Glossary oil and
Gas terms

Glossary of Commonly Used Terms
Broadmoor Land And Minerals

Volume Abbreviations

• BBL: A barrel of liquid, usually oil or water. Equivalent to 42 U.S. gallons.

• BC: Barrel of condensate

• BCF: A billion cubic feet of natural gas

• BCFE: A billion cubic feet equivalent. Used to describe hydrocarbons in terms of cubic feet. Determined using the ratio of 6 Mcf of natural gas to 1 Bbl of crude oil. This ratio is derived from the energy output (Btu’s) obtained from each source, however it is usually not accurate on an economic basis and therefore alternative ratios can be used. For example $6/Mcf of gas to $60/bbl of oil.

• BO: Barrel of oil

• BOE: Barrels of oil equivalent. Used to describe hydrocarbons in terms of a barrel of oil. Gas converted to oil by dividing by 6.

• MBBLS: One thousand barrels.

• MBO: One thousand barrels of oil.

• MBW: One thousand barrels of water.

• MCF: A thousand cubic feet.

• MCFD: A thousand cubic feet of gas per day.

• MCFE: A thousand cubic feet equivalent.

• MMBBLS: One million barrels.

• MMBC: One million barrels of condensate

• MMBO: One million barrels of oil.

• MMBOE: One million barrels of oil equivalent

• MMCF: One million cubic feet.

• MMCFD: One million cubic feet of gas per day

• MMCFE: One Million cubic feet equivalent.

• SCF: Standard cubic foot.

• Assignment: The sale, transfer, or conveyance of all or a fraction of ownership interest or rights owned in real estate or other such property. The term is commonly used in the oil and gas business to convey working interest, leases, royalty, overriding royalty interests and net profit interests.

• Bonus: A monetary incentive given by the company to the mineral owner for executing or ratifying an oil, gas and or mineral lease.

• Completion: The process of preparing a well for testing and production. This often includes running and cementing production casing, perforating and stimulating.

• Condensate: A low-density mixture of hydrocarbon liquids that are present as gaseous components of natural gas produced from many natural gas reservoirs. It condenses out of the gas if the temperature is reduced to below the dew point temperature.

• Conventional crude oil Petroleum found in liquid form, flowing naturally or capable of being pumped without further processing or dilution.

• Conveyance: A written contract between the grantor and grantee, used to transfer title or rights to real estate or property. Typical conveyances include oil, gas and mineral leases; assignments; deeds and rights of way.

• Delay Rental: Consideration paid to the lessor by a lessee to extend the terms of an oil and gas lease in the absence of operations or production that is contractually required to hold the lease. This consideration is usually required to be paid on or before the anniversary date of the oil and gas lease during its primary term, and typically extends the lease for an additional year. Nonpayment of the delay rental in the absence of production or commencement of operations will generally result in abandonment of the lease after its primary term has expired.

• 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.

• Distillate: Liquid condensed from a gas during distillation.

• Discovery well An exploratory well that encounters a previously untapped oil or gas deposit.

• DIVISION ORDER A schedule of owners and their decimal share in revenues of the well, derived from the sale of oil or gas.

• Dry hole Any exploratory or development well that does not find commercial quantities of hydrocarbons.

• Established reserves The portion of the discovered resource base that is estimated to be recoverable using known technology under present and anticipated economic conditions. Includes proved plus a portion of probable (usually 50%).

• Exploratory Well: A well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir.

• Field The surface area above one or more underground petroleum pools sharing the same or related infrastructure.

• Flow line Pipe, usually buried, through which oil or gas travels from the well to a processing facility.

• Flaring/Venting The controlled burning (flare) or release (vent) of natural gas that can’t be processed for sale or use because of technical or economic reasons.

• GRANTOR A person who grants or conveys land, minerals, etc.

• GRANTEE The person receiving the grant of land, minerals, etc.

• Gross Production Tax: A state tax imposed primarily on mining companies for each unit mined.

• Heavy crude oil Oil with a gravity below 28 degrees API.

• Horizontal Drilling: A drilling technique used by an operator in order to produce a larger portion of the target formation than conventional (vertical) drilling. This process can result in both increased production rates and greater ultimate recoveries of hydrocarbons; the cost of the well however tends to be more expensive.

• Hydrocarbon: An organic compound that contains only carbon and hydrogen. These compounds can exist in a gaseous, liquid, or solid state depending on the pressure and temperature they are exposed to. Methane, propane, and octane are examples of these.

• Infill Drilling- Wells drilled between established producing wells on a lease in order to increase production from the reservoir.

• Injection well- A well used for injecting fluids (air, steam, water, natural gas, gas liquids, surfactants, alkalines, polymers, etc.) into an underground formation for the purpose of increasing recovery efficiency.

• JOINT OPERATING AGREEMENT- An agreement among owners describing how a well is to be operated.

• Lease: A contract between mineral owner, otherwise known as the lessor and a company or working interest owner, otherwise known as the lessee in which the lessor grants the lessee the right to explore, drill and produce oil, gas and other minerals for a specified primary term and as long thereafter as oil, gas or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor.

• Light crude oil:

Liquid petroleum which has a low density and flows freely at room temperature.

• Medium Crude Oil: Liquid petroleum with a density between that of light and heavy crude oil.

• Methane: The principal constituent of natural gas; the simplest hydrocarbon molecule, containing one carbon atom and four hydrogen atoms.

• Natural gas liquids: Liquids obtained during natural gas production, including ethane, propane, butanes, and condensate.

• NET REVENUE INTEREST: An owner’s interest in the revenues of a well.

• NET WORKING INTEREST: Share in well proceeds attributable to the working interest.

• NON-OPERATING INTEREST: A working interest owner in a well, but not the operator.

• NON-PARTICIPATING ROYALTY: A royalty interest which “participates” in any oil, gas or mineral found but does not “participate” in lease bonuses or rentals.

• Oil Sands- A deposit of sand saturated with bitumen.

• Operator- The company or individual responsible for managing an exploration, development or production operation.

• OPERATING EXPENSES- The costs associated with operating a well.

• OPERATING INTEREST- A working interest owner who is also the well operator.

• Paid Up Leases: An oil and gas lease in which delay rentals for the entire primary term are paid in advance with the bonus consideration.

• PARTICIPATING ROYALTY- A royalty interest giving its owner the right to “participate” in bonuses received in leasing along with the right to “participate” in any oil or gas found.

• Perforations: Holes shot in an interval of casing in order to allow formation fluids to flow into the wellbore.

• Pooling: The consolidation and combining of leased land with adjoining leased tracts. The area is called a pool or a unit.

• Primary Term: The period of time during which an oil and gas lease will be in effect, in the absence of production, drilling or other operations specified by the lease. The oil and gas lease can be perpetuated past the primary term by production in paying quantities, drilling, operations and/or the payment of shut-in royalties specified by the lease.

• Porosity: The volume of spaces within rock that might contain oil and gas (like the amount of water a sponge can hold); the open or void space within rock — usually expressed as a percentage of the total rock volume. Thus porosity measures the capacity of the rock to hold natural gas, crude oil or water.

• Pugh Clause: A clause, which is calculated to prevent the holding of non-pooled acreage in a lease while certain portions of the lease acreage are being held under pooled arrangements. The main purpose of a Pugh clause is to protect the landowner from having their entire property held under a lease by production from a very small portion.

• Royalty: A percentage share of production, or the value derived from production, paid from a producing well. It is important to specify how royalties are to be calculated and paid as well as insuring that you are given the right to have a third party auditor verify the records of the production from your wells. Your royalty should be free of the costs of drilling and producing.

• RUN STUB: Stub attached to a check disclosing month of production, gas or oil, price received, and total volumes produced.

• Sandstone: A compacted sedimentary rock composed mainly of quartz or feldspar; a common rock in which oil, natural gas and/or water accumulate.

• Secondary Term: The term of an oil and gas lease in which the lease is held in force after expiration of the primary term. Production, operations, continuous drilling and/or shut-in royalty payments are often used to extend an oil and gas lease into its secondary term.

• Sedimentary basin: A geographical area, such as the Western Canada Sedimentary Basin, in which much of the rock is sedimentary (as opposed to igneous or metamorphic) and therefore likely to contain hydrocarbons.

• Seismic studies: Refers to studies done to gather and record patterns of induced shock wave reflections from underground layers of rock which are used to create detailed models of the underlying geological structure.

• Severance: Mineral rights may be severed or separated from surface rights by mineral deed or by mineral reservation. Severance by mineral deed occurs when a party owning both surface rights and mineral rights sells or grants by deed all or a portion of the mineral rights underlying his/ her property. This deed, known as a mineral deed, is registered with the county register of deeds and will become a part of the abstract of title to the land involved.

• Severance Tax: A tax imposed on the removal of nonrenewable resources such as crude oil, condensate and natural gas, coal bed methane and carbon dioxide. Severance tax is charged to producers, or anyone with a working or royalty interest, in oil or gas operations in the imposing states. You may be charged severance tax even if you do not realize a net profit on your investment.

• Shale: Rock formed from clay.

• SHUT-IN: An oil or gas well that is inactive.

• Shut In Royalty: A payment stipulated in the oil and gas lease, which royalty owners receive in lieu of actual production, when a gas well is shut-in due to lack of a suitable market, a lack of facilities to produce the product, or other cases defined within the shut-in provisions contained in the oil and gas lease. It is the responsibility of the landowner to clearly establish the allowable time limits for a well to be shut in by way of an addendum.

• Solution Gas: Natural gas that is found with crude oil in underground reservoirs. When the oil comes to the surface, the gas expands and comes out of the solution.

• Sour Gas: Natural gas at the wellhead may contain hydrogen sulphide (H2S), a toxic compound. Natural gas that contains more than 1 per cent of H2S is called sour gas. About 30 per cent of Canada’s total natural gas production is sour, most of it found in Alberta and northeast British Columbia.

• Stakeholders: Industry activities often affect surrounding areas and populations. People with an interest in these activities are considered stakeholders. They may include nearby landowners, municipalities, Aboriginal communities, recreational land users, other industries, environmental groups, governments and regulators.

• Steam Injection: An improved recovery technique in which steam is injected into a reservoir to reduce the viscosity of the crude oil.

• Sweet oil and gas: Petroleum containing little or no hydrogen sulphide.

• Synthetic Crude Oil: A mixture of hydrocarbons, similar to crude oil, derived by upgrading bitumen from oil sands.

• Term Lease: An oil and gas lease that expires after a specified period of time, regardless of whether oil, gas and/or other minerals are being produced.

• Tertiary Recovery: The third major phase of crude oil recovery which involves using more sophisticated techniques, such as steam flooding or injection of chemicals, to increase recovery.

• Tight Gas: Gas with very low flow rates. Found in sedimentary layers of rock that are cemented together so tight that it “greatly hinders” the extraction. Getting tight gas out usually requires enhanced technology like “hydraulic fracturing” where fluid is pumped into the ground to make it more permeable. The National Energy Board estimates Canada could have between 89 and 1500 trillion cubic feet (tcf) of tight gas, compared to total gas estimates (excluding tight gas) of 733 tcf.

• Traps: A mass of porous, permeable rock – sealed on top and both sides by non-porous, impermeable rock – that halts the migration of oil and gas, causing them to accumulate.

• Ultimate potential: An estimate of recoverable reserves that will have been produced by the time all exploration and development activity is completed; includes production-to-date, remaining reserves, development of existing pools and new discoveries.

• Undiscovered recoverable resources: Those resources estimated to be recoverable from accumulations believed to exist based on geological and geophysical evidence but not yet verified by drilling, testing or production.

• Unitization: The combining of multiple wells to produce from a specified reservoir.

• Vertical Drilling: A drilling technique that bores a single well shaft vertically into the desired formation.

• Viscosity: The resistance to flow, or “stickiness” or a fluid.

• Wildcat: A well drilled in an area where no oil or gas production exists.

 

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