3-D siesmic - A relatively new exploration technique used in the search for oil and gas underground structures. The basic premise behind seismic is the same as ultra sound technology used in the medical field. Sound from a shot hole is recorded from geophones and interpreted to give a picture of the underlying structures within the earth. 3-D has now become a common practice to redefine and identify known as well as unknown structures. Many times these structures contain traps that hold oil and gas yet to be discovered.

4-D Seismic - The newest advances in seismic technology which now takes into consideration a 4th dimension; which is time. With 4-D seismic geologists are now able to monitor the movement and the mobility of oil as it is extracted in the production process.

Abstract of title - A chronological history of the ownership of a tract of land.

Acidizing a well - Increasing the flow of oil from a well by pumping hydrochloric acid into the well under high pressure. This reopens and enlarges the pores in the oil-bearing limestone formation.

Acre - The most common of land measure in the United States. A square 210 feet on a side (44,100 sq. ft) would be a bit larger than an acre (43,560 sq. ft). There are 640 acres in a square mile.

Acre-foot - In the U.S., the thickness of a pay zone is measured in feet, and the area of the reservoir is measured in acres. An acre-foot is a volume of reservoir rock that is one acre in area and one foot thick.

Actuals - Commodities such as metals, coffee and grain which are bought and sold for use as opposed to hedging by trading on a futures contract.

AFE (Authorization For Expenditure) - An estimate of the costs of drilling and completing a proposed well, which the operator provides to each working interest owner before the well is commenced.

Annular space - The space between a well's casing and the wall of the borehole.

Annulus of a well - The space between the surface casing and the inner, producing well-bore casing.

Anticline - A geological term describing a fold in the earth's surface with strata sloping downward on both sides from a common crest. Anticlines frequently have surface manifestations like hills, knobs, and ridges. At least 80 percent of the world's oil and gas has been found in anticlines.

API - American Petroleum Institute, a petroleum industry association that sets standards for oil field equipment and operations.

API gravity - The gravity (weight per unit of volume) of crude oil expressed in degrees according to an American Petroleum Institute recommended system. The higher the API gravity, the higher the crude. High-gravity crudes are generally considered more valuable.

Aquifer - An underground water reservoir contained between layers of rock, sand or gravel.

Arab oil embargo of 1973-74 - During the Arab-Israeli conflict in October 1973, Arab oil producers cut off shipments to the Unites States and the Netherlands in retaliation for their support of Israel. At the same time, they cut down production. The shortage was felt by all oil-importing nations, with world prices moving sharply higher. Price and allocation controls suppressed some of this increase in the United States, but gasoline lines were still prevalent.

Asphalt - A solid hydrocarbon which may be deposited within the reservoir rock, in well equipment, or in surface lines and tanks.

Associate gas - The gas that occurs with oil either as free gas or in solution. When occurring alone, it is referred to as unassociated gas.

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B

Back-in - A type of interest in a well or property that becomes effective at a specified time in the future, or on the occurrence of a specified future event.

Barrel Standard - Unit of measurement in the petroleum industry. One barrel of oil equals 42 U.S. gallons.

Basement rock - Igneous or metamorphic rock lying below sedimentary formations in the earth's crust. Basement rock does not contain petroleum deposits.

Basin - A depression in the earth's crust in which sedimentary materials have accumulated. Such a basin may contain oil or gas fields.

Basis Point - Usually one hundredth of a percentage point used in quoting movements in interest rates of yields on securities.

BCF (billion cubic feet) - The cubic foot is a standard unit of measure for gas at atmospheric pressure.

Bear Market - A market in which sellers outnumber buyers and where the trend of share prices is consequently a falling one.

Behind pipe - If a well drills through several pay zones and is completed in the deepest productive reservoir, casing is set all the way down to the producing zone. Viewed from (a perspective) inside the borehole, reserves in the shallower pay zones up the hole are behind the casing.

Biomass - Any organic material, such as wood, plants, and organic wastes, that can be turned into fuel.

Bit - The cutting or boring element used in drilling oil and gas wells. The bit consists of a cutting element and a circulation element.  The cutting element is steel teeth, tungsten carbide cottons, industrial diamonds, or polycrystalline diamond compacts (PDCs)

Bleeding core - A core sample of rock so highly permeable and saturated that oil drips from it.

Blind pool - Refers to an oil and gas limited partnership which has not committed to specific prospects, leases, or properties at the time of capital formation.

Block - Any assembly of pulleys on a common framework; in mechanics, one or more pulleys, or sheaves, mounted to rotate on a common axis. The crown block is an assembly of sheaves mounted on beams at the top of the derrick or mast. The drilling line is reeved over the sheaves of the crown block alternately with the shaves of the traveling block, which is raised and lowered in the derrick or mast by the drilling line.

Blowout - A sudden escape of oil or gas from a well, caused by uncontrolled high pressure. It usually occurs during drilling.

Blowout insurance - An insurance policy that protects the insured party (working interest owner) from liabilities which might arise from a blowout during the drilling, completion, or production of a well.

Blue Sky Law - State regulations governing an offering to sell securities within the state.

Bonus Money - paid to a landowner or other holder of mineral rights by the lessee for the execution of an oil and gas lease in addition to any rental or royalty obligations specified in the lease.

BOP (blowout preventer) - An assembly of heavy-duty valves attached to the top of a well casing to control pressure.

Bore - The inside diameter of a pipe or a drilled hole. to penetrate or pierce with a rotary tool.

Borehole - A hole made by drilling or boring; a wellbore.

Bottom-hole pressure - The pressure of the reservoir or formation at the bottom of the hole. A decline in pressure indicates some depletion of the reservoir.

Bottom-hole pump - A compact, high-volume pump located in the bottom of a well, not operated by sucker rods or a surface power unit.

Brake - A device for arresting the motion of a mechanism, usually by means of friction, as in the drawworks brake.

Break circulation - To start the mud pump for restoring circulation of the mud column.

Bridle - The cable link between the "horsehead" and the pump rod on a pumping unit.

BS&W - (basic sediment and water) Material pumped up with oil and gas which must be separated out.

Btu (British thermal unit) - A standard measure of heat content in a fuel. One Btu equals the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit at or near 39.2 degrees Fahrenheit.

Bull Market - A market in which prices are rising and in which investor confidence in the continuation of rising prices is high.

Butane - A hydrocarbon associated with petroleum. It is gaseous at ordinary atmospheric conditions.

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C

Cable drilling - A method of well-drilling that employs a reciprocating, rather than a rotary, motion to penetrate rock. In the nineteenth century, until Drake's time, power was supplied by men. Drake used a steam-powered cable rig. Today, cable rigs are powered by gasoline or diesel engines.

Cap - To control a well that is flowing out of control; often accomplished by attaching a valve in the open position on top of the well and then closing it to seal off the flow.

CAOF (calculated absolute open flow) - A figure representing a gas well's theoretical producing capability per day.

Capital Funds - Monies invested in a business for use in conducting the operations of the business.

Capital asset - An asset acquired as an investment, for the purpose of creating a product or service intended to be used in the activities or operations of a business.

Capital costs (Oil & Gas Tax Usage) - For Federal income tax purposes, the costs of capital expenditures which may be recovered by deduction against income (through depreciation and depletion).

Capital expenditure - An expenditure intended to benefit the future activities of a business, usually by adding to the assets of a business, or by improving an existing asset.

Capitalize - To treat certain expenditures as capital expenditures for Federal income tax computations.

Carried Interest - A fractional working interest in an oil and gas lease that comes about through an arrangement between co-owners of a working interest.

Casing Pipe - used in oil wells to reinforce the borehole. Sometimes several casings are used, one inside the other. The outer casing, called the "surface pipe,' shuts out water and serves as a foundation for subsequent drilling.

Casinghead - The portion of the casing that protrudes above the surface and to which control valves and flow pipes are attached.

Casinghead gas - Natural gas produced from an oil well, as opposed to gas produced from a gas well.

Casinghead gasoline - Highly volatile, water-white liquid hydrocarbons separated from casinghead gas.

Cavings Rock - Fagments that break off from the walls of a borehole and fall into the borehole during drilling operations.

Cement - Fluid cement is mixed at the surface, pumped to the bottom of a cased well, forced to flow around the lower end of the casing and up into the space between the casing and the borehole. When the cement solidifies (sets), it holds the casing in place, and provides support.

Cement plug - 1. A portion of cement placed at some point in the wellbore to seal it. 2. A wiper plug. See cementing, wiper plug Cement squeeze - Forcing cement into the perforations, large cracks, and fissures in the wall of a borehole to seal them off.

Choke - An orifice installed in a pipeline at the well surface to control the rate of flow.

Christmas tree - An assembly of valves, gauges, and chokes mounted on a well casinghead to control production and the flow of oil to the pipelines.

Circulate - To pump drilling fluid into the borehole through the drillpipe and back up the annulus.

Clay - 1. A term used for particles smaller than 1/256 millimetre (4 microns), regardless of mineral composition. 2. A group of hydrous aluminum silicate minerals (clay minerals).

Clean oil - Crude oil containing less than 1 percent sediment and water; "pipeline oil", oil clean enough to send through a pipeline.

CO2 injection - A secondary recovery technique in which carbon dioxide (CO2) is injected into wells as part of a miscible recovery program.

Coal gasification - The chemical conversion of coal to synthetic gaseous fuel.

Coal liquefaction - The chemical conversion of coal to synthetic liquid fuel.

Cogeneration - The combined production of electrical or mechanical energy and usable heat energy.

Commercial quantity - An amount of oil and gas production large enough to enable the operator to realize a profit, however small.

Commercial paper - A short term note issued by banks and corporations with a range of maturities from 30 days to 270 days.

Commissions - Payments to qualified agents of the sponsor of a limited partnership, for selling interests in it to investors. Commissions may take the form of a percent of partnership interests sold, an oil and gas interest, or stock in the sponsor's company.

Common carrier - A person or company in the business of transporting the public or goods for a fee. In the industry, a person or company engaged in the movement of petroleum products, like a public utility.

Completed well - A well made ready to produce oil or natural gas. Completion involves cleaning out the well, running steel casing and tubing into the hole, adding permanent surface control equipment, and perforating the casing so oil or gas can flow into the well and be brought to the surface.

Condensate - Liquid hydrocarbons separated from natural gas, usually by cooling.

Conductor casing - Generally, the first string of casing in a well. Its purpose is to prevent the soft formations near the surface from caving in and to conduct drilling mud from the bottom of the hole to the surface when drilling starts. Also called conductor pipe, drive pipe.

Confirmation well - A well drilled to "prove" the formation encountered by an exploratory well.

Connate water - The water present in a petroleum reservoir in the same zone occupied by oil and gas considered by some to be the residue of the primal sea, connate water occurs as a film of water around each grain of sand in granular reservoir rock and is held in place by capillary attraction.

Consumer price index -  An index which tracks the prices of a variety of goods purchased by an average consumer. The goods typically include food, clothing, utilities and medical care. Also known as the cost of living index which is used as a reference for wage increases and other similar inflation prone items such as Social Security payments.

Contract - A written agreement that can be enforced by law and that lists the terms under which the acts required are to performed. A drilling contract covers such factors as the cost of drilling the well (weather by the foot or by the day), the distribution of expenses between operator and contractor, and the type of equipment to be used.

Contract depth - The depth of the wellbore at which a drilling contract is fulfilled.

Conventional energy sources - Oil, gas, coal, and sometimes nuclear energy, in contrast to alternative energy sources such a solar, hydroelectric and geothermal power, synfuels, and biomass.

Conveyance - Legal term for transferring the title of a property from one party to another, typically by deed.

Core - Samples of subsurface rocks taken as a well is being drilled. The core allows geologists to examine the strata in proper sequence and thickness.

Cost Basis - The cost price of an asset used to establish capital gains tax liability.

Cracking - The process of breaking down the larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules, thus increasing the gasoline yield from crude oil. Cracking is done by application of heat and pressure, and in modern time the use of a catalytic agent.

Crude oil - Liquid petroleum as it comes out of the ground. Crude oils range from very light (high in gasoline) to very heavy (high in residual oils). Sour crude is high in sulfur content. Sweet crude is low in sulfur and therefore often more valuable.

Crude oil equivalent - A measure of energy content that converts units of different kinds of energy into the energy equivalent of barrels of oil.

Cuttings - Chips and small rock fragments brought to the surface by the flow of drilling mud as it is circulated and examined by geologists for oil content.

D

Day trading - In the simplest terms, the purchase and sale, or sale and purchase, of a security on the same day.  Day traders aim to make small profits on a large number of 'intra-day' transactions.  They follow the markets, use technical analysis to spot price trends, and get 'in and out' very quickly.

Daywork - Descriptive of work done on daywork rates.

Daywork rates - The basis for payment on drilling contracts when the rig owner is paid by the day rather by the foot. Daywork rates are the most common way in which contractors are paid for the rig’s work.

Deadline - The drilling line from the crown block sheave to the anchor, so called because it does not move. Compare fastline.

Deductions - Tax items which may be subtracted from gross income to arrive at taxable income in Federal income tax computations.

Deed - A written document by which the title to a property is transferred from one party (the grantor) to another (the grantee).

Deepwater port - An offshore marine terminal designed to accommodate large vessels such as VLCCs and tankers, connected to the shore by submerged pipelines.

Delay rental - Cash payments to the mineral rights owner (lessor) by the working interest owner (lessee), for the privilege of postponing the commencement of drilling operations on the leased property.

Deliverability - A well's tested ability to produce.

Depletion, restoration of - In federal income taxation, the adding back to income of depletion allowance taken on minerals not produced.

Derrick - A large load-bearing structure, usually of bolted construction. In drilling, the standard derrick has four legs standing at the corners of the substructure and reaching to the crown block. Compare mast.

Development - well A well drilled in an already discovered oil or gas field.

Diesel oil - A petroleum fraction composed primarily of aliphatic (linear of unbranched) hydrocarbons. Diesel oil is slightly heavier than kerosene.

Differential-pressure sticking - A condition in which a section of drillpipe becomes stuck in deposits on the wall of the borehole.

Directional drilling - Drilling at an angle, instead of on the perpendicular, by using a whipstock to bend the pipe until it is going in the desired direction. Directional drilling is used to develop offshore leases, where it is very costly and sometimes impossible to prepare separate sites for every well; to reach oil beneath a building or some other location which cannot be drilled directly; or to control damage or as a last resort when a well has cratered. It is much more expensive than conventional drilling procedures.

Directional hole - A wellbore intentionally drilled at an angle from the vertical.

Disclosure - The providing of all information by a company in accordance with the requirements of a regulatory authority (e.g. the FSA or SEC) or in accordance with a contract.

Discovery well - The first oil or gas well drilled in a new field that reveals he presence of a hydrocarbon-bearing reservoir.

Distillate - Liquid hydrocarbons, usually colorless and of high API gravity, recovered from wet gas by a separator that condenses the liquid out of the gas. The present term is natural gas.

Distillate fuel oil - A term subject to a variety of definitions. Sometimes the definition is based on the method of production, but other definitions are based on boiling range, viscosity, or use.

Distributor - A wholesaler of gasoline and other petroleum products; also know as a jobber. Distributors of natural gas are almost always regulated utility companies.

Division Order - A contract for the sale of oil or gas, by the holder of a revenue interest in a well or property, to the purchaser (often a pipeline transmission company).

Doghouse - A small enclosure on the rig floor used as an office for the driller and as a storehouse for small objects.

Dollar cost averaging - In the US, a plan which enables investors to accumulate shares in stock or a mutual fund by purchasing on a regular basis (for example monthly) with a fixed dollar amount. When the price is low, more shares will be purchased and fewer when the price is high. Also known as constant dollar plan

Domestic production - Oil and gas produced in the United States as opposed to imported product.

Double - A length of drill pipe, casing or tubing consisting of tow joints screwed together. Compare  fourble, single, thribble.

Dow Jones Industrial Average - One of the main USA share indices which monitors the movement of 30 industrial companies traded on the New York Stock Exchange.
The Dow Jones Industrial Average has just been joined by a new index, the Dow Jones Total Market Index, which covers a much broader range of companies.

Downhole - Refers to equipment or operations that take place down inside a borehole.

Downstream - All operations taking place after crude oil is produced, such as transportation, refining, and marketing.
Drake well - The first well drilled in the United States in search of oil. Some 69 feel (21 metres) deep, it was drilled near Titusville, Pennsylvania, and was completed in 1859. It was named after Edwin L. Drake, who was hired by the well owners to oversee the drilling.

Drill - To bore a hole in the earth, usually to find and remove subsurface formation fluids such as oil and gas.

Drill ahead - To continue drilling operations.

Drill bit - The part of the drilling tool that cuts through rock strata.

Drill collar - A heavy, thick-walled tub, usually steel, placed between the drill pipe and the bit in the drill steam.

Drill column - See drill stem.

Drill pipe - Seamless steel or aluminum pipe made up in the drill stem between the kelly or top drive on the surface and the drill collars on the bottom. Several joints are made up (screwed together) to from the drill string.

Drill site - The location of a drilling rig.

Drilled show - Oil or gas in the mud circulated to the surface.

Drill string - Also called drill pipe or drill stem. Thirty-foot lengths of steel tubing screwed together to form a pipe connecting the drill bit to the drilling rig. The sting is rotated to drill the hole and also serves as a conduit for drilling mud.

Drill stem test (DST) - The conventional method of formation testing. The basic drill stem test tool consists of a packer or packers, valves or ports that may be opened and closed from the surface, and two or more pressure-recording devices. The tool is lowered on the drill string to the zone to be tested. The packer or packers are set to isolate the zone from the drilling fluid column. The valves or ports are then opened to allow for formation flow while the recorders chart static pressures. A sampling chamber traps clean formation fluids at the end of the test.

Driller - The employee directly in charge of a drilling rig and crew. This person’s main duty is operation of the drilling and hoisting equipment, but the driller is also responsible for downhole condition of the well, operation of downhole stools, and pipe measurements.

Drilling - The act of boring a hole through which oil or gas may be produced if encountered in commercial quantities.

Drilling break - A sudden increase in the rate of drilling.

Drilling contract - An agreement made between a drilling company and an operation company to drill and complete a well. It sets for the obligation of each party, compensation, identification, method of drilling, depth to be drilled, and so on.

Drilling contractor - And individual or group that owns a drilling rig or rigs and contracts services for drilling wells.

Drilling crew - A driller, a derrickhand, and two or more rotary helpers who operate a drilling rig.

Drilling engine - An internal-combustion engine used to power a drilling rig.

Drilling engineer - An engineer who specializes in the technical aspects of drilling.

Drilling fluid - Circulating fluid, one function of which is to lift cuttings out of the wellbore and to the surface. Other functions are to cool the bit and counteract downhole formation pressure. Although a mixture of clay and other minerals, water, and chemical additives is the most common drilling fluid, wells can also be drilled by using air, gas, water, or oil-bas mud as the drilling mud. See mud.

Drilling fund - The generic term employed to describe a variety of organizations established to attract venture capital to oil and gas exploration and development. Typically the fund is established as a joint venture or limited partnership.

Drilling mud - A mixture of clay, water, chemical additives, and weighting materials that flushes rock cuttings from a well, lubricates and cools the drill bit, maintains the required pressure at the bottom of the well, prevents the wall of the borehole from crumbing or collapsing, and prevents other fluids from entering the well bore.

Drilling platform - An offshore structure with legs anchored to the sea bottom that supports the drilling of up to 35 wells from one location.

Drilling rate - The speed with which the bit drills the formation; usually called the rate of penetration (ROP).

Drilling rig - The surface equipment used to drill for oil or gas, consisting chiefly of a derrick, a winch for lifting and lowering drill pipe, a rotary table to turn the drill pipe, and engines to drive the winch and rotary table.

Drillstem test - A test through the drill pipe prior to completion to determine if oil or gas is present in a formation.

Dry hole - A well that either produces no oil or gas or yields too little to make it economic to produce.

Dry natural gas - Natural gas containing few or no natural gas liquids (liquid petroleum mixed with gas).

Dual completion - Completing a well that draws from two or more separate producing formations at different depths. This is done by inserting multiple strings of tubing into the well casing and inserting packers to seal off all formations except the one to be produced by a particular string.

Due Diligence - In an offering of securities, certain parties who are responsible for the accuracy of the offering document, have an obligation to perform a "due diligence" examination of the issuer; issuer's counsel, underwriter of the security, brokerage firm handling the sale of the security. Due diligence refers to the degree of prudence that might properly be expected from a reasonable man, on the basis of the significant facts which relate to a specific case.

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E

Earned income - Income that comes from work - such as a salary or wages. As distinct from unearned income - bank interest and company dividends etc. Income from pensions is also classified as earned income.

EBIT - Earnings before interest and tax.  Calculated by taking the pre-tax profit of a company and adding back only the total interest charges which it has paid on debt.EBIT is a commonly used way of measuring the profitability of a company.

Economic interest - An interest in oil and gas in the ground. It entitles the owner to a deduction from gross income derived from production of that oil and gas as specified in Federal income tax regulations.

Efficient market theory (EMT) - The theory that claims that the current price of a share reflects everything that is known about the company and its future earnings potential, and that is it impossible to beat the market consistently.
Efficient market theory suggests that the army of analysts and fund managers in the City whose job is to actively manage superior-performing portfolios are engaged in a futile exercise because everything they find out is rapidly transmitted around the market, and share prices instantly reflect the common knowledge. In other words, no one can get one up on anyone else. And the logical extension of this is that passive funds - tracker and index funds - are the best place to park your money, because their management costs are much lower and they are mathematically structured to match the performance of their chosen index.

Electrical well logging - A method of oil exploration that originated with Conrad Schlumberger, who first tested it in 1927 on a 1,500-meter well in France. As used today, the process is very simple. Current passes into the ground, through the resistive medium and into the sonde. The resulting charts show the varying resistance, the conductance, and the self-potential of the strata surrounding the well at every level, and geophysicists use them to assay whether petroleum is present in a formation.

Enhanced oil recovery - Injection of water, steam, gases or chemicals into underground reservoirs to cause oil to flow toward producing wells, permitting more recovery than would have been possible from natural pressure or pumping alone.

Ethanol - The two-carbon-atom alcohol present in the greatest proportion upon fermentation of grain and other renewable resources such as potatoes, sugar, or timber. Also called grain alcohol.
Eurodollar - US dollar currency deposited in banks outside the USA.

European Community (EC) - The current community - current members are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom.

Expenses (Tax Usage) - Expenditures for business items that have no future life (such as rent, utilities, or wages) and are incurred in conducting normal business activities.

Exploration - The search for oil and gas. Exploration operations include: aerial surveys, geophysical surveys, geological studies, core testing and the drilling of test wells.

Exploitation well - A well drilled to permit more effective extraction of oil from a reservoir. Sometimes called a development well.

Exploratory well - A well drilled to an unexplored depth or in unproven territory, either in search of a new reservoir or to extend the known limits of a field that is already partly developed.

External casing packer - A device used on the outside of the well casing to seal off formations or protect certain zones. The packer is run on the casing and expanded against the wall of the borehole at the proper depth by hydraulic pressure or fluid pressure from the well.

Extraction plant - A plant for the extraction of the liquid constituents in casinghead gas or wet gas.

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F


Fair market value - The traded value of an asset agreed by seller and buyer.

Farm in - When one company drills wells or performs other activity on another company's lease in order to earn an interest in or acquire that lease.

Farm out agreement - An arrangement in which the responsibility of exploration and development is shifted (by assignment) from the working interest owner to another party.

Farmer's oil - An expression that refers to the landowner's share of oil from a well drilled on his property. This royalty is traditionally one-eighth of the produced oil free of any expense to the landowner.

Fault - A break in the continuity of stratified rocks or even basement rocks. Faults are significant to oilmen because they can form traps for oil when the rock fractures, they can break oil reservoirs into noncommunicating sections, they help produce oil accumulations, and they form traps on their own.

Fault trap - A geological formation in which oil or gas in a porous section of rock is sealed off by a displaced, nonporous layer.

Federal Deposit Insurance Corporation (FDIC) - In the US, the federal agency that acts as guarantor for funds deposited in member banks.

Federal Reserve System - The American central banking system which comprises 12 regional Federal Reserve Banks, their branches and all national and state banks within the system. The Federal Reserve sets monetary policy in the USA and regulates the banking system.

Fee-based advisor - An independent financial adviser whose income is derived from fees charged to customers rather than commissions from provider companies. Any commission received can be rebated to the customer as a cash sum, reduced fee or improved set of benefits.

Fee lands - Privately owned, nonpublic lands.

Feet of pay - The thickness of the pay zone penetrated in a well.

Field - A geographical area under which one or more oil or gas reservoirs lie, all of them related to the same geological structure.

Filter cake - A plastic-like coating that builds up inside the borehole. Such buildup can cause serious drilling problems, including sticking of the drillpipe.

Fish - An object that is left in the wellbore during drilling or workover operations and that must be recovered before work can proceed. to recover from a well any equipment left there during drilling operations, such as a lost bi or drill collar or part of the drill string.

Fishing - Recovering the tools or pipe that have been accidentally lost down the borehole by using specially designed tools that screw into or grab the missing equipment.

Fishing tools - Special instruments equipped with the means for recovering objects lost while drilling the well.

Five-spot waterflood program - A secondary-recovery operation in which four injection wells are drilled in a square pattern with the production well in the center. Water from the injection wells moves through the formation, forcing oil toward the production well.

Fixed income securities - Securities which pay a fixed rate of interest.  Government bonds (gilts) are the best known example.  Compared to shares, fixed income securities have the attraction of certainty - you know what income you will get in advance - and they are less risky than shares.  But the upside is not as good, and you will never get the really high returns with a bond that you might get with a share that does well.

Flange up - To complete the drilling of a well.

Flaring - The burning of gas vented through a pipe or stack at a refinery, or a method of disposing of gas while a well is being drilled. Flaring is regulated by state agencies. Venting (letting gas escape unburned) is generally prohibited.

Floating offshore drilling rig - A type of mobile offshore drilling unit that floats and is not in contact with the seafloor (except with anchors) when it is in the drilling mode. Floating units include drill ships and semisubmersibles. See mobile offshore drilling unit.

Flooding - One of the methods of enhanced oil recovery. Water flooding or gas flooding might be considered secondary recovery methods.

Flow Through concept - In ventures structured as partnerships (or S corporations), certain items of tax significance (profit, loss, etc.) are passed on to the partners (or S corporation shareholders) in the venture. In a venture structured as a "C" corporation, the responsible tax-paying party would be the corporation itself (not its shareholders).

Flowing well - A well that produces through natural reservoir pressure and does not require pumping.

Fluid - Substance that flows and yields to any force tending to change its shape. Liquids and gases are fluids.

Footage rates - A fee basis in drilling contracts stipulating that payment to the drilling contractor is made according to the number of feet or metres of hole drilled.

Force majeure - Unforeseeable events, beyond the control of participants in a contract, which may excuse either side from fulfilling its liabilities.

Formation - A geological term that describes a succession of strata similar enough to form a distinctive geological unit useful for mapping or description.

Formation boundary - The horizontal limits of a formation.

Formation fluid - Fluid (such as gas, oil, or water) that exists in a subsurface rock formation.

Formation fracturing - A method of stimulating production by opening new flow channels in the rock surrounding a production well. Often called a frac job. Under extremely high hydraulic pressure, a fluid (such as distillate, diesel fuel, crude oil, dilute hydrochloric acid, water, or kerosene) is pumped downward through production tubing or drill pipe and forced out below a packer or between two packers. The pressure causes cracks to open in the formation, and the fluid penetrates num pellets, walnut shells, or similar materials (propping agents) are carried in suspension by the fluid into the cracks. When the pressure is released at the surface, the fracturing fluid returns to the well. The cracks partially close on the pellets, leaving channels for oil to flow around them to the well.

Formation pressure - The force exerted by fluids in a formation, recorded in the hole at the level of the formation with the well shut in. Also called reservoir pressure or shut-in bottom hole pressure.

Fossil fuels - Fuels that originate from the remains of living things, such as coal, oil, natural gas, and peat.

Fracturing - A well stimulation technique in which fluids are pumped into a formation under extremely high pressure to create or enlarge fractures for oil and gas to flow through. Proppants such as sand are injected with the liquid to hold the fractures open.

Front-end costs - Costs that are paid out of initial investment in a venture, first, before the venture activities actually begin.

Fuel oil - See Heating oil.

Future prices - Refers to the New York Mercantile Exchange (NYMEX) which introduced futures contracts for crude oil in 1985 and natural gas in 1990.
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G

Gamma-ray logging - A technique of exploration for oil in which a well's borehole is irradiated with gamma rays. The varying emission of these rays indicates to geologists the relative density of the rock formation at different levels.

Gas cap - The gas that exists in a free state above the oil in a reservoir.

Gas condensate - Liquid hydrocarbons present in casinghead gas that condense when brought to the surface.

Gas lift - A recovery method that brings oil from the bottom of a well to the surface by using compressed gas. Gas pumped to the bottom of the reservoir mixes with fluid, expands it, and lifts it to the surface.

Gas-cut mud - Drilling mud permeated with bubbles of gas from downhole. The circulation of such mud can be severely impaired, seriously affecting drilling operations.

Gas-oil ratio - The number of cubic feet of natural gas produced along with a barrel of oil.

Gasoline - A volatile, inflammable, liquid hydrocarbon mixture.

Gauge - 1. The diameter of a bit or the hole drilled by the bit. 2. A device (such as a pressure gauge) used to measure some physical property. To measure size, volume, depth, or other measure property.

Gel - A semisolid, jellylike state assumed by some colloidal dispersions as rest. When agitated, the gel converts to a fluid state. Also a nickname for bentonite. To take the form of a gel; to set.

General agreement on tariffs and trade (GATT) - A trade agreement between a large number of countries, dating back to 1948, which was set up to improve trading world wide and to work towards the reduction of tariff barriers.

General partner - In a limited partnership, the general partner is responsible for managing the partnership's activities (and is commonly the party that put the deal together). His liability to the partnership's creditors is limited.

Geophones - The sound-detecting instruments used to measure sound waves created by explosions set off during seismic exploration work.

Geophysicist - A geophysicist applies the principles of physics to the understanding of geology.

Geothermal energy - Energy produced from subterranean heat.

Goodwill - The value of a business to a purchaser over and above its net asset value. It reflects the value of intangible assets like: reputation, brand name, good customer, relations, high employee morale, and other factors which improve the company's business.
Goodwill is normally given a value in a company's balance sheet, but is amortised over a period of time.

Gravimeter - A geophysical device that has been particularly useful in finding salt domes. Actually, it is a weight on a spring. The spring gets longer in high-gravity areas and shorter in areas of gravity-minus. Magnetism helps the oil geologist understand its measurements

Gross income - Total income from an activity, before deduction of (1) items that may be treated as expenses (such as intangible drilling costs), and (2) allowed tax items (such as depletion allowance, depreciation allowance, etc.).

Gross domestic product (GDP) - The value of all goods and services created within an economy. It equals gross national product minus income from abroad.

Gross national product (GNP) - The total value of all goods and services produced by a country. Real growth in GNP measures the increase in output after making adjustments for inflation.

Groundwater - The water in underground rock strata that supplies wells and springs.

Guaranteed payments - Payments by a partnership to one or more of its partners for services rendered.

Guidelines - Lines, usually four, attached to a special guide base to help position equipment (such as blowout preventers) accurately on the seafloor when a well is drilled offshore from a floating vessel.

Gun perforation - A method of creating holes in a well casing downhole by exploding charges to propel steel projectiles through the casing wall. Such holes allow oil from the formation to enter the well.

Gusher - A well drilled into a formation in which the crude is under such high pressure that at first it spurts out of the wellhead like a geyser. Gushers are rare today owning to improved drilling technology, the use of drilling mud to control downhole pressure, and oilmen's recognition of their wastefulness.

H

Hang Seng Index - The main indicator of stock market performance in Hong Kong based on 33 companies. The index is arithmetically calculated and weighted by market capitalisation.

Hang the rods - To pull pump rods out of the well and hang them in the derrick on rod hangers.

Heating oil - Oil use for residential heating.

Heavy oil - A type of crude petroleum characterized by high viscosity and a high carbon-to-hydrogen ration. It is usually difficult and costly to produce by conventional techniques.

Hedge - A strategy employed in the futures, options and warrants markets to reduce risk.Traditionally a commodity producer (say, a cocoa grower) would agree to sell his goods at a stated price at a stated time in the future, and the user of the commodity (say, a chocolate manufacturer) would agree to buy them.  By agreeing on a price, quantity and delivery date, they introduce certainty into their operations and reduce risk.

Held by production - Refers to an oil and gas property under lease, in which the lease continues to be in force, because of production from the property.

History of a well - A written account of a well's drilling and operation, required by law in some states.

Horizon - A specific sedimentary layer in a cross section of land, especially one in which a petroleum reservoir is found.

Horizontal drilling - The newer and developing technology that makes it possible to drill a well from the surface, vertically down to a certain level, and then to turn at a right angle, and continue drilling horizontally within a specified reservoir, or an interval of a reservoir.

Horsehead - The curved guide or head piece on the well end of a pumping jack's walking beam. The guide holds the short loop of cable, called the bridle, attached to the well's pump rods.

Horsepower - A unit of measure of work done by a machine. One horsepower equals 33,000 foot-pounds per minute. (Kilowatts are used to measure power in the international, or SI, system of measurement.)

Hydraulic fracturing - A method of stimulating production from a low-permeability formation by creating fractures and fissures by applying very high fluid pressure.

Hydrocarbons - A large class of organic compound of hydrogen and carbon. Crude oil, natural gas, and natural gas condensate are all mixtures of various hydrocarbons, among which methane is the simplest.

Hydrometer - An instrument that measures the specific gravity of liquids.

Hydrostatic head - The height of a column of liquid. The difference in height between two points in a body of liquid.

Hydrostatic pressure - The force exerted by a body of fluid at rest. It increases directly with the density and the depth of the fluid and is expressed in pounds per square inch or kilopascals. The hydrostatic pressure of fresh water is 0.433 pounds per square inch per foot (9.792 kilopascals per metre) of depth. In drilling, the term refers to the pressure exerted by the drilling fluid in the wellbore. In a water drive field, the term refers to the pressure that may furnish the primary energy for production.

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I

Idiot stick - A shovel

In situ - In its original place. Refers to methods of producing synfuels underground, such as underground gasification of a coal seam or heating oil shale underground to release its oil.

Incentive stock option - A stock option, which specifies a set number of shares at a specified option price extending over a given period, which is free of tax when granted and when exercised. If the share is subsequently sold two years or more after the grant date or one year or more after the transfer to an employee, a reduced capital gains tax liability on profits will apply.

Independent producer - 1. A person or corporation that produces oil for the market, who has no pipeline system or refining. 2. An oil entrepreneur who secures financial backing and drills his own wells

Infill drilling - Wells drilled to fill in between established producing wells to increase production.

Initial potential - Flow rate measured during the initial completion of a well in a specific reservoir (initial daily rate of production).

Injection well - A well employed for the introduction into an underground stratum of water, gas or other fluid under pressure. Injection well are employed for the disposal of salt water produced with oil or other waste. They are also use for a variety of other purposes: 1) Pressure maintenance, to introduce a fluid into a producing formation to maintain underground pressures which would otherwise be reduced by virtue of the production or oil or gas, 2)Secondary recovery operations, to introduce a fluid to decrease the viscosity of oil, reduce its surface tension, lighted its specific gravity, and drive oil into producing wells, resulting in greater production of oil.

Intangible drilling costs - Expenditures, deductible for federal income tax purposes, incurred by an operator for labor, fuel, repairs, hauling, and supplies used in drilling and completing a well for production.

Intermediate casing string - The string of casing set in a well after the surface casing but before production casing is set to keep the hole from caving and to seal off troublesome formations. In deep wells, one or more intermediate strings may be required. Sometimes called protection casing.

Intermediate string - See intermediate casing string.

Internal-combustion engine - A head engine in which the pressure necessary to product motion of the mechanism results from the ignition or burning of a fuel-air mixture within the engine cylinder.

 Internal Rate of Return - The interest rate which, when used as the discount rate for a series of cash flows, gives a net present value of zero. To understand this, remember the fundamental concept that $1 received in ten years is not worth as much as $1 received now, because $1 received now can be invested for ten years and compound into a higher amount.

So if you are a project financier, and you are considering the viability of a project that requires up front capital expenditure, which will be recouped by net cash inflows in years 3, 4 and 5, you have to discount the earnings in those later years to establish their net present value.  The discount you apply is the crucial thing, but the IRR gives you a starting point -it is the discount rate at which the project will break even.

If you apply a discount rate to future cashflows that is higher than the IRR, the project will make a loss in real terms.  If you apply a discount that is lower than the IRR, the project will be profitable.

Investment Tax Credit (ITC) - A credit against income taxes, usually computed as a percent of the cost of investment in certain types of assets.

Isopachous map - A geological map showing the thickness and shape of underground formations. A tool used to determine underground oil and gas reservoirs.

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J

Jack or Unit - An oil-pumping unit. The pumping jack's walking beam provides the up-and-down motion to the well's pump rods.

Jack-up rig - A floating platform with legs on each corner that can be lowered to the sea bottom to raise or jack up the platform above the water.

Jet fuel - See Kerosene.

Jetting - Injecting gas into a subsurface formation for the purpose of maintaining reservoir pressure.

Joint - A single section of drill pipe, casing, or tubing, usually about 30 feet long.

Joint Operating Agreement - A detailed written agreement between the working interest owners of a property which specifies the terms according to which that property will be developed.

Joint venture - A large-scale project in which two or more parties (usually oil companies) cooperate. One supplies funds and the other actually carries out the project. Each participant retains control over his share, including liability and the right to sell.

Junk basket - A magnet used to retrieve small tools lost in the well. A fishing instrument.

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K

Kelly bushing - Part of the drilling rig, the Kelly is a long hollow steel bar that connects to the upper end of the drill string.

Kerogen - The hydrocarbon in oil shale. Scientists believe that kerogen was the precursor of petroleum and that petroleum development in shale was somehow prematurely arrested.

Kerosene - The petroleum fraction containing hydrocarbons that are slightly heavier than those found in gasoline and naphtha. Kerosene (also spelled kerosene) was the most important petroleum product because of its use for home and commercial lighting; in recent years demand has risen again as a result of kerosene's use in gas turbines and jet engines.

Keyseating - A condition in which the drill collar of another part of the drill string becomes wedged in a section of crooked hole.Kick Occurs - when the pressure encountered in a formation exceeds the pressure exerted by the column of drilling mud circulating through the hole. If uncontrolled, a kick leads to a blowout.

Kick - An entry of water, gas, oil, or other formation fluid into the wellbore during drilling. It occurs because the pressure exerted by the column of drilling fluid is not great enough to overcome the pressure exerted by the fluids in the formation drilled.

Kick fluids - Oil, gas, water, or any combination that enters the borehole from a permeable formation.

Kick off - To deviate a wellbore from the vertical, as in directional drilling.

Kickoff point (KOP) - The depth in a vertical hole at which a deviated or slant hole is started: used in directional drilling.

Kill a well - To overcome downhole pressure by adding weighting elements to the drilling mud.

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L

Lag time - The time it takes for cuttings to be carried (circulate) from the bottom of the borehole up to the surface by the mud system.

Landman - A self-employed individual or company employee who secures oil and gas leases, checks legal titles, and attempts to cure title defects so that drilling can begin.

Landowner royalty - The share of the gross production of the oil and gas on a property without deducting any of the cost of producing the oil or gas. The usual landowner's royalty is one-eighth of gross production.

Law of capture - A legal concept on which oil and gas law in some states is based: since petroleum is liquid, and hence mobile, it is not owned until it is produced.

Lead lines - The lines through which production from individual wells is run to tanks.

Lease (Oil and Gas) - A contract by which the owner of the mineral rights to a property conveys to another party, the exclusive right to explore for and develop minerals on the property, during a specified period of time.

Lease acquisition costs - Bonus payments.

Lease broker - An individual engaged in obtaining leases for speculation or resale.

Lease hound - Someone who goes out and aggressively acquires oil and gas leases from the landowner, and then turns around and sells or trades them to an oil company planning to drill a well in the area.

Lease offering (lease sale) - An area of land offered for lease - usually by the U.S. Department of Interior - for the exploration for and production of specific natural resources such as oil and gas. Such a lease conveys no title or occupancy rights apart from the right to search for and produce petroleum or other natural resources subject to the conditions stated in the lease.

Lease or Sublease - Any transaction in which the owner of operating rights in a property assigns all or a portion of these rights to any other party.

Lifting costs - The costs of producing oil from a well or lease; the operating expenses.

Lignite - A solid fuel of a grade higher than peat but lower than bituminous coal.

Limestone - Sedimentary rock largely consisting of calcite. On a world-wide scale, limestone reservoirs probably contain more oil and gas reserves than all other types of reservoir rock combined.

Limited partner - In a limited partnership, a partner whose liability is limited to the amount of his investment in the partnership (plus any assessments and his share of undistributed partnership earnings).

Limited partnership - A partnership in which the general partner manages the partnership's activities and is solely liable for them. The limited partners are liable only to the extent of their contributions.

LNG (liquefied natural gas) - Natural gas that has been converted to a liquid through cooling to -260 degrees Fahrenheit at atmospheric pressure.

Logs - Records made from data-gathering devices lowered into the wellbore. The devices transmit signals to the surface which are then recorded on film and used to make the record describing the formation's porosity, fluid saturation, and lithology. The filing of a log is required by the federal government if the drill site is on federal land.

Log a well - To run any of the various logs used to ascertain downhole information about a well.

Logging devices - Any of several electrical, acoustical, mechanical, or nuclear devices that are use to measure and record certain characteristics or events that occur in a well that has been or is being drilled.

Logging while drilling (LWD) - Logging measurement obtained by measurement-while-drilling techniques as the well is being drilled.

Lost circulation - A serious condition that occurs when drilling mud pumped into the well does not return to the surface, but goes into the porous formation, crevices, or caverns instead.

Lost circulation - A serious condition that occurs when drilling mud pumped into the well does not return to the surface, but goes into the porous formation, crevices, or caverns instead.

LPG (liquefied petroleum gases) - Hydrocarbon fractions lighter than gasoline, such as ethane, propane and butane, kept in a liquid state through compression and/or refrigeration, commonly referred to as "bottled gas.

Luxury tax - A tax on goods considered to be luxury items. In the US in the early 1990s, a 10% luxury tax was imposed on all cars selling for $30,000 or more, airplanes, boats, furs and expensive jewellery.  That particular tax was repealed in the Revenue Reconciliation Act of 1993.

M

Macroeconomics - The study of a country's economy using such elements as unemployment, price levels, government spending, interest rates, national productivity etc and the influence of government policy on them.

Major - A large oil company, such as ExxonMobil or Chevron, that not only produces oil, but also transports, refines, and markets it and its products.

Make a connection - To attach a joint of drill pipe onto the drill stem suspended in the wellbore to permit deepening the wellbore by the length of the joint (usually about 30 feet, or 9 metres).

Make a trip - To hoist the drill stem out of the wellbore to perform one of a number of operations, such as changing bits or taking a core, and then to return the drill stem to the wellbore.

Make hole - To deepen the hole made by the bit, i.e., to drill ahead.

Make up - 1. To assemble and join parts to form a complete unit (e.g., to make up a string of casing). 2. To screw together two threaded pieces. 3. To mix or prepare (e.g., to make up a tank of mud).

Make up a joint - To screw a length of pipe into another length of pipe.

Mast - A portable derrick that is capable of being raised as a unit. Compare derrick.

Microeconomics - The study of economic statistics at the level of the household or the company.  In contrast, macroeconomic focuses on economics at the country level.

Mid-continent crude - Oil produced mainly in Kansas, Oklahoma, and North Texas.

Midstream or Middle distillates - Refinery products in the middle of the distillation range of crude oil, including kerosene, kerosene-based jet fuel, home heating fuel, range oil, stove oil and diesel fuel.

Migration - The movement of oil and gas through layers of rock deep in the earth.

Milling - Cutting a "window" in a well's casing with a tool lowered into the hole on the drillstring.

Mineral Rights - The ownership of all rights to gas, oil, or other minerals as they naturally occur in place, at or below the surface of a tract of land.

Mix mud - To prepare drilling fluids from a mixture of water or other liquids and any other or more of the various dry mud-making materials (such as clay, weighting materials, and chemicals). MMCF Million cubic feet - The cubic foot is a standard unit of measure for quantities of gas at atmospheric pressure.

Monocline - A geologic formation in which all the strata are inclined in the same direction.

Mousehole - On opening through the rig floor, usually lined with pipe, into which a length of a drill pipe is placed temporarily for later connection to the drill string.

Mud - A fluid mixture of clay, chemicals, and weighting materials suspended in fresh water, salt water, or diesel oil.

Mud engineer - A technician responsible for proper maintenance of the mud system.

Mud logger - A technician who uses chemical analysis, microscopic examination of the cuttings, and an assortment of electronic instruments to monitor the mud system for possible indications of hydrocarbons (shows).

Mud logging - The recording of information derived from examination and analysis of formation cuttings made by the bit and of mud circulated out of the hole.

Mud pit - Originally, an open pit dug in the ground to hold drilling fluid or waste materials discarded after the treatment of drilling mud. For some drilling operations, mud pits are used for suction to the mud pumps, settling of mud sediments, and storage of reserve mud. Steel tanks are much more commonly used for these purposes now, but they are still referred to as pits, except offshore, where “mud tanks” is preferred.

Mud pump - A large, high-pressure reciprocating pump used to circulate the mud on a drilling rig. Also called a slush pump.

Mud tank - One of a series of open tanks, usually made of steel plate, through which the drilling mud is cycled to remove sand and fine sediments. Also called mud pits.

Mud weight -  A measure of the density of a drilling fluid expressed as pounds per gallon, pounds per cubic foot, or kilograms per cubic metre. Mud weight is directly related to the amount of pressure the column of drilling mud exerts at the bottom of the hole.

Multiple completion - Completion of a well in more than one producing formation. The tubing of each production zone extends up to the Christmas tree to be piped to separate tankage.

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N

Naked -  An uncovered position such as the position of a writer of an option which is not covered by an opposite position in the underlying instrument (for example shares, commodities etc).

Natural gas - A mixture of hydrocarbon compounds and small amounts of various nonhydrocarbons (such as carbon dioxide, helium, hydrogen sulfide, and nitrogen) existing in the gaseous phase or in solution with crude oil in natural underground reservoirs.

Naval petroleum reserves - Areas containing proven oil reserves that were set aside for national defense purposes by Congress in 1923 (located in Elk Hills and Buena Vista, California; Teapot Dome, Wyoming; and on the North Slope in Alaska).

Net present value -  A calculation which is based on the idea that $1 received in ten years' time is not worth as much as $1 received now because the $1 received now could be invested for those ten years and compound into a higher value.

The NPV calculation establishes what the value of future earnings is in today's money. To do the calculation you apply a discount % rate to the future earnings. The further out the earnings are (in years) the more reduced their present value is.

Net profits interest - A share of gross production from a property that is carved out of a working interest, and is figured as a function of net profits from operation of the property.

Net Revenue Interest (NRI) - The percentage of revenues due an interest holder in a property, net of royalties or other burdens on the property. A landowner leases his mineral rights to an oilman. The landowner retains a royalty of 1/8 (=12.5%); his net revenue interest is 12.5%. The oilman's net revenue interest would be 87.5% (=100% - 12.5%).

NGL (natural gas liquids) - Portions of natural gas that are liquefied at the surface in lease separators, field facilities, or gas processing plants, leaving dry natural gas. They include, but are not limited to, ethane, propane, butane, natural gasoline, and condensate.

Normal circulation - The smooth, uninterrupted circulation of drilling fluid down the drill stem, out the bi, up the annular space between the pipe and the hole, and back to the surface. Compare reverse circulation.

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O

OCS (outer continental shelf) - A gently sloping underwater plain that extends seaward from the coast.

Octane - An hydrocarbon of the paraffin series. It is liquid at ordinary atmospheric conditions, although small amounts may be present in the gas associated with petroleum.

Octane number - A performance rating used to classify motor fuels by grading the relative antiknock properties of various gasolines. A high-octane fuel has better antiknock properties than one with a low number.

Offering memorandum - A legal document provided to potential investors in a venture describing the terms under which the investment is being offered.

Offset well - A well drilled near the discovery well. Also a well drilled to prevent oil and gas from draining from one tract of land to another where a well is being drilled or is already producing.

Offshore drilling - Drilling for oil or gas in an ocean, gulf, or sea, usually on the Outer Continental Shelf. A drilling unit for offshore operations may be a mobile floating vessel with a ship or barge hull, a semisubmersible or submersible bas, a self-propelled or towed structure with jacking legs (jackup drilling rig), or a permanent structure used as a productions platform when drilling is completed.

Offshore platform - A fixed structure from which wells are drilled offshore for the production of oil and natural gas.

Oil - A simple o complex liquid mixture of hydrocarbons that can be refined to yield gasoline, kerosene, diesel fuel, and various other products.

Oil-base mud - A drilling fluid in which oil is the continuous phase and which contains from less than 2 percent and up to 5 percent water.

Oil column - The vertical height (thickness) of an oil accumulation above the oil-water contact.

Oil gravity - The density of liquid hydrocarbons, generally measured in degrees.

Oil mud - A drilling mud, e.g., oil-base mud and invertemulsion mud, in which oil is the continuous phase.

Oil in place - The crude oil estimated to exist in a field or a reservoir. Oil in the formation not yet produced.

Oil pool - An underground reservoir containing oil. An oil field may contain one or more pools, each of which has its own pressure system.

Oil rig - A drilling rig that drills for oil and gas.

Oil run - 1. The production of oil during a specified period of time. 2. A tank of oil gauged, tested, and put on a pipeline.

Oil sand - 1. A sandstone that yields oil. 2. (by extension) any reservoir that yields oil, whether or not it is sandstone.

Oil seep - A surface location where oil appears, the oil having permeated its subsurface boundaries and accumulated in small pools or rivulets. Also called oil spring.

Oil shale - A fine-grained, sedimentary rock that contains kerogen, a partially formed oil. Kerogen can be extracted by heating the shale, but at a very high cost.

Oilwell - A well from which oil is obtained.

Oilwell cement - Cement or a mixture of cement and other materials for use in oil, gas, or water wells.

Oilfield services - Described as service companies that do work in and for the oilfield. These services may include: cementing, perforating, trucking, logging, etc.

On the pump - A phrase used in reference to a well that no longer flows from natural reservoir energy by is produced by means of a pump.

OPEC (Organization of Petroleum Exporting Countries) - An international oil cartel originally formed in 1960 and including in 1983: Saudi Arabia, Kuwait, Iran, Iraq, Venezuela, Quatar, Libya, Indonesia, United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon.

Open - 1. Of a wellbore, having no casing. 2. Of a hole, having no drill pipe or tubing suspended in it.

Open hole - 1. Any wellbore in which casing has not been set. 2. Open or cased hole in which no drill pipe or tubing is suspended. 3. The portion of the wellbore hat has no casing.

Open-hole fishing - The procedure of recovering lost or stuck equipment in an uncased wellbore.

Operating company - See operator.

Operating profit - A company's profit after deducting its operating costs from gross profit.

Operator - The individual or company responsible for the drilling, completion and production operations of a well, and the physical maintenance of the leased property.

Organization costs - Direct costs incurred in the creation of a new business organization such as an oil and gas limited partnership.

Outcrop - A portion of bedrock or other stratum protruding through the soil level, indicating a fault or some other oil-bearing formation.

Overriding Royalty (ORRI) - A revenue interest in oil and gas, created out of a working interest. Like the lessor's royalty, it entitles the owner to a share of the proceeds from gross production, free of any operating or production costs.

Overshot - A fishing tool that is attached to tubing or drill pipe and lowered over the outside wall of pipe lost or stuck in the wellbore. A friction device in the overshot, usually either a basket or a spiral grapple, firmly grips the pipe, allowing the fish to be pulled from the hole.

Overthrust belt - A geological system of faults and basins in which geologic forces have thrust layers of older rock above strata of newer rock that might contain oil or natural gas. The Eastern Overthrust Belt runs from eastern Canada through Appalachia into Alabama. The Western Overthrust Belt runs from Alaska through western Canada and the Rocky Mountains into Central America.

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P

P&A - Plug and abandon

Packer - A flexible rubber sleeve that is part of a special joint of pipe.

Pay zones - The term to describe the reservoir that is producing oil and gas within a given wellbore. Pay zones (or oil reservoirs) can vary in thickness from one foot to several hundred feet.

Payoff - The time when a well's production begins to bring in revenues.

Payout - The amount of time it takes to recover the capital investment made on a well or drilling program.

Perforate - To pierce the casing wall and cement of a wellbore to provide holes through which formation fluids may enter or to provide holes in the casing so that materials may be introduced into the annulus between the casing and the wall of the borehole.

Perforated completion - 1. A well completion method in which the producing zone or zones are casing through, cemented, and perforated to allow fluid flow into the wellbore. 2. A well completed by this method.

Perforating gun - An instrument lowered at the end of a wireline into a cased well. It contains explosive charges that can be electronically detonated from the surface.

Perforating truck - A special vehicle designed to allow control of a perforating operation within it.

Perforation - A method of making holes through the casing opposite the producing formation to allow the oil or gas to flow into the well. See the Gun perforation.

Permeability - A measure of the ease with which a fluid such as water or oil moves through a rock when the pores are connected. Geologists express permeability in a unit named the darcy, but oilmen use the millidarcy because most of the rocks they come in contact with are not very permeable.

Petrochemicals - Chemicals derived from crude oil or natural gas, including ammonia, carbon black, and other organic chemicals.

Petroleum - Strictly speaking, crude oil. Also used to refer to all hydrocarbons, including oil, natural gas, natural gas liquids, and related products.

Petroleum engineer - A term including three areas of specialization: 1) Drilling engineers specialize in the drilling, workover, and completion operations, 2) Production engineers specialize in studying a well's characteristics and using various chemical and mechanical procedures to maximize the recovery from the well, 3) Reservoir engineers design and execute the planned development of a reservoir. Many U.S. universities offer BS, MS, and Ph.D. degrees in petroleum engineering.

Petroleum geologist - A geologist who specializes in the exploration for, and production of, petroleum.

Pinch out - The disappearance of a porous, permeable formation between two layers of impervious rock over a horizontal distance.

Pipeline - A tube or system of tubes used for the transportation of oil or gas. Types of oil pipelines include: lead lines, form pumping well to a storage tank; flow lines, from flowing well to a storage tank; lease lines, extending from the wells to lease tanks; gathering lines, extending from lease tanks to a central accumulation point; feeder lines, extending from leases to trunk lines; and trunk lines, extending from a producing area to refineries or terminals.

Pipeline gas - Gas under enough pressure to enter the high-pressure gas lines of a purchaser; gas in which enough liquid hydrocarbons have been removed so that such liquids will not condense in the transmission lines.

Platform - See platform rig.

 Platform rig - An immobile offshore structure from which development wells are drilled and produced. Platform rigs may be built of steel or concrete and may be rigid or compliant. Rigid platform rigs, which rest on the seafloor, are the concrete gravity platform and the steel-jacket platform. Compliant platform rigs, which are used in deeper waters and yield to water and wind movements, are the guyed-tower platform and the tension-leg platform.

Play - 1. The extent of a petroleum-bearing formation. 2. The activities associated with petroleum development in an area.

Plug back - To block off the lower section of the borehole by setting a plug, in order to perform operations in the upper part of the hole.

Plugged & Abandoned (P&A) - This expression refers to setting cement plugs in an unsuccessful well (a dry hole) or a depleted well.

Plugging a well - Filling the borehole of an abandoned well with mud and cement to prevent the flow of water or oil from one strata to another or to the surface.

Pool - 1) (noun) An underground reservoir containing or appearing to contain a common accumulation of oil and natural gas. A zone of a structure which is completely separated from any other zone in the same structure is a pool. 2) (verb) To combine two or more tracts of land into one unit for drilling purposes. This may be accomplished voluntarily, or through compulsion.

Pooling - A term frequently used interchangeably with "Unitization" but more properly used to denominate the bringing together of small tracts sufficient for the granting of a well permit under applicable spacing rules.

Porosity - A measure of the number and size of the spaces between each particle in a rock. Porosity affects the amount of liquid and gases, such as natural gas and crude oil, that a given reservoir can contain.

Possible reserves - Areas in which production of crude oil is presumed possible owing to geological inference of a strongly speculative nature.

Present net value - The present value of the dollars (income, or stream of income) to be received at some specified time in the future, discounted back to the present at a specified interest rate.

Primary recovery - Production in which oil moves from the reservoir, into the wellbore, under naturally occurring reservoir pressure.

Primary term - The basic period of time during which a lease is in effect.

Private Placement Offering - A securities (investment) offering not intended for the general public. By meeting certain criteria, such an offering may qualify for exemptions from registration with the Securities and Exchange Commission of the Federal government.

Probable reserves - Areas which are unproven but presumed capable of production because of geological inference, for instance, proximity to proven reserves in the same reservoir.

Producing horizon - Where the well is actually produced, since it may be drilled to a greater depth.

Producing platform - An offshore structure with a platform raised above the water to support a number of producing wells.

Production - A term commonly used to describe taking natural resources out of the ground.

Production test - A test made to determine the daily rate of oil, gas, and water production from a potential pay zone.

Proppants - Materials used in hydraulic fracturing for holding open the cracks made in the formation by the fracturing process. Proppants may consist of sand grains, beads, or other small pellets suspended in fracturing fluid.

Prospect - A lease or group of leases on which an operator intends to drill.

Proved behind-pipe reserves - Estimates of the amount of crude oil or natural gas recoverable by recompleting existing wells.

Proved developed reserves - Estimates of what is recoverable from existing wells with existing facilities from open, producing payzones.

Proved reserves - Estimates of the amount of oil or natural gas believed to be recoverable from known reservoirs under existing economic and operating conditions.

Proved undeveloped reserves - Estimates of what is recoverable through new wells on undrilled acreage, deepening existing wells, or secondary recovery methods.

Public lands - Any land or land interest owned by the federal government within the 50 states, not including offshore federal lands or lands held in trust for Native American groups.

Public Offering - A securities (investment) offering intended for sale to the general public. It must be register with 1) the Securities and Exchange Commission of the Federal government and 2) the securities-regulating agencies of the various states in which it will be offered.

Pump - A device that is installed inside or on a production string (tubing) that lifts liquids to the surface.

Pump off - To pump a well so rapidly that the oil level falls below the pump's standing valve, rendering the well temporarily dry.

Pumping well - A well that does not flow naturally and requires a pump to bring product to the surface.

Q


Quad - One Quadrillion (1,000,000,000,000,000) Btus

Quadruple - See fourble.

Qualified plan - A tax deferred pension plan set up by an employer to enable employees to accumulate tax free savings for retirement benefits. Usually, contributions are made by employer and employee and when income is taken at retirement it is taxable
Quitclaim deed - A document by which one party (grantor) conveys title to a property, by giving up any claim which he may have to title (although he does not profess that claim is necessarily valid).

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R

R&D - Research and development.

Rack - Framework for supporting or containing a number of loose objects, such as a pipe. 1. to place on a rack. 2. to use on a rack.

Ram - A closure mechanism on a blowout-preventer stack.

Rathole - A hole in the rig floor, which is lined with casing that projects about the floor and into which the kelly and swivel are placed when hoisting operations are in progress.

Rathole connection - The addition of a length of drill pipe to the active string using the rathole instead of the mousehold, which is the more common connection. Compare mousehole connection.

Rathole rig - A small, usually truck-mounted rig, the purpose of which is to drill ratholes for regular drilling rigs that will be moved in later. A rathole rig may also drill the top part of the hole, the conductor hole, before the main rig arrives on location.

Re-entry - A well was abandoned, but subsequent drilling and production in the area suggests that a potential pay zone in the well was missed or passed over.

Reamer - A tool used to enlarge or straighten a borehole.

Reclamation - The restoration of land to its original condition by regrading contours and replanting after the land has been mined, drilled, or otherwise has undergone alteration from its original state.

Recoverable resources - An estimate of resources, including oil and/or natural gas, both proved and undiscovered, that would be economically extractable under specified price-cost relationships and technological conditions.

Reef - A buildup of limestone formed by skeletal remains of marine organisms. It often makes an excellent reservoir for petroleum.

Refiner - A person or company that has any part in the control or management of any operation by which the physical or chemical characteristics of petroleum or petroleum products are changed.

Refining - Manufacturing petroleum products by a series of processes that separate crude oil into its major components and blend or convert these components into a wide range of finished products, such as gasoline or jet fuel.

Relief well - A well drilled in a high-pressure formation to control a blowout.

Reserve - That portion of the identified resource from which a usable mineral and energy commodity can be economically and legally extracted at the time of determination.

Reserve (pool) - A porous and permeable underground formation of producible oil and/or natural gas, confined by impermeable rock or water barriers, and characterized by a single natural pressure system.

Reservoir - A porous, permeable sedimentary rock formation containing quantities of oil and/or gas enclosed or surrounded by layers of less permeable or impervious rock. Also called a "horizon."

Reservoir pressure - The pressure at the face of the producing formation when the well is shut-in. It equals the shut in pressure at the wellhead plus the weight of the column of oil in the hole.

Retained Interest - A fractional interest reserved by the owner of a whole interest when the balance of the whole interest is transferred to another party.

Return on Investment - The overall profit (or loss) on an investment expressed as a percentage of the total invested.  For example: A person invests $5,000 in the shares of a company and some time later has received $100 in dividends with the value of the shares now $5,200.  The return on investment is: ($100 + $5,200 - $5,000) /$5,000] x 100 = 6%

Reverse circulation - The course of drilling fluid downward through the annulus and upward through the drill stem. Also referred to as “circulating the short way,” since returns from bottom can be obtained more quickly than in normal circulation. Compare normal circulation.

Reversionary interest - An interest in a well or property that becomes effective at a specified time in the future or on the occurrence of a specified future event.

Rig - The derrick or mast, drawworks, and attendant surface equipment of a drilling unit.

Rig crew member - See rotary helper.

Rig down - To dismantle a drilling rig and auxiliary equipment following the completion of drilling operations. Also called tear down.

Rig floor - The area immediately around the rotary table and extending to each corner of the derrick or mast-that is, the area immediately about the substructure on which the drawworks, the rotary table, and so forth rest. Also called derrick floor, drill floor.

Rig manager - An employee of a drilling contractor who is in charge of the entire drilling crew and the drilling rig, providing logistics support to the rig crew and liaison with the operation company.

Rig superintendent - See toolpusher.

Rig supervisor - See toolpusher.

Risk - The possibility of loss or injury. A level of uncertainty is associated with the various possible outcomes of the undertaking. Risk usually refers to a numerical estimate of the likelihood of the occurrence to these various possible outcomes.

Roof rock - A layer of impervious rock above a porous and permeable formation that contains oil or gas.

Rotary drilling - A method of well-drilling that employs a rotating bit and drilling mud to cut through rock formations.

Roughnecks - Members of the drilling crew.

Round trip - Pulling the drillpipe from the hole to change the bit, then running the drillpipe and new bit back in the hole.

Roustabout - A semi-skilled hand who looks after producing wells and production facilities.

Royalty - A payment to a landowner or mineral rights owner by a leaseholder on each unit of resources produced.

Royalty Funds - Generally speaking, a royalty fund is when royalty interests are being bought, sold and held by the funds sponsors. In nearly all leasing situations, once a lease has been developed, it provides a revenue stream. A portion of the revenue stream is set aside for royalty which generally amounts to 12.5% and overriding royalty &/or carried working interest of 2-5%. In a royalty fund the objective of the fund is to generate it's revenue from royalties that are held from different producing fields throughout the country. The main feature to owning a percentage of a royalty fund is that with an oil royalty the royalty owner (or interest owner) pays no percentage of operating or developmental costs associated with the production of the oil or gas. Royalty programs generally offer a low risk factor along with a relatively low return. However, their main feature is that these types of programs last for many many years.

Run casing - To lower a string of casing into the hole. Also called to run pipe.

Run in - To go into the hole with tubing, drill pipe, and so forth.

Run pipe - To lower a string of casing into the hole. Also called to run casing.

Run ticket - A record of the oil run from a lease tank into a connecting pipeline. An invoice for oil delivered.

Running the tools - Putting the drillpipe, with the bit attached, into the hole in preparation for drilling.

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S

Salt dome - A subsurface mound or dome of salt.

Salt-bed storage - Storage of petroleum products in underground formations of salt whose cavities have been mined or leached out with superheated water.

Sample - Cuttings of a rock formation broken up by the drill bit and brought to the surface by the drilling mud. These are examined by geologists to identify the formation and type of rock being drilled.

Sample log - A record of rock cuttings made as a well is being drilled. A record is then kept that shows the characteristics of the various strata drilled through.

Sand - 1. An abrasive material composed of small quartz grains formed from the disintegration of preexisting rocks. Sand consists of particles less than 0.078 inch (2 millimetres) and greater than 0.062 inch 91/16 millimetre) in diameter. 2. Sandstone.

Sandstone - Rock composed mainly of sand-sized particles or fragments of the mineral quartz.

Saturation - 1. The extent to which the pore space in a formation contains hydrocarbons or connate water. 2. The extent to which gas is dissolved in the liquid hydrocarbons in a formation.

Schlumberger (pronounced "slumber-jay") - The founder of electrical well logging, now the name for any electrical well log.

Scout - An individual who observes and reports on competitor's leasing and drilling activities.

Secondary recovery - The introduction of water or gas into a well to supplement the natural reservoir drive and force additional oil to the producing wells.

Section - A square tract of land having an area of one square mile (=640 acres). There are 36 sections in a township.

Securities - Securities are commonly thought of as stocks and bonds. As defined by the Securities Act of 1933, however, securities include any certificate of interest or participation in any profit sharing agreement, investment contract, or fractional undivided interest in oil, gas, or other mineral rights.

Securities Act of 1933 - Establishes requirements for the disclosure of information for any interstate offering and sale of securities.

Securities Exchange Act of 1934 - Established the Securities and Exchange Commission which regulates the activities of securities markets.

Sedimentary basin - A large land area composed of unmetamorphized sediments. Oil and gas commonly occur in such formations.

Sedimentary rock - Rock formed by the deposition of sediment, usually in a marine environment.

Seep - The surface appearance of oil or gas that results naturally when a reservoir rock becomes exposed to the surface, thus allowing oil or gas to flow out of fissures in the rock.

Seismic - Of or relating to an earthquake or earth vibration, including those artificially induced.

Seismic data - Detailed information obtained from earth vibration produced naturally or artificially (as in geophysical prospecting).

Seismic exploration - A method of prospecting for oil or gas by sending shock waves into the earth. Different rocks transmit, reflect, or refract sound waves at different speeds, so when vibrations at the surface send sound waves into the earth in all directions, they reflect to the surface at a distance and angle from the sound source that indicates the depth of the interface. These reflections are recorded and analyzed to map underground formations.

Seismograph - A device that records natural or manmade vibrations from the earth. Geologists read what it has recorded to evaluate the oil potential of underground formations.

Selling Expenses - Expenses incurred in marketing interests in securities and commonly paid out of the investor's capital investment.

Separator - A pressure vessel used to separate well fluids into gases and liquids.

Service well - A well drilled in a known oil or natural gas field to inject liquids that enhance recovery or dispose of salt water.

Set casing - To cement casing in the well hole, usually in preparation for producing a commercial well.

Severance - The owner of all rights to a tract of land can sever the rights to his land (vertically or horizontally). In horizontal severance, for example, if he chooses to sell all or part of the mineral rights, two distinct estates are created: the surface rights to the tract of land and the mineral rights to the same tract. The two estates may change hands independently of each other.

Severance tax - Tax paid to the state government by producers of oil or gas in the state.

Shale - A type of rock composed of common clay or mud.

Shale oil - The substance produced from the treatment of kerogen, that hydrocarbon found in some shales, which is difficult and costly to extract. About 34 gallons of shale oil can be extracted from one ton of ore.

Shale shaker - A vibrating screen or sieve that strains cuttings out of the mud before the mud is pumped back down into the borehole.

Shaped charge - A relatively small container of high explosive that is loaded into a perforating gun. On detonation, the charge releases a small, high-velocity stream of particles (a jet) that penetrates the casing, cement, and formation. See perforating gun.

Shareholder - The owner of shares in a company.

Sharing arrangement - An arrangement whereby a party contributes to the acquisition, or exploration and development, of an oil and gas property, and receives as compensation, a fractional interest in that property.

Shoestring sands - Narrow strands of saturated formation that have retained the shape of the stream bed that formed them. In the United States, such a formation is located in Kansas.

Shoot a well - A technique that stimulates production of a tight formation by setting off charges downhole that crack open the formation. The early wells were shot with nitroglycerin; then dynamite was used. The nitro man has been replaced today by acidizers and frac trucks.

Show - An indication of oil or gas observed and recorded during the drilling of a well.

Shut-down well/shut-in well - A well is shut down when initial drilling ceases for one reason or another. A well is shut in when the wellhead valves are closed, shutting off production, often while waiting for transportation or for the market to improve.

Shut-in -To stop a producing oil and gas well from producing.

Shut-in pressure -The pressure at the wellhead when valves are closed.

Shut-in Royalty - A special type of royalty negotiated in the leasing of a property.

Side track - When fishing operations have been unable to recover an object in the hole that prevents drilling ahead, the borehole can often be drilled around the obstacle in the original hole.

Simple interest - Interest, normally paid annually, which is earned on deposited capital only.  Unlike compound interest, the annual interest is not added to the capital.  For example, if the capital deposited is $1,000 and the interest rate is 8%, you would receive $80 at the end of the first year and at the end of the second year.  This contrasts with compound interest, where the 8% interest earned on the first year would be added to the original capital, and the amount of money earning interest in the second year would be $1,080.00.

Single - A joint of drill pipe. Compare double, fourble, and thribble.

Skidding the rig - Moving a derrick from one location to another on skids and rollers.

Solution gas - Natural gas that is dissolved in the crude oil in a reservoir.

Sour Crude or Gas - Oil or natural gas containing sulfur compounds, notably hydrogen sulfide a poisonous gas.

Source rock - Sedimentary rock, usually shale containing organic carbon in concentrations as high as 5-10% by weight.

Spacing unit - The size (amount of surface area) of a parcel of land on which only one producing well is permitted to be drilled to a specific reservoir.

Spot market - A short-term contract (typically 30