Accredited Investor: Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. Or any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
Associated gas: Natural gas produced with crude oil from the same reservoir.
Barrel: A unit of measure for oil and petroleum products that is equivalent to 42 U.S. gallons.
BBL: Abbreviation for barrels of oil.
BCF: Abbreviation for a billion cubic feet of natural gas.
Beneficiary: A person or entity named in a will or a financial contract as the inheritor of property when the property owner dies. A beneficiary can be a spouse, child, charity or any entity or person to whom the property owner would like to leave his or her possessions and assets.
Blowout: The uncontrolled flow of gas, oil or other fluids from a well.
Blowout preventer (BOP): The equipment installed at the wellhead to control pressures in the annular space between the casing and drill pipe or tubing during drilling, completion, and workover operations. Also see Christmas tree.
Brine: See produced water.
British thermal unit (BTU): A measure of the heating value of a fuel.
Broker Participation: An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.
Capital Contribution: The total cash contribution which a joint venturer makes to the joint venture, including assessments.
Capital Working Interest: The portion of the working interest which is not required to pay its pro rata share of drilling, testing and/or completion and equipment costs.
Captial Costs: All of the costs incurred by the joint venture in drilling, testing, completing, and equipping the venture well. Includes any pipelines built to the venture well, which costs are required to be capitalized for federeal income tax purpuses, including any dry hole tangible costs but excluding any intangible completion costs, geological and geophysical costs, and operating costs.
Casing: Metal pipe inserted into a wellbore and cemented in place to protect both subsurface formations (such as groundwater) and the wellbore. A surface casing is set first to protect groundwater. The production casing is the last one set. The production tubing (through which hydrocarbons flow to the surface) will be suspended inside the production casing.
Christmas tree: The assembly of valves, pipes, and fittings used to control the flow of oil and gas from a well.
Code: The Internal Revenue Code of 1986, as amended.
Coiled tubing: A long, small diameter pipe flexible enough to be stored on and deployed from a large, truck-mounted roll. Used to replace jointed pipe in certain types of drilling, completion, and workover operations.
Completion: After a well is drilled and the decision is made to complete it, a number of things must be done. The well must be cleaned out, setting the casing and tubing into the hole, adding surface equipment (pumps, tanks, meters) and perforating the casing so that oil or gas can flow into the well and be brought to surface. Once a well is completed, it is ready to produce oil or gas.
Compressor: An engine used to increase the pressure of natural gas so that it will flow more easily through a pipeline.
Contract: A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.
Development well: A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive; a well drilled in a proven field for the purpose of completing the desired spacing pattern of production.
Downhole: A term used to describe tools, equipment, and instruments used in the wellbore, or conditions or techniques applying to the wellbore.
Downstream: When referring to the oil and gas industry, this term indicates the refining and marketing sectors of the industry. More generically, the term can be used to refer to any step further along in the process.
Drill cuttings: The small pieces of rock created as a drill bit moves through underground formations while drilling.
Dry gas: The volume of gas remaining after all water and natural gas liquids have been removed.
Dry hole: Any exploratory or development well that does not find commercial quantities of hydrocarbons.
Due Diligence: The process of gathering information about the condition and legal status of assets to be sold.
E&P: Exploration and production. The 'upstream' sector of the oil and gas industry.
Enhanced oil recovery (EOR): Refers to a variety of processes to increase the amount of oil removed from a reservoir, typically by injecting a liquid (e.g., water, surfactant) or gas (e.g., nitrogen, carbon dioxide).
Exploratory well: A hole drilled: a) to find and produce oil or gas in an area previously considered unproductive area; b) to find a new reservoir in a known field, i.e., one previously producing oil and gas from another reservoir, or c) to extend the limit of a known oil or gas reservoir.
Field: An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
Formation damage: The reduction in permeability in reservoir rock due to the infiltration of drilling or treating fluids into the area adjacent to the wellbore.
Frac: A method used to increase the deliverability of a (Fracturing) production or underground storage well by pumping a liquid or other substance into a well under pressure to crack (fracture) and prop open the created fracture with sand to provide a conduit for the hydrocarbons to easily travel from considerable distances out in the reservoir into the well bore.
Fracturing: The application of hydraulic pressure to the reservoir formation to create fractures through which oil or gas may move to the wellbore.
Gas-to-Liquids (GTL): The conversion of natural gas to a liquid form so that it can be transported easily. Typically, the liquid is converted back to natural gas prior to consumption.
Gravity: A standard adopted by the American Petroleum Institute for measuring the density of a liquid. Gravity is expressed in degrees with lower numbers indicating heavier liquids and higher numbers indicating lighter liquids.
Income: For corporations, revenues minus cost of sales, operating expenses, and taxes, over a given period of time. Income is the reason corporations exist, and are often the single most important determinant of a stock's price. Income is important to investors because they give an indication of the company's expected futuredividends and its potential for growth and capital appreciation. That does not necessarily mean that low or negative earnings always indicate a bad stock; for example, many young companies report negative income as they attempt to grow quickly enough to capture a new market, at which point they'll be even more profitable than they otherwise might have been. also called earnings.
Intangible Completion Costs: All of the costs incurred by the joint venture in completing of the oil and gas well to be drilled by the joint venture which are to be paid by the joint venture and which may be deducted for federal income tax purposes to the exercise of the option provided under Section 263(c) of the Code.
Intangible Drilling Costs: All of the costs incurred by the joint venture in drilling of the oil and gas well to be drilled by the joint venture which are to be paid by the joint venture and which may be deducted for federal income tax purposes to the exercise of the option provided under Section 263(c) of the Code.
Integrated: When applied to an oil company, it indicates a firm that operates in both the upstream and downstream sectors (from exploration through refining and marketing).
Joint Venture: Term used to describe a specific oil and gas investment project.
Joint Venturers: Any persons, firms, corporations or other entities that are admitted into a joint venture either as additional or substitute joint venturers and that are then owners of a unit or units in a joint venture.
Lease: A legal document conveying the right to drill for oil and gas, or the tract of land on which a lease has been obtained where the producing wells and production equipment are located.
Lifting costs: The cost of producing oil from a well or lease.
Log: To conduct a survey inside a borehole to gather information about the subsurface formations; the results of such a survey. Logs typically consist of several curves on a long grid that describe properties within the wellbore or surrounding formations that can be interpreted to provide information about the location of oil, gas, and water. Also called well logs, borehole logs, wireline logs.
Loss: A reduction in the value of an investment.
A condition in which a company's expenses exceed its revenues. Opposite of profit.
MCF: Abbreviation for a thousand cubic feet of natural gas.
Midstream: A term sometimes used to refer to those industry activities that fall between exploration and production (upstream) and refining and marketing (downstream). The term is most often applied to pipeline transportation of crude oil and natural gas.
MMCF: Abbreviation for a million cubic feet of natural gas.
Natural gas liquids (NGL): The portions of gas from a reservoir that are liquified at the surface in separators, field facilities, or gas processing plants. NGL from gas processing plants is also called liquified petroleum gas (LPG).
Net Income: In business, what remains after subtracting all the costs (namely, business, depreciation, interest, and taxes) from a company’s revenues. Net income is sometimes called the bottom line. Also called earnings or net profit.
For an individual, gross income minus taxes, allowances, and deductions. An individual's net income is used to determine how much income tax is owed.
Net Revenue: That revenue available from the sale of oil and gas after royalties and (NRI) operating costs, including taxes.
Net Revenue Interest: The percentage of production to which a working interest owner is entitled after deducting costs such as royalties.
For example, revenue interest could be 1.25% for a 1 unit subscription.
Non-Accredited Investors: Persons or entities who do not satisfy one or more of the alternative definitions of the term "Accredited Investor" and who, by virtue of their financial resources acumen, satisfy a joint venture manager or its authorized representatives that such investors satisfy the suitability standards imposed by Rule 506 of Regulation D and otherwise meet the finanacial investment standards so required by each joint venture manager.
Non-associated gas: Natural gas produced from a reservoir that does not contain significant quantities of crude oil.
OCS: Outer Continental Shelf, a term used primarily in the U.S. for the offshore areas under federal jurisdiction.
Operating Costs: In respect to any time period, all cash costs and expenses of the joint venture in any period, including, without limitation, all costs incurred in connection with the operation and maintenance of the joint venture and the venture well.
Overriding Royalty Interests: Non-operating interests in oil and gas leases which entitle the owner thereof to receive a share in the production from any oil and gas wells drilled on the property to which such interests are subject without being obligated to pay any of the drilling, testing, completion or operating costs related thereto.
Passive Income: Income that does not require active participation.
Per Annum: The amount of return on investment each year.
Permeability: A measure of the ability of a rock to transmit fluid through pore spaces.
Plugged and abandoned (P&A): A depleted well or dry hole that has been (typically) filled with cement and marked, with all surface equipment removed.
Porosity: A ratio between the volume of the pore space in reservoir rock and the total bulk volume of the rock. The pore space determines the amount of space available for storage of fluids.
Power of Attorney: A written instrument duly signed and executed by an individual which authorizes an agent to act on his behalf to the extent indicated in the document.
Private Placement Offerings (PPO): The sale of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds, and foundations. Does not require SEC registration, provided the securities are bought for investment purposes rather than resale, as specified in the investment letter.
Produced water: The water extracted from the subsurface with oil and gas. It may include water from the reservoir, water that has been injected into the formation, and any chemicals added during the production/treatment process. Produced water is also called “brine” (and may contain high mineral or salt content) or “formation water.” Some produced water is quite fresh and may be used for livestock watering or irrigation (where allowed by law).
Producing Well: Wells capable of producing oil or gas in commercial quantities, including those wells capable of producing in commercial quantities that are shut in, or wells which are not currently producing in commercial quantities but have been commercially productive wells in the past.
Profit: The positive gain from an investment or business operation after subtracting for all expenses. Opposite of loss.
Rate of Return: The annual rate of return on an investment, expressed as a percentage of the total amount invested. Also called return.
Regulation D: Rules 501 through 506 of the SEC as adopted pursuant to Section 4(2) of the Act.
Return on Investment (ROI): The income that an investment provides in a year.
Royalty: A percentage interest in the value of production from a lease that is retained and paid to the mineral rights owner.
SEC: The Securities and Exchange Commission.
Separation: The process of separating liquid and gas hydrocarbons and water. This is typically accomplished in a pressure vessel at the surface, but newer technologies allow separation to occur in the wellbore under certain conditions.
Shut in: To close valves on a well so that it stops production, or a well on which the valves have been closed.
Sour crude oil: Oil containing free sulfur or other sulfur compounds whose total sulfur content is in excess of 1 percent.
Sour gas: Natural gas containing hydrogen sulfide.
Spacing: The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.
Stimulation: The term used for several processes to enlarge old channels, or create new ones, in the producing formation of a well designed to enhance production. Examples include acidizing and fracturing.
Subscription Agreement: An application by an investor to join a limited partnership. In most cases, the investor will have to fill out a form created by the general partner evaluating the investor's suitability for the investment in the partnership. Note:
All limited partners must be approved by the general partner. Becoming a limited partner rather than a partner is an attractive option since it means the investor's liability is limited to the amount he or she has invested in the partnership.
Tanks: When the drilling, testing, completing and equipping of a well is finished the well is said to be completed "to the tanks".
Terms: The period of time that an agreement is in effect.
Under balanced drilling: Drilling under conditions where the pressure being exerted inside the wellbore (from the drilling fluids) is less than the pressure of the oil or gas in the formation.
Underground injection: The placement of gases or fluids into an underground reservoir through a wellbore. May be used as part of enhanced oil recovery or water flooding processes or for disposal of produced water.
Unit: A fixed measure of investment into a Joint Venture, the number of units offered is determined by each exploration company and project. For example, a subscription agreement may offer 20 units at $25,000 per unit.
Upstream: The exploration and production portions of the oil and gas industry.
Water flooding: The injection of water into an oil reservoir to “push” additional oil out of the reservoir rock and into the well bores of producing wells.
Well servicing: Maintenance work performed on an oil or gas well to improve or maintain the production.
Wellhead: The equipment at the surface of a well used to control the pressure; the point at which the hydrocarbons and water exit the ground.
Wet gas: Natural gas containing significant amounts of liquifiable hydrocarbons.
Wildcat well: A well drilled in an area where no current oil or gas production exists. Also called a “rank wildcat”.
Working Interest: The interest that provides its owners the right to explore for and produce oil and gas. It is a measurement, as a percentage, of the proportion of the costs of exploration and production borne by the working interest's owner.
For example, working interest could be 1.5% for a 1 unit subscription.
Workover: Operations on a producing well to restore or increase production. A workover may be performed to stimulate the well, remove sand or wax from the wellbore, to mechanically repair the well, or for other reasons.
WTI: West Texas Intermediate, a type of crude oil commonly used as a price benchmark.
