid by an operator to the surface owner for actual and contemplated damages to the surface and crops and for inconvenience cause by the drilling and operation of a well.
To conduct a survey inside a borehole to gather information about the subsurface formations; the results of such a survey. Logs typically consist of several curves on a long grid that describe properties within the wellbore or surrounding formations that can be interpreted to provide information about the location of oil, gas, and water. Also called well logs, borehole logs, and wireline logs.
Last string of casing set in the well, covering the productive zone.
Low Temperature Extracting (LTX) Unit
Condensation of gas into a liquid by refrigeration.
Liquefied Petroleum Gas. A mixture of butane, propane, and other light hydrocarbons derived from refining crude oil. At normal temperature it is a gas but it can be cooled or subjected to pressure to facilitate storage and transportation.
A company integrated to a substantial degree, that is, engaged in production, refining, transportation and marketing. This term traditionally referred to the “Seven Sisters,” British Petroleum, Exxon, Gulf, Mobil, Shell, Chevron, and Texaco. Today, however, the term may include one of just a handful of companies because of recent mergers.
(1) Gas that is taken in succeeding years and has been paid for previously under a take-or-pay clause in a gas purchase contract. The contract will normally specify the number of years after payment in which the purchaser can take delivery of make-up gas without paying a second time. (2) Gas injected into a reservoir to maintain a constant reservoir pressure and thereby prevent retrograde condensation. (3) In gas processing, the gas that makes-up for plant losses. During processing there is a reduction in gas volume because of fuel and shrinkage. Some agreements between gas transmission companies and plant owners require plant losses to be made up or to be paid for.
Make-Up Gas Period
The time period when an under-produced owner is making up the under-produced volumes of gas accumulated during a previous time period in which no gas was taken by taking his share of the gas, plus a percentage of the overproduced owners’ gas, until the overproduced volumes are eliminated.
A field that may not produce enough net income to make it worth developing at a given time; should technical or economic conditions change, such a field may become commercial.
Marginal Probability of Hydrocarbons (MPHC)
The probability that oil and gas occur in commercial quantities, using existing recovery technology under current economic conditions.
Typically a well that is approaching depletion of its natural resources to the extent that any profit from continued production is doubtful. This term is used to describe oil and gas wells that produce a very low number of barrels or mcf per day.
Ownership of real property which is free from reasonable doubt. Each state has developed laws which define marketable title and these laws vary from state to state. For the purposes of payment to the owners by a purchaser of oil or gas, each company will develop its own policies regarding the information it requires before paying money out to a party claiming ownership.
Costs incurred in making gas merchantable such as compression, dehydration, treating, and costs of transporting gas to the point of delivery to the purchaser. Sometimes referred to as “handling costs.” These costs are borne by the working interest owners as required by the covenant to market implied in every oil and gas lease unless the contract expressly provides otherwise.
A provision in a gas contract that gives the purchaser the right to lower its price or disconnect a well when, in the purchaser’s opinion, the production of gas becomes uneconomical due to well or market conditions. The well owner is allowed to reject the lower price and have the pipeline transport the gas to another buyer.
Thousand barrels of oil.
One thousand cubic feet.
1,000 cubic feet equivalent.
The depth of the well measured along the wellbore. Also called the logged or driller’s depth.
A claim created by law to secure priority of payment for the value of work performed and materials furnished, such as in well drilling and operations. The lien attaches to the land as well as leasehold interest and improvements erected thereon.
Mechanical Integrity Test (MIT)
The act of setting a packer or retrievable bridge plug above the perforations in a wellbore and applying pressure to the annulus in order to ensure soundness of the casing.
Memorandum of Lease
A document filed of record with the county clerk acknowledging that a lease has been entered into and the legal description of the property. It is signed by the lessor and lessee and is done to avoid putting the entire lease and its terms in the county records for all to see.
Memorandum of Trust
A document which states pertinent facts about a trust such as trustor or settlor, effective date, trustee, and properties conveyed into the trust. This document, when filed, is record notice of change of ownership from an individual to a trust.
An organic chemical compound that has a sulfur like odor that is added to natural gas before distribution to the consumer, to give it a distinct, unpleasant odor (like rotten eggs). This serves as a safety device by allowing it to be detected in the atmosphere, in cases where leaks occur.
Precision catalysts that provide extended manufacturing control over the molecular structure and properties of polyethylene. When used to manufacture linear low-density polyethylene, the result is a film of exceptional clarity and strength that is ideal for food packaging.
The key ingredients in the company’s proprietary metallocene catalyst.
Rocks developed as a result of being subjected to heat and pressure.
Metes and Bounds
A type of description which sets out the boundary of a tract beginning at a boundary marker or commonly known marker and tracing around the tract to the place of beginning. Metes and bounds may be in several units of measure such as feet and inches, degrees, minutes and seconds, varas, etc.
The principal constituent of natural gas.
A sulfur-based chemical used primarily to produce methionine and agricultural chemicals.
Methyl Tertiary Butyl Ether (MTBE)
A lead-free, anti-knock additive for gasolines.
Equivalent to 1000 kilos, 2204.61 lbs, 7.5 barrels.
A term sometimes used to refer to those industry activities that fall between exploration and production (upstream) and refining and marketing (downstream). The term is most often applied to pipeline transportation of crude oil and natural gas.
(1) A naturally occurring inorganic crystalline element or compound with a definite chemical composition and characteristic physical properties such as crystal shape, melting point, color, and hardness. Most minerals found in rocks are not pure. (2) Broadly, a naturally occurring homogeneous substance that is obtained from the ground for human use (e.g., stone, coal, salt, sulfur, sand, petroleum, water, natural gas).
The full mineral interest and rights in one acre of land. Example: If mineral owner “A” had 100 acres and owned all the minerals, he would have 100 mineral acres; if he owned 50% of the minerals, he would have 50 mineral acres. Also see net acres.
A deed conveying only an interest in the minerals.
The ownership of minerals lying below the surface of land, and considered to be “real property” or an interest in real property. The mineral ownership can be tied to surface ownership or can be severed from it. The six rights which encompass the mineral estate are: 1. Right to execute (executive right). 2. Right to explore for minerals. 3. Right to produce minerals. 4. Right to receive delay rentals. 5. Right to receive bonus. 6. Right to receive royalty.
An ownership of the minerals underlying a tract of land. If the surface ownership and the mineral ownership are different, the minerals are said to be severed.
The person who owns the rights to any oil, gas or other minerals in the ground. They have the right to drill through the surface even if someone else owns the surface.
Legislation allowing oil and gas companies to hold revenues until a certain amount is accrued. It is an effort to reduce high administrative costs to prolong the life of marginally producing wells. Also called Aggregate Pay.
A guarantee of a certain minimum payment to the lessor. For example, if the minimum royalty payment is $3,000 and the lessor only receives $2,000 for production sold that year, the lessee must pay the lessor an additional $1,000. Also, in Federal leases, a payment made on leases within a unit but outside of the participating area.
A secondary recovery process which involves the injection of a mixture of hydrocarbons which displaces fluid.
Million barrels of oil.
Million barrels of oil.
Million barrels of oil equivalent.
One million (1,000,000) British thermal units.
Millions of cubic feet.
Millions of cubic feet per day.
Millions cubic feet of gas equivalent.
Mobile Drilling Rig
A drilling rig used offshore. It floats from one drill site to another. Drill ships, jack-ups, and semi-submersibles are mobile rigs.
Board half way up the derrick, where a man with a safety belt stood, to reach the drill stem to unlock the fittings, etc., and rack the drill pipe when “tripping” in or out of the hole.
A simple molecular unit from which a polymer can be made.
An aperture in the center of a drillship or semi-submersible drilling rig, through which drilling and diving operations can be conducted.
A written agreement describing a debt and stating that there is a lien against the specified property to secure payment of the debt. The lender is the mortgagee; the payor is the mortgagor. Also called a deed of trust.
Mother Hubbard Clause
A lease provision used to assure a lease covers all lands that the lessor intended to include in the lease description but which may have been unintentionally omitted from the lease description. The clause often states the lease is intended to include all lands contiguous to or appurtenant to the land described in the lease and owned or claimed by the lessor.
Refined lubricating oil, usually containing additives; used as a lubricant in internal combustion engines.
Memorandums of Understanding/Agreement.
A mixture of dirt, water and chemicals that is pumped into a well being drilled to cool and lubricate the drill bit and push pieces of rock and soil to the surface.
Big steam driven pump that circulated the mud down the drill pipe and brought the cuttings up the outside. From there it went over a shale shaker screen and the clean mud was recirculated.
Rule governing gas well production from an oil reservoir gas cap.
Multiple Completion Well
A well producing oil and/or gas from more than one reservoir.
Multiple Contract Gas Wells (One Purchaser)
A term used to describe the separate sales by owners having interests in a well who have negotiated separate gas contracts with one purchaser.
A colorless liquid product of petroleum distillation that is used as a manufacturing solvent, a dry-cleaning fluid and a gasoline-blending stock.
National Petroleum Reserve-Alaska
A petroleum province west of the Prudhoe Bay Field and south of Point Barrow on the North Slope of Alaska, consisting of millions of acres set aside and held in reserve for the purpose of national defense.
A mixture of hydrocarbon gases with varying amounts of impurities. Odorless, colorless, non-solid and non-liquid, clean burning fossil fuel. Public Service companies add a bad odor to it so we will know if there is a leak.
Natural Gas Liquids (Natural Gas Products)
The separate products derived from natural gas liquids, including butane (iso-butane and normal butane), propane, propane mixtures and natural gasoline, but not ethane (see DOE/ERA Regulations, Section 212.162). Sometimes referred to as plant products.
Natural Gas Policy Act of 1978
Enacted on November 9, 1978 and became effective December 1, 1978. The act has been amended, and it replaced or amended the Natural Gas Act. Refer to 15USC 3301-3432.
Volume of unitized formation which contains unitized substances and has an area extent of one acre and an average thickness of one foot. Determinant sometimes used to determine participation in a unit.
Net Acre Foot
Volume of unitized formation which contains unitized substances and has an area extent of one acre and an average thickness of one foot. Determinant sometimes used to determine participation in a unit.
The percentage of total acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres.
Net Profits Interest
This is an interest carved out of the working interest. It is a non-operating interest that shares in the net profits, if any, but has no liability for capital investments or losses.
Net Profits Lease
A lease in which the lessor shares in the net proceeds of production after the lessee has recovered his initial investment. The various expenses to be allowed as deductions from gross proceeds are points of negotiation. Also applies to working interest relationship.
Net Revenue Interest (NRI)
The share of revenue, expressed in fractions or decimals, accruing to the working interest after deducting all lease burdens (royalty, overriding royalty, or similar burden).
Net Working Interest
A working interest owner’s gross working interest in production, less the related royalty, overriding royalty, production payment, and net profits interest.
New Field Wildcat
A well drilled in a an area where previously there had been no production of oil or gas.
New York Mercantile Exchange (NYMEX)
The world’s largest physical commodity futures exchange. The prices quoted for oil, gas and other commodity transactions on the exchange are the basis for prices paid throughout the world.
Next of Kin
The persons who are most nearly related to a decedent by blood. It is sometimes used to mean only those who are entitled to take under the statute of distributions.
Term used to describe workman who did odd jobs around the drill site, picking up equipment and carrying messages to the rigs.
When drilling crew received only part of their pay. The balance only when and if the well became a producer.
Non Compos Mentis (NCM)
A legal term meaning “not of sound mind.” A guardian or conservator is named to protect and handle the affairs of such a person.
Natural gas produced from a reservoir that does not contain significant quantities of crude oil.
An interest in a mineral property whose life is limited in terms of dollars, units of production, or time.
Non-Dedicated (Non-contracted) Owner
Any interest owner in an oil or gas well who does not have a gas contract for his share of gas production and who has not entered into any other agreement that governs the taking or sharing of gas.
Non-Executive Mineral Interest
A term used to describe an interest in oil and gas which lacks the right to join in the execution of oil and gas leases. The holder of such an interest may have a right to a share of the bonus and delay rentals as well as royalty under existing or future leases. This type of interest is also called non- participating royalty and non-participating mineral interests.
An interest in an oil or gas property that bears no costs of development or operation, such as the landowner’s royalty interest.
Non-Operating Working Interest
A working interest owner that does not participate in the day-to-day operations of developing and operating a mineral interest.
Non-Participating Royalty Owner
A person who owns a severed portion of a royalty interest but who does not execute leases, participate in bonus or rentals, or have right of exploration and production.
Production from a well which is used to support facilities such as generators, boilers, etc. on the leased premises for the operation of the well.
The practice whereby most states, after receipt of a holder’s unclaimed property report, publish a public notice or notices listing names of apparent owners, in alphabetical order, stating the address of the state official to contact to ascertain the holder of the property, and advising that the property will be turned over to the state if a claim is not submitted to the holder by a prescribed date.
Oil and gas.
Outer Continental Shelf, a term used primarily in the U.S. for the offshore areas under federal jurisdiction.
A measure of the resistance of a fuel to pre-ignition when burned in an internal combustion engine. Higher the number, the more anti-knock quality.
Any malodorous substance added to natural or LP-gas in small concentrations for the purpose of making the presence of gas detectable.
A royalty payable under the provision of a lease in lieu of drilling an offset well. Sometimes referred to as Compensatory Royalty. The offset royalty may be a flat annual sum or may be measured in some other way, such as the royalty which would have been paid if the offset well had been drilled and placed in production.
A well drilled on one tract of land generally to prevent drainage of oil and/or gas from an adjoining tract of land on which a well is being drilled or is already in production.
Any well subject to Commission jurisdiction for which the surface location is on state lands in or on the Gulf of Mexico, that is not a bay well.
The raw material that petroleum products are made from. A black liquid fossil fuel found deep in the Earth. Gasoline and most plastics are made from oil.
A heater to evaporate the gas and catch the oil.
A geographic area under which oil lies.
Oil in Place
An estimated measure of the total amount of oil contained in a reservoir, and, as such, a higher figure than the estimated recoverable reserves of oil.
Oil that is spilled or burned.
Oil Payment (Production Payment)
A share of the oil or gas produced from a described tract of land, free of costs, terminating when a specified sum from the sale of such production has been realized. This payment may be reserved to the lessor, retained by an assignor of a lease, or carved out of a working interest or royalty interest. Usually, this is expressed in a specified amount of dollars or barrels and is of limited duration.
An underground reservoir containing oil in the sedimentary rocks.
A complex mixture of sand, water, and clay trapping very heavy oil known as bitumen.
Areas where tiny amounts of petroleum have migrated to the surface.
A well that is being pumped because it will not flow.
Oklahoma Corporation Commission (OCC)
Governing body that regulates the oil and gas industry in Oklahoma.
Basic chemicals made from oil or natural gas liquids feedstocks; commonly used to manufacture plastics and gasoline.
The Organization of Petroleum Exporting Countries organized for the purpose of negotiating with oil companies on matters of oil production, prices, and future concession rights. Current members (as of the date of writing this definition) are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. http://www.opec.org
Open Flow Test
A test made to determine the volume of gas that will flow from a well during a given time span with minimum restrictions.
An agreement between interested parties for the testing and development of a tract of land. The agreement generally contains details concerning the drilling of a test well, the drilling of any additional wells which may be required, the sharing of expenses, accounting methods, and the authority of and restrictions on the operator. See Joint Operating Agreement.
Expenses incurred in the operation of a producing property.
See Working Interest.
Operating Working Interest
A working interest owner who participates in the day-to-day operations of developing and operating the mineral interest.
The person or company, either proprietor or lessee, actually operating a well. The operator is a usually a working interest owner and is also responsible for physical maintenance of the well and other responsibilities as covered in the JOA (Joint Operating Agreement).
An aromatic compound used in the manufacture of plasticizers and polyester.
Outer Continental Shelf
A well drilled in an attempt to make a long extension of a producing pool; a well located outside the established reservoir boundaries.
The extent to which one or more owners of a property have sold or used a volume of gas which is more or less than their gross working interest share (entitlement) of the total gas production.
State of a well that has produced more than its allowable volume.
A working interest owner in a well who has sold more than his share of gas from the well. The other owners must sell more gas to bring the well back into balance. Often working interest owners will enter into a gas balancing agreement to provide procedures to balance gas sales among the working interest owners.
Overriding Royalty Interest (ORRI)
An interest in production that is created and payable out of the working interest. Usually, the term of an ORRI is for the life of the mineral lease.
A person having a legal or equitable interest in property subject to a particular unclaimed property law, including, but not limited to, a creditor, claimant, or payee.
A unique number assigned to each interest owner by the purchasing company for identification and accounting purposes. It appears on check stubs and vouchers and various printouts and forms.
Paid Up Lease
An oil and gas lease for which all delay rentals are paid along with the cash bonus and on which no further action is required during the primary term. Very practical in small tract or town lot leasing.
An aromatic compound used to make polyester fibers and plastic soft drink bottles.
The Louisiana equivalent of a county in other states.
The percentage of costs and benefits generally under an Operating Agreement borne and to be received by the various parties to the agreement.
To divide into parts by means of legal instrument or by court order.
Two or more persons joined together as co-owners in a business for profit. A contractual business relationship between two or more persons. All partners should be requested to execute division orders and transfer orders on partnership leases unless one partner is given a power of attorney by the other partner(s).
The original conveyance out of the Sovereignty of the Soil (such as the Republic of Texas) to the first owner. A government grant of public lands.
See Production in Paying Quantities.
A particular point in time when the costs of drilling and equipping a well have been recovered. Often it is the point when contractual payment obligation has been achieved.
Rock where enough oil and gas is found for production.
Per Capita (By the Head)
A term used in the distribution of property; to persons according to the number of individuals (per capita), share and share alike. This is distinguished from per stirpe, which is division to a family.
Per Stirpes (By the Branch)
A term used in the distribution of property to persons as members of a family (per stirpes) and not as individuals (per capita). Two or more children of the same parent take per stirpes when together they take what the parent, if living, would take.
A deduction for federal income tax purposes based on the gross income from mineral properties. Percentage depletion is in lieu of cost depletion. It is also known as “Statutory Depletion.”
To penetrate the well casing with holes made with a perforating gun.
The measurable capacity through which a rock formation allows fluid to flow. Permeability and porosity are the two most important characteristics of reservoir rock.
An natural person, corporation, association, partnership, receiver, trustee, guardian, executor, administrator, and a fiduciary or representative of any kind.
Movable property as opposed to land and fixtures on land. Severed minerals may be considered personal property in some states, while minerals in the ground may be considered real property.
(1) A person named in a decedent’s will to administer the estate who accepts the appointment by qualifying before the clerk. (2) A party appointed by a court to carry out the terms of a will or distribute the property of one who died intestate. Also called administrator or executor.
Chemical derived from petroleum or natural gas.
General name for crude oil, liquid gas, natural gas and other products.
A scraping instrument for cleaning a pipeline.
Long steel piles driving into the seabed to anchor fixed offshore structures solidly in place.
A small-scale test project used to assess the viability of a concept prior to committing significant capital to a large-scale project.
A system of pipes for transporting oil and gas.
Hole dug out in the ground surface for temporary storage of fluids during drilling operations.
A subdivision of an offshore area used as the initial basis for considering blocks to be offered for lease.
A generic term for a range of high-molecular-weight polymers that can be used to produce a variety of items.
A class of petroleum-based materials that can be molded to form plastic items or used as the basis of adhesives.
The level of peak production reached by an oil or gas field; it is always followed by declining level of production.
An offshore structure that is permanently fixed to the seabed.
Industry jargon for the development of a prospect.
A permanent plug, usually either cast iron or cement, set in a borehole to block the flow of fluids to isolate sections of the well or to permanently plug a dry hole or depleted well.
To seal off a lower formation in a well bore in order to produce a from a higher formation.
Plugged and Abandoned (P&A)
The setting of plugs in a dry hole or depleted well prior to abandonment.
Unauthorized contamination of surface or subsurface waters or land.
Plastic made from ethylene; used in manufacturing trash bags, milk jugs, shampoo bottles, water coolers, and cable coating, among other things.
A complex compound formed by the polymerization of one or more monomers.
Refining process which uses low temperature reforming to increase the octane value of gasoline.
An engineering plastic with excellent resistance to most chemicals.
Basic plastic formed by joining propylene molecules together. Used in manufacture of synthetic fibers, automotive parts, luggage, safety helmets, and home construction.
An underground reservoir having a common accumulation of oil or gas.
A unit formed by the bringing together of separately owned interests under the provisions of pooling clauses in leases or some special agreement or by state regulation.
Frequently used interchangeably with “unitization” but more properly the combining of small or irregular tracts into a unit large enough to meet state spacing regulations for drilling permits. Unitization is a term used to describe the combined operations of all or some portion of a producing reservoir. See Voluntary Pooling.
A characteristic of reservoir rock determined by its holes or spaces. Higher porosity rock can contain more hydrocarbons and is, therefore, considered a better quality of reservoir rock.
Those reserves which and present cannot be regarded as “probable” but are estimated to have a significant but less than 50% chance of being technically and economically producible.
The price published and circulated between buyers and sellers in a particular field.
The ability of crude oil to flow at low temperatures.
Power of Attorney
The appointment of a person to act on behalf of another (agent) for all purposes or for very limited purposes. A legal instrument is needed to make this appointment effective. A power of attorney creates an Attorney-in-Fact (the agent). The agent may execute leases if provided in the power of attorney, but caution should be taken to make sure the power of attorney is still in effect. A power of attorney ceases when the person granting it dies or becomes incapacitated unless it is a “durable” power of attorney, in which case the powers can survive incapacity.
Parts per million.
Present Value of Future Reserves
means 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%.
Injection of gas, water, etc. to repressure an oil field.
An instrument for maintaining pressure in a pipeline; downstream from the valve.
A posting of price per barrel the purchaser will pay for each grade of crude oil in a field.
The period of production in which oil moves from its reservoir through the wellbore under naturally occurring reservoir pressure and not by means of secondary recovery methods such as waterflood.
The period of time during which a lease may be kept alive by a lessee (even though there is no production in paying quantities) by virtue of drilling operation on the leased lands or the timely payment of rentals.
Those reserves which are not yet proven but which are estimated to have a better than 50% chance of being technically and economically producible.
(1) The legal process in which a court oversees the distribution of property left in a will. The procedure whereby a will is admitted of record in the clerk’s office, including the process of qualifying a person as an executor of an estate and the process of administering an estate. (2) The collection, filing, and authentication of documents of an estate, i.e., the Will, Order Admitting the Will to Probate, Letters Testamentary, and appraisals. Could include payment of debts and distribution of property. In some states, there is a time limit on settlements of estates.
Gas handled through a plant for the extraction of liquefiable hydrocarbons.
A facility designed to separate substances or make new substances through chemical reactions, procedures, or physical actions.
For purposes of IRC section 263A, it includes contract, build, install, develop, manufacture, improve, create, raise, or grow.
The water extracted from the subsurface with oil and gas. It may include water from the reservoir, water that has been injected into the formation, and any chemicals added during the production/treatment process. Produced water is also called “brine” (and may contain high mineral or salt content) or “formation water.” Some produced water is quite fresh and may be used for livestock watering or irrigation (where allowed by law).
Any party owning, controlling, managing, or leasing any gas well and/or any party who produces in any manner natural gas by taking it from the earth or waters.
A lease where one well or several wells have discovered hydrocarbons in paying quantities, but for which there is no production during the reporting period.
Producible Zone Completion
The interval in a wellbore that has been mechanically prepared to produce oil, gas, or sulphur. There can be more than one zone completed for production in a wellbore.
A lease that is producing oil, gas, or sulphur in quantities sufficient to generate royalties.
Includes refined crude oil, crude tops, topped crude petroleum, residue from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, etc.
The percentages of gasoline, jet fuel, kerosene, gas oil, distillates, residual fuel oil, lubricating oil, and solid products that refinery can produce from a single barrel of crude oil.
The lifting of oil and gas to the surface and gathering, processing and storing it. * Gross Production: Total production before deducting royalties.* Net Production: Gross production, minus royalties, multiplied by one’s fractional working interest.
Drilling of wells in order to bring a field into production.
Production in Paying Quantities
A well capable of making a profit over the cost of drilling, equipping, completing, and operating it. In some instances, the term means merely a well with sufficient production to cover current operating expenses, without regard to original drilling costs.
An installation from which development wells are drilled and that carries all the associated processing plants and other equipment needed to maintain a field in production.
A document issued by the governing state granting an oil company authority to produce oil and natural gas in a designated geographic area.
Production Payment Interest
An interest that will change ownership when a specified production level has been attained or the interest has earned a certain amount of money.
The productive life of an oil or gas field.
A platform from which development wells are drills and that carries all the associated processing plants and other equipment needed to maintain a field in production.
Production Related Costs
Most notably related to FERC Order 94 of the Federal Energy Regulatory Commission, production related costs refer to all costs associated with bringing natural gas or LPG to a marketable point of title transfer. The more common production related costs include, but are not limited to, compression, dehydration, gathering, processing, treating, liquefaction, conditioning, or transporting of natural gas. Production costs related to crude oil may include storage, transportation, etc.
The tubing or piping in a production well through which oil or gas flows from the reservoir to the wellhead.
Taxes levied by state governments on mineral production based upon the value and/or quantity of production. They are also known as severance taxes.
A well used to remove oil or gas from a reservoir.
A test of the maximum or other rates at which a well can produce.
A large territory that the taxpayer determines can be explored advantageously in a single integrated operation.
Proof of Claim
The verified written explanation which the apparent owner must file with a particular jurisdiction to reclaim unclaimed property which a holder previously has remitted to that jurisdiction.
A heavy gaseous hydrocarbon found in crude oil and natural gas; used as fuel and in the making of petrochemicals.
Each separate interest owned by a taxpayer in each mineral deposit in each separate tract or parcel of land. Certain interests may be combined to form a property.
Legal words delineating real property boundaries. May be by metes and bounds, by plat reference, range, township and section subdivision. For division order purposes, property descriptions are frequently abbreviated as their main purpose is to distinguish between various leases. Metes and bounds are the foot-by-foot description of the property.
Proportionate Reduction Clause
A clause in an oil and gas lease providing for the reduction of payments to a lessor if his interest is less than that which he purported to lease. A lease purports to lease the entire acreage although the lessor often owns only a fractional share of the acreage. Also referred to as the Lesser Estates Clause or Lessor Interest Clause.
A raw material in the chemical, plastics and fibers industries. Major component of the plastic polypropylene.
A system, enforced by a state or federal agency or by agreement between operators, that limits the amount of petroleum that can be produced from a well or a field within a given period. See allowables.
Acreage allocated to a well for the purpose of determining an allowable.
An area designated for the potential drilling of development or exploratory wells. An area of interest that an oil and gas producer identifies for possible drilling.
Estimates of oil, gas and NGL quantities thought to be recoverable from known reservoirs under existing economic and operating conditions.
Proved Undeveloped Reserves
Reserves which are expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for completion.
An oil and/or gas field whose physical extent and estimated reserves have been determined.
A property whose principal value has been demonstrated by exploration, discovery, or development.
Pounds per square inch, an English system of measure of the amount of pressure on an area that is one square inch.
Pounds per pressure square inch absolute, using absolute zero as a base.
Pounds of pressure per square inch gauge, using atmospheric pressure as a base.
A clause in an oil and gas lease that releases non-producing acreage or zones at the end of the primary term or some other specified period. Under the clause, unproductive or untested zones and acreage that are outside a producing pooled unit must be released if drilling or exploration does not occur by the end of the specified time. Also called a Freestone rider.
Facilities placed along the route of a pipeline to keep oil or gas moving along with pressure or suction.
The party who buys oil or gas from a supplier based on the purchase contract.
Put on a Pump
To install a pump jack or pumping unit, sucker rods, and bottom hole sucker rod jump.
Put on a Well
To begin a well flowing or pumping.
One quadrillion (1,000,000,000,000,000) British Thermal Units (BTU).
A legal term for settling a dispute over the ownership of a piece of property; usually results in a suit settled in court.
A deed that conveys or transfers to another all rights or interest that a person may have in property. The grantor of the quitclaim deed warrants nothing but merely conveys, whatever rights, if any, he may have. In California leases, a quitclaim deed is required of the lessee in lieu of a release.
Line cleaning instrument. A small plug which is run through a line.
Railroad Commission of Texas
The government body that regulates the oil and gas industry in Texas.
In the Governmental Survey of the United States, one of the divisions of a state, a row or tier of townships as they appear on the map.
Hole adjacent to well bore for storage of the Kelly joint when not in use during drilling operations.
In division order terms, ratification generally refers to the formal approval or confirmation of a previously executed lease.
A vessel, tank or tower in which a specific chemical reaction takes place.
Land surface, fixtures and minerals in place.
The process of applying pressure surges on the coal formation at the bottom of a well in order to increase fracturing, enlarge the bottomhole cavity and thereby increase gas production.
Plant that treats and reclaims waste oil.
After the initial completion of a well, the action and techniques of reentering the well and redoing or repairing the original completion to restore the well’s productivity. Compare to Workover.
Natural gas that is produced from a reservoir using well facilities that previously tapped a different, formerly nonproductive reservoir; the previous operations having commended before January 1, 1973, and new operations having commended on or after January 1, 1973, as defined under section 271.402 (b) (4) of the NGPA.
A survey of a project area utilizing various geological and geophysical techniques to identify specific geological features with sufficient mineral producing potential to merit further exploration.
(n) An authentic official copy of a document deposited with a legal designated officer; (vb) to set down in writing; to deposit an authentic official copy as in a deed.
The ownership of an interest which is determinable from the county records in which the property is located. Record title may be different than actual ownership where there are assignments or letter agreements unrecorded. Under Federal leases, the official chain of title is kept by the Government. Each time lease ownership changes, the changes must be made with the Government and an instrument also filed in the county records to update both.
References put on documents when they are filed by County Clerks to show where the documents can be located. Usual references are volume or book and page number. Recorded instruments are presumed to be known to every member of the public. In case of disputed ownership of a piece of property, the recordation helps to determine the rightful owner.
The act of placing an instrument in the county or parish records. The recording is required to put all concerned on notice that a transaction has occurred. If a document is not recorded, it may be invalid as to all but the parties to the agreement.
That proportion of the oil and/or gas in a reservoir that can be removed using currently available techniques.
The process undertaken to regain material for human use. To reuse; to make ready to reuse.
Testing a potential zone by using the borehole of a plugged and abandoned well, usually after new drilling and production has occurred in the area.
An industrial plant that heats crude oil so that it separates into chemical components which are then made into more useful things.
The process of converting crude oil into usable fuel products. A full description of refining and refining processes is available.
The difference in value between the products produced by a refinery and the value of the crude oil used to produce them. Refining margins will thus vary from refinery to refinery and depend on the price and characteristics of the crude used.
Refinery process aimed at improving gasoline quality by changing chemical characteristics rather than breaking up molecules as in cracking.
A cleaner-burning gasoline that reduces smog and other air pollution. Federal law mandates the sale of reformulated gasoline in metropolitan areas with the worst ozone smog. Some other cities voluntarily require reformulated gasoline.
Permit to drill, plug back or deepen that does not require an exception.
A document in writing executed and delivered by the lessee indicating that a lease has terminated or expired or has been surrendered or forfeited.
The person or entity who receives the property after a life estate owner dies. This type of ownership is a future interest in land and the owner can do nothing to interfere with the rights of the life estate owner.
Check stub from payee of oil and gas. It will usually indicate barrels or MCF, gross revenue or net revenue, and the amount actually paid.
A report required by a jurisdiction submitting the unclaimed property held for unclaimed owners who have not been found by the particular jurisdictions publication of names of apparent owners. Some jurisdictions combine the unclaimed property report and remittance report into one report.
Periodic payments made by the holder of a lease, during the primary lease term for the right to use the land or resources for purposes established in the lease.
Rental Due Date
The date during the primary term on or before which the rental payments are due and payable if the lease is to be kept alive by the payment of such rentals. See Anniversary Date.
The portion in a conveyance of the grantor’s property that he is reserving, (holding back) or not conveying (i.e. “…all my right, title and interest in the above described property save and except 1/16 royalty interest herein reserved to Grantor…”). At common law, a reservation was distinct from an exception, which was an interest not granted because it had already been carved out of the conveyance. That is why you will usually see “reserved and excepted” used together in a granting document to avoid a problem with any possible difference between the two terms.
Pit used to collect spent drilling fluids, cutting and wash water during drilling operations.
Generally the amount of oil or gas in a particular reservoir that is available for production.
A porous and permeable formation containing significant quantities of hydrocarbons. A reservoir is characterized by a single natural pressure system.
The continuing process of integrating and interpreting geological, geophysical, petrophysical, fluid and performance data to form a unified, consistent description of a reservoir.
Residual Fuel Oil
Very heavy fuel oils produced from the residue from the fractional distillation process rather than from the distilled fractions.
Gas remaining after processing through a plant for the extraction of liquids.
A solid or semi-solid mixture of organic substances of complex composition having no definite melting point, as in plastic resins made from hydrocarbon feedstocks.
A specified fractional interest that is reserved by one owner when he deeds or assigns his interest to another individual or entity.
An accounting term describing earnings of a working interest owner. The working interest minus royalties or other interest deductions (such as overriding royalties and carried interests) equals the revenue interest.
A future interest retained by a grantor (or his successor) after present possessory interests expire.
A trust in which the settlor reserves the right to end the trust and reclaim the trust property at any time.
Reworking a Well
Restoring a well’s productivity by cleaning out accumulations of sand, silt, or other substances that clog the production tubing.
A structure that contains all the necessary equipment for drilling.
The trip of land, usually about 50 feet wide, that is the route of a pipeline and for which the company pays for the legal right of passage.
A pipe between a seabed BOP and a floating drilling rig.
The section of pipework that joins a seabed wellhead to the Christmas tree.
Utilizing a rotary drill pipe and bit, producing cuttings which are eliminated at the surface by a mud system; in contrast to the cable tool system of a drill stem and bit working vertically in the hole.
The member of the drilling crew who puts together and takes apart the drill pipe.
The member of the drilling crew who loads and unloads equipment and helps with general operations.
The share of the production or proceeds there from reserved to the lessor under the terms of the mineral lease. Normally, royalty interests are free of all costs except production taxes, and are established in the lease by reserving a royalty which is usually expressed fractionally.
A deed conveying a royalty interest. Note: Many “Royalty Deeds” actually describe and convey mineral interests.
Pertaining to the royalty owners share.
Royalty Interest (RI)
An ownership interest that entitles its owner to share in the production from the mineral deposit, free of development and operating costs, and extends undiminished over the productive life of the property. It is a nonoperating interest.
The landowner’s share of net oil production, taken in the form of crude oil rather than in cash.
The cash of kind paid to the owner of mineral rights.
The state-wide well spacing regulations of Texas.
Rule of Capture
The theory that oil and gas produced from a particular tract is owned by the royalty owners therein, even though it may be proven to have migrated across property lines, so long as the producing well does not trespass.
A monthly summary of run tickets given by the purchaser or operator of crude oil detailing volume, gravity, price, and value of each run ticket.
A document evidencing the amount, gravity, temperature, BS&W content, etc., of oil being delivered. This document is the basis of payment for the oil. The term “run” is often used to describe the delivery or sale of oil.
South African Bureau of Standards
The proceeds received for the sale of the mineral.
Salt Water Disposal Well (SWD)
A well used for the purpose of injecting produced water back into the ground.
A geological term for a formation beneath the surface of the earth from which hydrocarbons are produced. Its make-up is sufficiently homogeneous to differentiate it from other formations.
Satellite Oil Fields
Oil fields adjacent to larger existing fields.
An offshore structure that depends on another platform for materials or services.
A device used to remove dirt, water, foreign matter, or undesired liquids that are part of the gas flowstream. Used to protect downstream rotating equipment or recover valuable liquids from gas.
The recovery of oil and gas through the injection of liquids or gases into the reservoir, supplementing its natural energy. Secondary recovery methods are often applied when production slows due to depletion of the natural pressure.
The period during which an oil and gas lease is extended beyond the primary term due to ongoing production or drilling. Compare primary term.
(1) A unit of land measurement in the rectangular survey system. Each 6-mile square, or township, is divided into 36 sections. A section usually is 1 square mile, or 640 acres. It may be larger or smaller, depending on its position in the township. (2) Vertically arrayed data.
Gas or oil that escapes underlying rock strata vertically to the surface soil.
A tool for identifying underground accumulations of oil and gas by sending energy waves or sound waves into the earth and recording the wave reflections. Results indicate the type, size, shape and depth of subsurface rock formations. 2-D seismic provides two-dimensional information while 3-D creates three-dimensional pictures. 4-C, or four-component, seismic is a developing technology that utilizes measurement and interpretation of shear wave data. 4-C seismic improves the resolution of seismic images below shallow gas deposits.
The instrument used to record the refraction of sound waves.
A survey of an area by means of an instrument which records the vibrations of the earth. By recording the time interval between the source of the shock wave and the reflected or refracted shock waves from various formations, geophysicists are able to define the underground configurations.
A floating drilling installation that is supported by underwater pontoons; generally used for exploration purposes only.
Property in a community property state which is owned by only one spouse. It is the opposite of community property, and can be created by acquisition prior to the marriage, a devise under a will, a gift solely to that spouse, or by inheritance. It must be clearly maintained as separate property or it may be come commingled with the couple’s community property and then become community property.
The process of separating liquid and gas hydrocarbons and water. This is typically accomplished in a pressure vessel at the surface, but newer technologies allow separation to occur in the wellbore under certain conditions.
A well drilled for the purpose of supporting production; for example, a gas injection well or a water injection well.
Service Zone Completion
The interval in a well bore that has been mechanically prepared for service use, usually water or gas injection to stimulate production from other wells or for water or other waste disposal.
An easement or other incorporeal interest in land. In Louisiana, any severed mineral or royalty interests, whether reserved or granted, including the interest of an oil and gas lessee, is an incorporeal interest called servitude.
One who makes a settlement or creates a trust of property.
A state or municipal tax on oil and gas products levied at the wellhead for the removal of the hydrocarbons. Also called Production Tax.
Severed Mineral Interest
An interest in the minerals in, on, and under a given tract of land owned by a person other than the surface owner.
Severed Royalty Interest
Nonexpense-bearing interest in minerals produced and saved from a tract owned by someone other than the surface owners. Owner of severed royalty interest gets a share of production from wells, but does not have to share the costs of production. The interest may be set up prior or subsequent to the leasing of the land, granted or reserved for years, for life, in fee simple defeasible, or in perpetuity.
A deed resulting from default under a mortgage, or other such document or as a result of taxes being overdue and the taxing authority ordering a sale of the property to pay for the back taxes.
A legal entity who contracts with a transporter to move gas through the transporter’s pipeline system.
A production hiatus during which the platform ceases to produce while essential maintenance work is undertaken.
Payment to royalty owners made under the terms of an oil and gas lease which allows the lessee to defer production from a well capable of producing in paying quantities but shut-in for lack of a market or marketing facilities.
A well which is producing or capable of producing but is not produced. Reasons for wells being shut in may be lack of a pipeline, lack of a market, etc.
Shut in/Temporarily abandoned.
A well bore segment extending from a well bore intersection along a well bore path to a different well bore bottomhole from any previously existing well bore bottomholes.
A remedial operation that results in the creation of a new section of well bore for the purposes of detouring around “junk,” redrilling a lost hole or straightening a crooked hole.
The well activity of drilling a new well bore segment from a well bore intersection to a new well bore bottomhole or target.
Gas which is dissolved in oil in the reservoir under pressure.
Crude oil contaminated by sulphur compounds, typically hydrogen sulfide. Sour crude has sulphur content above 1%.
Natural gas containing hydrogen sulfide.
Silt containing organic matter becomes rock and the organic matter becomes petroleum after millions of years as a result of compaction, heating, decomposition and chemical reactions.
The distance between wells allowed by the regulatory body. The spacing is based on what is deemed to be the amount of acreage that can be efficiently and economically drained by one well.
Special Warranty Clause
A covenant of title in a deed, lease, or assignment, the effect of which is to guarantee title against all defects arising out of claims of the grantor, lessor, or assignor, and of persons claiming by, through, or from the grantor, lessor, or assignor. This differs from a general warranty clause which guarantees all title defects.
A measure of the density of a material usually obtained by comparing it with water.
Split Stream Gas Well
A term used to describe the separate sales of gas by owners having interest in a well to two or more pipeline purchasers where there are two or more pipelines running to the well. (Note: In many cases, the gas sales are split but one pipeline purchaser is tied into the well and another pipeline purchaser negotiates a transportation agreement so that they can also purchase production from a particular well to which their pipeline does not run.)
The process of selling natural gas production into a market other than the traditional market of a pipeline company. These arrangements are often only thirty (3) days in length, but will have an evergreen provision – that is, they continue in force and effect until specifically terminated by either party. Arrangements are re-confirmed monthly via new letter agreements.
A short-term price negotiated between the buyer and the seller.
To begin the drilling of a well.
Date that drilling begins.
The cable tool system of a drill stem and bit working vertically in the hole,
Connected joints of drill pipe stacked in the derrick when “making the trip” to change the bit.
Statute of Limitations
A law prescribing limitations to the right of a person or other entity to maintain a suit for certain described causes of action. Such statutes generally declare that no suit may be brought unless it is brought within a specified period of time. In unclaimed property language, statutes of limitation effectively determine how far back a jurisdiction may reach beyond the effective date of enactment of an unclaimed property law to claim funds held by a holder. Most unclaimed property statutes contain an anti-limitation provision which provides that statutes of limitation do not apply to unclaimed funds on which a statute of limitations has not run at the date the unclaimed property law is effective and for any subsequent period of time.
Steam-Assisted Gravity Drainage (SAGD)
A method of extracting bitumen from oil sands. Steam is injected under ground, softening the bitumen and allowing it to flow to the surface.
Step Out Well
A well drilled adjacent to a proved well in an attempt to determine the limits of the reservoir.
The term used for several processes to enlarge old channels, or create new ones, in the producing formation of a well designed to enhance production. Examples include acidizing and fracturing.
Stipulation of Interest
An instrument setting out the owner’s interest and authoring payment for oil and gas proceeds in accordance with the interest set out.
A gas that is stored in an underground reservoir.
Tank for the accumulation of oil pending transferal to a pipeline company or other purchaser.
Stratigraphic Cross Section
Series of electric logs that illustrate formation correlation with one formation as a datum.
Stratigraphic Test Well
A well drilled to obtain information about geologic conditions. This well is common for offshore drilling. Stratigraphic test wells are classified as follows: (1) Exploratory-type stratigraphic test well (a stratigraphic test well not drilled in a proven area) and (2) Development-style stratigraphic well (a stratigraphic test well drilled in a proved area).
A horizontal layer of hydrocarbons. See Horizon or Zone.
To pull both the rods and tubing from a well simultaneously.
A well nearing the end of its productive life.
A well which produces such small volume of oil or gas that the gross income there from provides only a small margin of profit or in many cases, does not even cover actual cost of production. Also know as marginal wells.
Structural Cross Section
Series of electric logs that illustrate subsurface structure by placing the logs relative to sea level.
Maps that indicate subsurface features.
An agreement subordinating a prior lien to an oil and gas lease.
An agreement in which a mortgage company or similar institution agrees to make their lien subject to the lease. If the property is mortgaged prior to the lease and the mortgage company does not subrogate to the lease, the mortgage company can take the property if it is foreclosed and lessee’s rights will end. Also sometimes called a “waiver of priority.”
Refers to rock formations lying beneath long, horizontal layers of salt. These rock formations may contain hydrocarbons.
A wellhead installed on the sea floor and controlled remotely from a platform, a floating production facility or land.
The settling or sinking of a surface as a result of the loss of support from underlying soils or strata.
Amount of acreage that is less than the standard amount for a proration unit for a field.
The support of an offshore installation on which the derrick, engines, quarters, helicopter pad, cranes, etc., are installed.
A trustee following the original or prior trustee. The appointment is provided for in the trust instrument.
A nonmetallic element that occurs in association with salt diapirs throughout much of the onshore and offshore Gulf of Mexico region. All offshore sulphur is mined by the FRasch process, which uses hot brine to melt sulphur out of enclosing rock so the molten sulphur can be recovered.
Supply Chain Management
The interlocking series of transactions necessary to convert crude oil into marketable product.
Outer casing cemented in the upper portion of the wellbore to protect fresh water formations from contamination.
A lease of the surface of the land. (Grazing, agricultural, commercial, or homesite purposes.)
The location of a well or facility/measurement point.
The person who owns the land above-ground. They have to let the mineral owner drill through the surface to get to their minerals.
A restoration of the surface as for productivity or usefulness.
Surface ownership of land and mineral ownership below the surface can be different. Severance sometimes means conveyance of surface and minerals separately.
A determination and delineation of the form and position of a tract of land. Surveys are often named after the surveyor who makes them. Many carry the railroad company names when railroads used their own survey.
An oil or gas field identified by a discovery well, but not being produced or developed.
A well that has been capped off temporarily.
The withholding of interest payments by the purchaser. The most common reasons are: a. Death of an interest owner. b. Pending transfer. c. Clouded title or disputed ownership. d. Operating expense arrears. e. Bad address. f. Overpayments or special adjustments. g. Pending title data, etc., for a new property. h. Extended lapse in production making lease validity questionable. i. Governmental order; e.g., the Texas State Comptroller for tax reasons, or a severance order from the Railroad Commission on account of rule violation.
A device that fits tightly inside the tubing; when pulled through the tubing, it lifts fluid.
Crude oil not contaminated by sulphur compounds in excess of 1%.
Synthetic crude oil derived by upgrading bitumen extractions from mine deposits of oil sands.
Synthetically petroleum products produced from coal, or natural gas.
Synthetic gas fuel.
Synthetic Natural Gas
Gases made from coals and other hydrocarbon-containing substances.
Liquid fuels made from hydrocarbon-containing substances, including tar sands, plus animal vegetable oils that are used as lubricants.
A sulfur recovery unit’s residue gas; any processing unit’s gaseous exhaust that is treated as residue.
A clause in a Gas Purchase Contract requiring the purchaser to take, or failing to take, to pay for the minimum annual contract volume of gas which the producer-seller has available for delivery. Under such clause the purchaser usually has the right to take the gas paid for (but undelivered) in succeeding years. Such gas is called Makeup Gas.
The cost of assets that in themselves have a salvable value.
Tanks for oil storage before delivery to a refinery.
A number of petroleum tanks that are operated together as a depot in oil storage and distribution activities.
The individual who measures a tank and prepares a tank table.
A table showing the volume of tank at various levels based on ¼ inch intervals.
Trans-Alaska Pipeline System, the line from Prudhoe Bay on the North Slope to the terminal port of Valdez on the south coast of Alaska.
Tax Identification Number
A unique number assigned to an individual, partnership, company, etc., under which income is reported to the Internal Revenue Service (synonymous with Social Security number).
Trillion cubic feet.
The act of isolating the completed interval or intervals within a wellbore from the surface by means of a cement retainer, cast iron bridge plug, cement plug, tubing and packer with tubing plug, or any combination thereof.
Tenant’s Consent Agreement
The consent of the owner of a possessory interest in land (i.e., a surface lessee) to drilling operations by the oil and gas lessee.
Tenants in Common
Persons who hold the same land together by several and distinct titles, but by unity of possession. Both parties have the right to use and possession the property simultaneously.
Tension Leg Platform
A floating offshore structure held in position by a number of tension-maintaining cables anchored to the seabed. The cables dampen wave action to keep the platform stationary.
A mineral or royalty interest of less than perpetuity; such as for ten years.
Term of Years
Ownership in land for a specific number of years. See Estates in Land.
Plant and equipment designed to receive and process crude oil or gas to remove water and impurities.
(1) The use of improved recovery methods that not only restore formation pressure but also improve oil displacement or fluid flow in the reservoir. (2) The use of any improved recovery method to remove additional oil after secondary recovery. Compare primary recovery, secondary recovery.
The first well to be drilled on a lease to evaluate a certain horizon. It is commonly referred to as a wildcat well.
A trust established by the terms of a will.
Having made and left a valid will; as apposed to intestate.
An estate to be administered pursuant to a will.
(1) One who dies leaving a will. (2) A person who leaves a will at the time of his death. Such a person is said to have died testate.
A woman who has made or left a valid will at the time of her death.
A unit of heat equivalent to 100,00 British Thermal Units (BTU).
A device for extracting oil samples from a tank.
The total amount of raw materials processed by a refinery or other plant in a given period.
Discharge of produced water or other waste materials into tide influenced waters.
Tight Formation Gas
Gas produced from a sedimentary layer of rock cemented together in a manner that greatly hinders the flow of any gas through the rock and, therefore, qualifies for (IRS) Section 29 tax credit.
(1) A well about which information is restricted for security or competitive reasons. (2) A section of the hole that, for some reason, is undergauge. For example, a bit that is worn undergauge will drill a tight hole.
Sand or sandstone formation with low permeability.
A statement of opinion by an attorney, often in the form of a letter, as to the state of the title to land, minerals, royalty, or working interests. Requirements, when appropriate, are set forth by the attorney and should be cured or waived prior to drilling. Division Order title opinions are used in the preparation of comprehensive division orders, especially for new production. Compare Division Order Title Opinion and Drill Site Title Opinion.
Point in time title actually changes hands.
Small amounts of acreage assigned to a proration unit after the unit is already established.
A key petrochemical and an organic solvent; along with xylene, a key component in unleaded gasoline.
Second in command of a drilling crew. (First in command is the superintendent)
A lease acquired while an oil and gas lease to the same property is still in effect. The top lease (usually held by a different company) replaces the existing lease when it expires or is terminated.
The primary distillation process phase of a refinery process, and by derivation, the type or refinery and its yield of products.
The superstructure of a platform.
Total Depth (TD)
The maximum depth reached in a well.
A division of territory in surveys of U.S. public land. (1) The north-south lines of the rectangular survey system. (2) The square contains 36 sections, or 36 square miles, 6 miles on each side, that is the major unit of land in the rectangular survey system of measurement. Compare range.
Any specific area of land.
Traditional Gas Sales Contracts
Usually a long-term contract, with numerous provisions such as price, deliverability, take-or-pay, quality of gas, etc. These contracts are usually with a pipeline company.
A series of units that together accomplish a complex process.
A document whereby participants in a Division Order change the disposition of their share of the proceeds.
The movement of any crude petroleum oil or products of crude petroleum oil or the products of either from any receptacle in which any such crude petroleum or products of crude petroleum oil or the products of either has been stored to any other receptacle by any means or method whatsoever, including the movement by any pipeline, railway, truck, motor vehicle, barge, boat, or railway tank car.
The sum of the fixed costs and variable costs of moving gas or oil.
The pipeline company that transports natural gas for a shipper. Any common carrier transporting oil or a product.
Removal of contaminants from gas by mechanical or chemical means.
A plant to remove contaminants from natural gas.
Traps associated with nonconformities or discontinuities in the strata.
An entity created in which property is conveyed and maintained for the benefit of a person, persons, or company. The trustee(s) supervises and maintains the trust for the beneficiary. See Testamentary Trust and Inter Vivos Trust.
A person or corporation to whom title is conveyed for handling and supervision for the benefit of another (the beneficiary).
A person who creates a trust; a broad term which includes settlor, testator, grantor and donor.
The piping installed in wells for the production of oil and gas.
A piece of equipment in which a shaft is steadily rotated by the impact of a current of steam, air, water, or other fluid directed from jets or nozzles upon blades of a wheel.
A period of brisk activity at a refinery or plant when processing units, or portions of them, are shut down for scheduled maintenance or the installation of new equipment and systems.
A completed well, drilled and equipped by a contractor for a fixed price.
Underground Injection Control, a program required in each state by a provision of the Safe Drinking Water Act (SDWA) for the regulation of Injection Wells, including a permit system. An applicant must demonstrate that the well has no reasonable chance of adversely affecting the quality of an underground source of drinking water before a permit is issued.
Natural gas found in reservoirs not including crude oil.
A term which has not be defined in many unclaimed property laws. The term has been interpreted by many jurisdictions to mean any funds held by a holder for a period in excess of the requisite abandonment period, subject to any specific statutory or regulatory exemptions. Defenses to funds being designated as unclaimed, which can vary from jurisdiction to jurisdiction, could include, but are not limited to, the following: (1) disputes as to ownership, e.g. a situation where more than one person claims the funds; (2) funds held pursuant to litigation; (3) funds held pursuant to liens; and (4) owner-generated activity which indicates an interest in the funds. Each item of property should be reviewed on its own facts and circumstances to arrive at a determination as to its unclaimed status.
Unclaimed Property Report
A report many jurisdictions require a holder of unclaimed property to file. The holder submits a report containing the names and last-known addresses of apparent owners of unclaimed property, and such other information as the particular jurisdiction may require. This report, in turn, is used to generate the notice that the jurisdiction uses to attempt to locate missing owners and to serve as the record of the holder’s compliance with the jurisdiction’s law.
Drilling under conditions where the pressure being exerted inside the wellbore (from the drilling fluids) is less than the pressure of the oil or gas in the formation.
Underground Hydrocarbon Storage
The use of subsurface geologic formations for storing liquid, liquefied or gaseous hydrocarbons, such as natural gasoline, propane and natural gas.
The placement of gases or fluids into an underground reservoir through a wellbore. May be used as part of enhanced oil recovery or waterflooding processes or for disposal of produced water.
Production that is less than the allowable assigned to a proration unit.
Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or gas.
A fractional interest in surface or minerals that is owned in each and every acre of a particular parcel of land.
A Federal unit in which all working interest owners pay costs for all activities within the unit area at percentages fixed when the unit is first formed. Most units are not the divided type of unit.
The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a Unitization Agreement.
Operation of the whole field (or substantially all of it) as an entity, without regard to ownership boundaries. As contracted to “pooling,” unitization involves a group of wells.
Land subject to a unitization agreement.
The processes of exploring for oil, developing oil fields, and producing oil from fields. The opposite of upstream is downstream.
A term for life estate in Louisiana.
A Spanish measurement that was used in many old Texas deeds, etc. In Texas, a vara equals 33 1/3 inches; 36 varas equal 100 feet.
State and county where an acknowledgment was taken.
To confer an immediate, fixed right of present or future possession and enjoyment of property.
The resistance that a fluid has to natural flow. Oil’s viscosity is usually greater than an oil and gas mixture.
Pooling of leased tracts willingly undertaken by all the parties involved, both working interest owners and royalty owners.
A guarantee made by the owner of a piece of land as to its ownership. A full warranty entitles a lessee to recover damages if it is later determined the lessor does not own all he warranted he owned. A special warranty is limited; i.e., “by, through and under, but not otherwise” is a special warranty.
The clause in a transfer document such as a warranty deed or an oil and gas lease that assures title to the leased property by an express covenant to that effect.
A deed given with a full warranty or guarantee of the ownership of the interest being conveyed.
Method of enhanced recovery in which water is injected into an oil reservoir to increase pressure and maintain or improve oil production.
A well drilled to obtain a supply of water for drilling or operating use.
A method of increasing oil recoveries from an existing reservoir. Water is injected through a special “water injection well” into an oil producing formation to force additional oil out of the reservoir rock and into nearby oil wells.
A hole drilled or bored into the earth, usually cased with metal pipe, for the purpose of obtaining water, gas, oil, or other natural resources.
A protective structure built around an offshore well to keep boats or floating debris from damaging the wellhead.
A record of geological formation penetrated during drilling, including technical details of the operation.
Maintenance work performed on an oil or gas well to improve or maintain the production.
The hole in the rock made by the drill bit.
The point at which the crude (and/or natural gas) exits the ground.
West Texas Intermediate (WTI)
A type of crude oil commonly used as a price benchmark.
Natural gas containing significant amounts of liquefiable hydrocarbons.
Lighter products from the top end of the refining process as distinct from “black” oil.
Wildcat (Wildcat Well)
(1) An exploration well drilled in “unproven territory,” without direct evidence of the contents of the underlying rock structure. (2) An exploration well that is drilled in an unproven reservoir from which no oil or gas has been produced in the nearby area. (3) A well drilled in an unproven area. Also known as an “exploration well” or a “rank wildcat.” (This term comes from the exploration wells in West Texas in the 1920’s where wildcats were abundant in the local area. Those unlucky enough to be shot were hung from the oil derricks.)
Wildcat Appraisal Well
An appraisal well drilled with minimum preliminary information about the underlying structure and conditions; it usually follows a wildcat well that reported shows of oil or gas.
(1) An individual’s written declaration of property disposal after death. (2) An instrument spelling out the disposition of one’s property after death. (On rare occasions, an oral statement can be considered a will, but most wills are in writing. An oral will cannot pass title to land in Texas.) See Holographic Will.
The right granted to the lessee of a property to explore for and to produce and own oil, gas, or other minerals. The working interest owners bear the exploration, development, operating, and marketing costs on either a cash, penalty, or carried basis. See Gross Working Interest and Net Working Interest.
The performance of one or more of a variety of remedial operations on a producing oil well to try to increase production. Examples of workover jobs are deepening, plugging back, pulling resetting liners, and squeeze cementing. Compare to Recompletion.
Expenses incurred in cleaning a well in an attempt to increase production.
An aromatic hydrocarbon that is the basis for many petrochemicals; along with toluene, a key ingredient in unleaded gasoline
The quantity of petroleum product derived from a process, based on the specific weights of raw materials
Zone of Cooperation
An area of the Timor Sea jointly administered by Australia and East Timor.
Layers of rock which have distinct characteristics that differ from nearby rock. Intervals of subsurface formations.
TIPRO – Texas Independent Producers and Royalty Owners
OIPA – Oklahoma Independent Petroleum Association
IPAA – Independent Petroleum Association of America
FERC – Federal Energy Regulatory Commission
IDC – Intangible Drilling Costs
AMT – Alternative Minimum Tax
WPT – Windfall Profits Tax
R & D – Research and Development
OCC – Oklahoma Corporation Commission
TRC – Texas Railroad Commission
MI – Mineral Interest
RO – Royalty Owner
WI – Working Interest
ORRI – Overriding Royalty Interest
LO – Landowner
MD – Mineral Deed
DO – Division Order
NADOA – National Association of Division Order Analysts
TOP – “Take or Pay” Clause (Gas Contract)
NOPR – Notice of Proposed Rulemaking
CMM – Certified Mineral Manager
RRC – Railroad Commission of Texas
TNRCC – Texas Natural Resources Conservation Commission
EPA – Environmental Protection Agency
RCRA – Resources Conservation and Recovery Act (1976)
CERCLA – Comprehensive Environmental Response, Compensation and Liability Act (1980) – “Superfund”
SARA – Superfund Amendments and Reauthorization Act (1986)
ESA – Endangered Species Act
SWDA – Safe Water Drinking Act
CWA – Clean Water Act (1977) Amended FWPCA (1948) –Federal Water Pollution Control Act
CAA – Clean Air Act
NEPA – National Environmental Policy Act (1970)
NORM – Normally Occurring Radioactive Material
ARC – American Royalty Council
MCF – Million Cubic Feet
BBL – Barrels of oil
TXOGA – Texas Oil & Gas Association
API – American Petroleum Institute
PUC – Public Utility Commission
PBR – Permit by Rule
TCEQ – Texas Commission of Environmental Quality
ARC Celebrates Oklahoma’s Centennial
The early science of crude oil discovery explained that it seeped up out of the ground. You simply had to know what it was, and how to make money from petroleum. The early discoveries were in Pennsylvania, and crept through the Great Lake states where transportation was available on barges. Oil had quickly become refined to kerosene, and dominated the lighting needs of the dark cities.
In Oklahoma, the first oil deal was called the ‘lease.’ It allowed the producer to bring drilling equipment onto the land. Oklahoma royalty owners were there at the beginning of the oil and gas industry and have seen all the changes that have helped shape Oklahoma’s production. With production of the oil came royalty, the percentage paid to the land owner. For decades, royalty was 1/8th (twelve and one-half per cent) of what would become billions of barrels of oil in Oklahoma. Early barrels sold for a dollar per barrel, but prices would become volatile and drop to 10 cents. The volatility would make and break producers for decades.
The American Royalty Council (ARC) has become the 21st century voice of royalty owners – offering the experience that the oil and gas industry has become the energy industry, and change is always on the horizon. ARC sustains the efforts of many county, state and regional royalty owner groups that met for education and support as the petroleum industry grew in the state. Although early producers burned natural gas and considered it dangerous, the modern-day royalty owner must be a prudent partner with those who produce and regulate the natural resources and disallow the waste of our natural resources due to a lack of knowledge and communication. Today we speak in e-commerce and WWW.AMERICANROYALTYCOUNCIL.COM. Energy is the life blood of our economy, and those who are part of the production revenue stream are consumers. It takes energy to make energy. As we look to the future, oil and gas will continue to be vital ingredients for all so-called ‘alternative’ supplies. A new generation of royalty owners will begin.
THE FIRST DEAL
Unlike many states, Oklahoma had been divided into tracts of land containing 160 acres. There were land runs, dozens of relocated Indian tribes, and statehood saw the tribal lands again divided. The rules of settlement often required only a few years of residency. As oil exploration arrived, speculation became a way of life. The concept of ‘severed’ mineral rights quickly brought investors from eastern cities. At statehood, Oklahoma was witness to the dismantling of the Standard Oil Trust, the infamous Rockefeller monopolies at the turn of the century. This would shape attitudes that still filter the perceptions of Oklahoma’s most valuable industry.
Oklahoma has had enormous oil fields. It has created tens of thousands of royalty owners. In the early days the crude oil was hauled by mules in wagons full of wooden barrels to local refineries for what was primarily city use. Oklahoma was a vast ocean of tallgrass prairies and the land was used for farming and ranching. The automobile was a novelty, electricity had not found its way to the rural world, and airplanes (that would take our favorite son, Will Rogers) were on the drawing board.
World War I focused the need for gasoline as new machines took troops overseas and gasoline powered battlefield equipment meant more and more crude oil needed to be produced in the U.S. and shipped by tanker to Europe. With every increase, the relationship between producer and royalty owner evolved. The years referred to as the ‘Roaring 20’s’ became the image of the victorious Americans in top hat and silk. The automobile had become the mode of transportation and often was driven by chauffeurs. The collapse of the stock market ravaged its investors and left unemployment approaching 25%. Trains burned coal and hauled oil across the country as people looked for a new day.
In Oklahoma, families lost farms and valuable mineral rights that they did not know what lay beneath their dusty soil. Others severed their minerals and saved what they could. Those who had means held their ground and looked for a way for their families to continue in the state. During these uncertain days families began to do what families do. They married, divorced, lost children and moved to the lands of their dreams. Royalty owners have moved throughout the county and even around the world. With each decision, the mineral rights began to be divided. It became more difficult to locate people, and the state needed to extract its natural resources in an orderly way. The Oklahoma Corporation Commission (OCC) was created to oversee the way oil was produced. Royalty owners would have to learn to be regulated. It was the days of populism and to the royalty owner the companies had too much power over their mineral rights.
World War II would need all of the oil the world could produce. Oklahoma joined all producing states in providing expertise to oil discoveries in foreign lands. Victory in Europe and the Pacific opened the U.S. workforce to Eisenhower’s view of the German Autobahn that led to America’s interstate highway and the love affair with the car – the bigger the better. Oil was cheap and plentiful no matter where it came from. Oklahoma’s royalty owners paid off debts at the bank, sent their children to college and made gifts to their church.
BOOM & BUST
In no industry does the term ‘bust’ mean more than the volatile oil and gas industry. The economics of inflation had kept the production of crude oil fairly stable for decades, and natural gas was still very cheap or wasted. In the 1970’s, a new royalty owner appeared as the world shrunk in size following WW II and the enormous growth years of the 1950’s. While Americans moved from a rural economy to suburban lifestyles and agri-business, the new owners of the oil markets joined forces and formed ‘OPEC.’ The Organization of Petroleum Exporting Countries had seen a new power – the control of energy.
No one used more energy than the United States and the costs were manifest in unusual forms. The public stood in line for gasoline. There was anger, but also fear. The oil producers were faced with concessions offered by countries that did not want to follow the same financial arrangements that had produced great wealth for their countries. They wanted more. Domestic producers needed to meet the needs of a country that was accustomed to very cheap gasoline. Equipment was sparse, and new leasing was a demand that had producers offering higher royalty rates. Three/sixteenths and even one quarter royalties were being offered to mineral owners who had little or no experience with the competition. The era would generate billions of dollars in oil and gas revenue and the royalty owners were there to receive their share.
It was called a BOOM, and few people knew how to handle the pace. The already ‘fat cat’ reputation of oil companies expanded as stories of excess grew to urban myth. The OCC had its hands full of ‘force pooling’ hearings and the challenge of the rules again drew a wedge between owners and producers. However, ‘lease bonuses’ became myth as well. Royalty owners could easily fall for the jackpot mentality rather than make sure their lease was a good one with a reputable operator. The smart players made good deals. Today there are still good deals. In that era, oil prices had risen from $3 per barrel of oil to over $35 per barrel. Prices for natural gas had also risen dramatically from pennies to $1 per million cubic feet (mcf). For years, oil and gas leases had allowed the lessors to use gas on the premises of their farms, and in some cases irrigation equipment was powered by natural gas. In the coming years, the commodity of natural gas would be traded as never before. The 1980’s would bring an all too familiar bust followed by the liberation of Kuwait in the 1990’s causing crude oil prices to rise and collapse. It was ‘boom’ and ‘bust,’ and Oklahoma’s royalty owners have been there to see it all. Each family represents a small business, and their contributions are in the economics of the state for all to witness.
THE AMERICAN ROYALTY COUNCIL
Oklahoma’s crude oil production has fallen from 200 million barrels yearly to 60 million barrels per year. Without renewed values for crude oil, wells would be abandoned at a catastrophic rate. Natural gas has become the savior for the Oklahoma oil patch. Royalty owners are the natural grassroots proponents of high quality goals for public perception that must be sustained for the economic well-being of Oklahoma. The American Royalty Council has created a forum for royalty owners and producers as well as the representatives from the new ‘mid-stream’ components of companies that must maintain the infrastructure that takes our natural resources to market. An elder statesman of the oilpatch once commented, “We send grain and natural gas to others, and they return a $5 box of cereal.” Maximization of Oklahoma’s great legacy of oil and gas takes outspoken support of the partnership that exists between royalty owner and producer. ARC is committed to improving that goal. For far too long the misperceptions have created a poor dialogue. Oklahoma is a mature producing state, but there are “miles to go before we sleep.” ARC is proud to support our industry. The tragedy of the impact of Hurricane Katrina is witness of the devastation we face without our energy production healthy and capable. ARC brings generations of common sense to the national dialogue we have begun to undertake in the United States. Oklahoma’s royalty owners have been partners to thousands of wells. They have fueled the engine of our state and our country. Be sure to visit the ARC website for energy news, education, and a forum for your voice to be heard in promoting Oklahoma’s oil and gas production in the future. The website offers a unique perspective of the oil and gas royalty owners’ connection to the property – the deed, lease, division order and the check stub which are the primary documents that define the interaction between mineral owner to royalty owner and the production.
(Oil & Gas Investor – May 2007)