Glossary of terms

Accredited Investor 

An accredited investor has a net worth of $1 million (not including their primary residence) or has made $200,000 the last two years and expects to make the same this year, or $300,000 if filing jointly.

Barrel (BBL)

A unit of measure for oil and petroleum products. One-barrel equals 42 U.S. gallons.  

Basin 

Petroleum basins are areas where hydrocarbons are found. Geologically speaking, the “basins” were once large, natural depressions on the earth’s surface in which sediments accumulated over extended periods, usually millions of years. The depressions may have undergone extensive tectonic activity, or uplifting, and reside at much higher elevations today. Over that same period, carbon is transformed by heat, and high pressure into oil, gas, and coal, which can be found trapped within the rock formations via drilling.  

Casing

The steel pipe placed in an oil or gas well to prevent the wall of the hole from caving in, prevent movement of fluids from one formation to another, and to aid in well control.  

Depletion Allowance

A tax deduction from gross income allowed for the exhaustion of oil and gas reserves or other mineral deposits, intended to incentivize the development of these resources.  

 Drilling

The process of boring a hole through the earth’s surface to explore for or extract oil and gas.  

Environmental, Social, and Governance (ESG) Criteria

Standards for a company’s operations that socially conscious investors use to screen potential investments, evaluating company behavior and determining future financial performance.  

Exit Strategy

The method by which an investor plans to exit their investment in a company and realize a profit, such as selling their stake after a company grows to a certain point.  

Fields

Areas of oil or gas production, encompassing one or more reservoirs.  Most fields are regulated by government entities so they can be effectively managed as a single entity in an efficient manner and avoid damaging the reservoirs.  

Flowback

The process of returning fluids and gases to the surface after they have been used for hydraulic fracturing in a well enabling the well to begin producing hydrocarbons from the reservoir.  

Formation

A distinct layer of rock within the earth typically encompassing a similar rock type (sandstone, limestone, or shale), or a specific geologic period.  Some formation types are prone to accumulations of oil, gas and water.  

Frac

Short for hydraulic fracturing, a method used to extract deep underground oil and gas resources by fracturing the rock with pressurized liquid then holding those fractures open with sand.  

Fuel

Materials that store potential energy in forms that can be practicably released and used for work or as heat energy.  

Greener

A term used to describe more environmentally friendly practices or technologies, especially those that reduce emissions of greenhouse gases.  

Horizontal Drilling

A drilling technique where the well is turned horizontally at depth, which increases the reservoir exposure length.  

Hydrocarbons

A naturally occurring fossil fuel found as a liquid or gas in reservoirs and formed from carbon-based plant and animal matter which has been deeply buried and subjected to high temperatures and pressures transforming the carbon into oil and gas.  

Intangible Drilling Costs (IDC)

Costs associated with drilling a well that are not directly tied to physical equipment, such as labor, chemicals, and mud.  

Landowner

The legal owner of the surface portion of the land who may or may not have the ownership of the mineral rights underlying the land.  

Lateral

The horizontal section of the wellbore drilled from the main vertical well bore.  

Lease Operating Expenses (LOE)

Costs incurred by the operator of an oil and gas lease for maintaining and operating property.  

Mineral estate

The subsurface estate which includes the ownership of all minerals below the freshwater zones.   

Mineral owner

The legal owner of the mineral estate who may or may not own the surface portion of the land.  

MCF

One thousand cubic feet, a standard measure for quantities of natural gas.  

Mineral Rights

Legal rights to extract minerals (such as oil, gas, and coal) from the earth.  

Natural Gas

A naturally occurring fossil fuel formed when layers of carbon-based plant and animal matter are deeply buried and subjected to intense heat and pressure over millions of years.  

Oil and Gas Lease

An agreement between a mineral owner and a company to allow exploration and production of oil and gas from the land in exchange for financial compensation, typically in the form of royalties  

Pay Zone

The portion of the reservoir that contains economically recoverable hydrocarbons.  

Pits

Excavated areas used in drilling operations to store equipment, waste, water, or mud.  

Proven Reserves

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.  

PDP (Proved Developed Producing)

A well that is actively producing hydrocarbons and where reserves have been demonstrated by actual production or formation tests.  

PUD (Proved Undeveloped Reserve)

Proved undeveloped oil and gas reserves are reserves that are expected to be recovered within nonproducing acreage that are a direct offseet to an existing PDP well.   

Probable Reserves

Probable reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than proved reserves.  

Pump

A device used to move fluids either horizontally as in a pipeline or vertically to aid in lifting fluids up to the surface.  

Prove up

A phase in oil exploration where additional data is gathered from an area to assess the size and extractability of an oil or gas discovery.  

Rig

The structures and equipment used for drilling oil and gas wells.  

Royalties

The non-cost bearing interest payments owed to mineral owners based on a percentage of the earnings from the minerals extracted from their land.  

Spud

Spudding is the process of beginning to drill a well in the oil and gas industry.  

Surface estate

The surface estate includes items above ground, such as the land itself, trees, and buildings.  

Surface owner

The owner of the surface estate. The surface owner may or may not own an interest in the mineral estate. 

Tangible Drilling Costs

Costs incurred in drilling an oil or gas well that are related to the physical construction of the well, including equipment and materials.  

Wellbore

The hole drilled by the drilling bit to explore for or extract natural resources such as oil or gas.  

Working Interest

The cost bearing interest that gives the holder the right to drill for and produce oil and gas on a property and makes the holder responsible for the proportionate share of the costs.