It's good to own one well. It's better to own a piece of many.
Glossary of Terms
ACIDIZING. A technique for increasing the flow of oil and/or gas out of a well. Hydrochloric acid is pumped into the oil-bearing rock. The acid dissolves limestone in the producing zone which increases porosity thus the oil and/or gas can flow into the well bore with less restrictions.
BLOWOUT PREVENTER. A large, specially designed valve that is mounted on top of the well during the drilling and completion stages of operation. The operator can close this valve to stop the flow of oil or gas in case of emergency.
BOTTOM HOLE PRESSURE. Reservoir pressure at the bottom of the well.
CASING. Steel pipe which screws together and is lowered into the hole after drilling is complete. It is used to seal off fluids and keeps the hole from caving in.
CASING POINT. Point in time after a well has been drilled to its objective depth where the Operator must decide whether to commit additional dollars to “setting pipe” and attempt a completion or to abandon the well as non-commercial.
CEMENT OR “SET PIPE”. A process whereby cement is pumped into the hole between the walls of the hole and the outside of the casing. Upon hardening, the cement holds the pipe in place and prevents fluid movement in the hole.
COMMERCIAL WELL. A well that is capable of producing enough oil and gas to be economically viable to operate.
COMPLETION. A general term referring to all activities necessary to put a well into production after it has been drilled to casing point.
DEPLETION. The reduction in value of mineral deposits as it is produced.
DEPLETION ALLOWANCE. An allowance granted on taxable income from oil and gas by the Federal and most State Governments.
DEPOSIT. An accumulation of oil, gas or other minerals that is capable of production.
DEVELOPMENT PROSPECT. A project that extends production of a producing oil or gas field including drilling additional wells or enhancing production of current wells.
DEVELOPMENTAL WELL. A well drilled to a known producing formation in an existing oil field.
DISCOVERY WELL. An exploratory well that encounters production in a previously unknown deposit.
ELECTRIC LOG. An electrical survey made on uncased holes. A special tool is lowered into the hole that ejects an electrical current into the rock and records its resistance to the current.
FRACTURING or FRAQING or FRACKING. The process of pumping fluids into a productive formation at high rates of injection to hydraulically break the rock. The “fractures” which are created in the rock act as flow channels for the oil and gas.
GAS WELL. A well that produces natural gas which is not associated with crude oil.
INTANGIBLE DRILLING COSTS (IDC). All cost incurred in drilling a well other than equipment or leasehold.
INITIAL PRODUCTION (IP). Production from a well is generally broken down into three categories: a) Flush or Initial, b) Settled, C) Stripper. A well cannot maintain the flow rates it made during the first stages of its life.
NET REVENUE INTEREST (NRI). Percentage of production revenues allocated to the working interest after first deducting proceeds allocated to royalty and overriding interests.
OFFSET WELL. Well location adjoining another well site.
OIL GRAVITY. The most widely used indicator of a crude oil’s worth to the producer. Normally, the price which a producer receives for his oil depends on its gravity, the less dense oils (higher gravity) being the most valuable.
OIL & GAS LEASE. A contract between an oil operator and a mineral owner that gives the operator the right to drill for oil and gas on the property.
OPERATING EXPENSE. The expenses incurred through the operation of producing properties.
PAYOUT. When the costs of drilling, producing, and operating have been recouped from the sale of oil and/or gas from a well.
PERMEABILITY. Measure of the resistance of rock to movement of fluids. Rocks may have holes in them (porosity), but if these holes do not connect, the permeability can be drastically reduced.
POROSITY. Measure of relative volume of void space in rock to the total rock volume. These spaces or pores are where oil and gas accumulate; therefore, a formation containing a high percentage of porosity can contain more hydrocarbons.
PROVEN RESERVES. Oil and gas that have not been produced but has been located and has been determined recoverable.
ROYALTY INTEREST. The percent ownership in the minerals that are produced paid out to the mineral interest owner (often the landowner) when the minerals are produced and sold from the land that is included in the producing area of a wellbore. Royalty Interest i s created when the owners of the mineral interest lease their ownership to an oil producer. Royalty Interest owners are not required to pay for development or operations of the wellbore (lease), but receive their percentage of Royalty on the gross income produced by the lease. (ie: Lease produces $100,000 gross income in a month. 1/8th royalty owner under the entire leasehold receives a free and clear payment of $12,500 for the month. Only deductions from this cash payment are taxes.
RESERVOIR. Rocks with the potential to store fluids such as oil and natural gas.
REWORK. To restore production from an existing formation when it has fallen off substantially or ceased altogether.
SALT WATER DISPOSAL WELL. Oftentimes, the salt water produced during oil production is pumped back into a formation that is deep enough not to pollute shallow water sands. Many wells which are no longer commercial are converted to salt water disposal wells.
SECONDARY RECOVERY. A broad term encompassing any method of extracting oil after a well or field has exhausted its primary production.
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.
SURFACE PIPE. Pipe which is set with cement through the shallow water sands to avoid polluting the water and keep the sand from caving in while drilling a well.
TANK BATTERY. A group of tanks at a well site used to store oil prior to sale to a pipeline company.
TESTING. When each new well is competed, a series of tests are run on the well to estimate the daily deliverability, payout, and reserves.
TUBING. Small diameter pipe which is installed in the casing. Oil is produced through tubing because it increases the viscosity of fluid and a well’s flow capabilities.
TURNKEY CONTRACT. A contract in which an operator agrees to furnish all labor and materials necessary to drill a well to a certain depth or stage of completion for a specified sum of money. The operator or contractor assumes all of the responsibility and risks involved in completing the operation.
VISCOSITY. The resistance of fluid to flow. A high viscosity fluid will not flow as easily as a low viscosity fluid.
WILDCAT. A well drilled in an area where no oil or gas production exists
WORKING INTEREST. A working interest in an oil or gas property is one that is burdened with the cost of development and operation of the property, such as the responsibility to share expenses of drilling completed or operating oil and gas property, according to working or operating mineral interest in any tract or parcel of land.