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Glossary of Industry Terms


ABSOLUTE OPEN FLOW (A.O.F.) – These figures are tabulated for a 24 hour production test. These test figures should not be relied upon by investors as a sustainable daily production rate for a well.
ACIDIZING A WELL – A technique for increasing the flow of oil from a well by the use of acid pumped down the hole and into the rock formation. The acid dissolves some of the rock enlarging the cracks and fissures near the well bore allowing more oil to flow.
ACRE-FOOT OF SAND – A unit of measurement applied to petroleum reservoirs; an acre of producing sand one foot thick.
ANTICLINE – A subsurface geological structure in the form of an elongated dome. Historically this type formation has been found favorable to the accumulation of oil or gas.
AUTHORIZATION FOR EXPENDITURE (AFE) – A document used to estimate the cost of drilling, completing a well or installing major equipment facilities in an oil field. The AFE is submitted to management and/or participants in the activity for their authorization and approval of the expenditure. The AFE is a budgetary device; when the project is complete, the operator collects invoices of actual work done and compares it to the AFE, should the project come in under budget, he refunds the balance. If the project has cost overruns, the operator submits additional invoices to the participants.


BARREL (BBL) – 42 U.S. gallons of crude oil.
BASEMENT ROCK – Igneous or metamorphic rock lying below the sedimentary formations in the earth’s crust. Basement rock does not contain petroleum deposits.
BASIN – A synclinal structure in the subsurface, once the bed of a prehistoric sea. Basins, composed of sedimentary rock, are regarded as good prospects for oil exploration.
BCF – One billion cubic feet of natural gas at atmospheric pressure.
BRIDGE PLUG – An expandable plug used in a well’s casing to isolate producing zones or to plug back to produce from a shallower formation; also to isolate a section of the bore hole to be filled with cement when a well is plugged.
BLOWOUT – Out-of-control gas or oil pressure erupting from a well.
BLOWOUT PREVENTER – A stack or an assembly of heavy-duty valves attached to the top of the casing to control well pressure.
BOTTOM SEDIMENT WATER (BS&W) – Water, being heavier than oil, will collect in the bottom of tanks if water is being produced with the oil. This water will contain some sediment material produced out of the well. Periodically Bottom Sediment Water is collected and disposed of in an appropriate facility.
BUY-IN COST – The cost of participation in a prospect to drill a well. These costs include lease costs, any prospect fees paid to the geologist, seismic cost and sometimes a promotional fee to cover sales and marketing expense.


CASING – Steel pipe used in oil wells to seal off fluids from the bore hole and to prevent the walls of the hole from sloughing off or caving in.
CEMENT – To fix the casing firmly in the hole with cement, which is pumped through the drill pipe to the bottom of the casing and up into the annular space between the casing and the walls of the well bore. After the cement sets (hardens) it is drilled out of the inside of the casing. The casing is then perforated to allow oil and gas to enter the well.
CEMENT SQUEEZE – A method whereby perforations, large cracks, and fissures in the wall of the bore hole are forced full of cement and sealed off.
CHRISTMAS TREE – An assembly of valves mounted on the casing through which the well is produced. The valves also allow testing of the well.
CIRCULATE – To pump drilling fluid into the bore hole through the drill pipe and back up the annulus between the pipe and the wall of the hole.
COMPLETE A WELL – To finish a well so that it is ready to produce oil or gas.
CONFIRMATION WELL – A well drilled to “prove” the formation or producing zone encountered by an exploratory or wildcat well.
CONTOUR LINE – A line (as on a map) connecting points on a land surface that have the same elevation above or below sea level.
CONTOUR MAP – A map showing land surface elevations by the use of contour lines. Structure contour maps are used by geoscientists to depict subsurface conditions or formations.


DECLINE CURVE – Production from oil and gas wells decline over time. Production can fluctuate for a number of reasons including reservoir pressures, depletion or down time for maintenance.
DEPLETION ALLOWANCE – A provision in the tax law that exempts a certain percent of mineral production from income tax. This provision considers that oil and gas reserves are depleted over time when produced.
DEVELOPMENT DRILLING – A development well is generally a well drilled as an additional well to the same oil and gas reservoir as other producing wells or not more than one location away from a producing well.
DEVIATED HOLE – A well bore which is off the vertical either by design or by accident.
DIRECTIONAL DRILLING – The technique of drilling at an angle from the vertical by deflecting the drill bit.
DISCOVERY WELL – An exploratory well that encounters a new and previously untapped petroleum deposit.
DISPOSAL WELL – A well used for the disposal of salt water. The salt water is pumped into a subsurface formation sealed off from other formations by impervious strata of rock.
DIVISION ORDER – A contract of sale to the buyer of crude oil or gas directing the buyer to pay for the product in the proportions set forth in the contract. Certain amounts of payment go to the operator of the producing property, the royalty owners and others having an interest in the production.
DRILLING MUD – A special mixture of clay, water, and chemical additives pumped down hole through the drill pipe and drill bit. The mud cools the rapidly rotating drill bit; lubricates the drill pipe as it turns in the well bore; carries rock cuttings to the surface; and serves as plaster to prevent the wall of the bore hole from crumbling or collapsing. Drilling mud also provides the weight or hydrostatic head to prevent extraneous fluids to entering the well bore and to control down-hole pressures that might be encountered.
DRILL STEM – The drill pipe. In rotary drilling, the bit is attached to the drill stem or drill column which rotates to “dig” the hole.
DRILL STEM TEST – A method of obtaining a sample of fluid from a formation using a “formation-tester tool” attached to the drill stem. The tool consists of a packer to isolate the section to be tested and a chamber to collect a sample of fluid. If the formation pressure is sufficient, fluid flows into the tester and up the drill pipe to the surface.
DRY-HOLE COST – The cost of drilling the well. Completion costs are in addition to dry-hole costs but only come due if the well locates producible oil or gas.


ECONOMIC DEPLETION – The reduction in value of a diminishing asset due to removal or production of the asset (minerals).
ELEVATORS – A heavy, hinged clamp in the derrick that is attached to the hook and traveling block by bail-like arms. The elevators are used for lifting drill pipe, casing, and tubing and lowering them into the hole. In hoisting a joint of drill pipe, the elevators are latched on to the pipe just below the tool joint (coupling), which prevents the pipe from slipping through the elevators.
ENHANCED RECOVERY – Sophisticate recovery methods for crude oil which go beyond the conventional secondary recovery methods of pressure maintenance and water flooding.


FARM IN – An arrangement whereby one oil operator “buys in” or acquires an interest in a lease or concession owned by another operator on which oil or gas has been discovered or is being produced.
FARM OUT – The name applied to a leasehold held und a farm-out agreement.
FARM OUT AGREEMENT – A form of agreement between oil operators whereby the owner of a lease who is not interested in drilling at the time agrees to assign the lease or a portion of it to another operator who wishes to drill the acreage. The seller may or may not retain an interest (Royalty or production payment) in the production.
FAULT – A fracture in the earth’s crust accompanied by a shifting of one side of the fracture with respect to the other side.
FLANGE-UP – Oil-field slang meaning to finish the job. Derived from work with pipe having flanges (rims) on the ends; this pipe is bolted together at those flanges; the pipe can carry liquids once it is “Flanged Up.”
FLOWING CASING PRESSURE – The static pressure in the casing when the well is flowing into delivery lines.
FLOWING TUBING PRESSURE – The static pressure in the tubing when the well is flowing into delivery lines.
FORMATION – A sedimentary bed or series of beds sufficiently alike or distinctive to form an identifiable geologic unit.
FRAC JOB – see Hydraulic Fracturing


GAS-CUT MUD – Drilling mud aerated or charged with gas from formations down hole. The gas forms bubbles in the drilling fluid. Gas-cut mud may indicate commercial quantities of gas present in the formation.
GAS KICK – Pressure from down hole in excess of that exerted by the weight of the drilling mud, causing loss of circulation. If the gas pressure is not controlled by increasing the mud weight, a kick can violently expel the column of drilling mud resulting in a blow-out.
GEOLOGICAL STRUCTURE – Layers of sedimentary rocks which have been displaced from their normal horizontal position by the forces of nature into folds, fractures and faults. Geological structures are the logical places to find accumulations of oil and gas.
GEOLOGIST – A person trained in the study of the earth’s crust. A petroleum geologist, in contrast to a hard-rock geologist, is primarily concerned with sedimentary rocks where most of the world’s oil and gas has been found.
GEOPHYSICIST – A person trained in the study and application of certain physical principles – magnetic, electrical, gravity and the progression and velocity of sound waves – to the study of geology.


HYDRAULIC FRACTURING – A method of stimulating production from a formation of low permeability by inducing fractures and fissures in the formation by applying very high fluid-pressure to the face of the formation, forcing the strata apart.


INDEPENDENT PRODUCER – A person or corporation that produces oil for the market, having no pipeline system or refinery.
INFILL DRILLING – Wells drilled to fill in between established producing wells on a lease to increase production from the lease.
INTANGIBLE DRILLING COSTS – Expenditures made by an operator for labor, fuel, repairs, hauling and supplies used in drilling and completing a well for production. Intangible drilling costs include the construction of derricks, tanks, pipelines on the lease, the buildings and preparation of the drill site but do not include the cost of materials or equipment. A rule of thumb is: do the items for which expenditure were made have any salvage value? If not, they qualify under the tax laws as intangible drilling costs.
INTERMEDIATE STRING – See Casing. There may be several strings of casing in a well, one inside another. The first casing put in a well is called Surface Pipe which is cemented into place and serves to shut out shallow water formations and also as a foundation or anchor for all subsequent drilling activity. Extremely deep wells will often have an “intermediate string” cemented in place to protect and preserve the well bore as the remaining hole is drilled and completed.


JACK-KNIFE RIG – A mast-type derrick whose supporting legs are hinged at the base. When the rig is to be moved, it is lowered or laid down intact and transported by truck.
JOINT – A length of pipe, casing, or tubing usually from 20 to 30 feet long. On a drilling rig, drill pipe and tubing are lowered into the whole the first time one joint at a time. When pulled from the hole and stacked in the rig, they are usually pulled two, three, or four at a time. These multiple-joint sections are called Stands.


KELLY – The first and sturdiest joint of the drill column; the thick-walled, hollow steel forging, with two flat sides and two rounded sides, when if fit into the square hole in the rotary table will rotate the kelly joint and thence the drill column and drill bit. Attached to the top of the kelly is the swivel and mud hose.
KELLY HOSE or MUD HOSE – This is a flexible, steel-reinforced, rubber hose connecting the mud pump with the swivel and kelly joint on the drilling rig. Mud is pumped through the mud hose to the swivel and down through the kelly joint and drill pipe to the drill bit at the bottom of the hole.


LANDOWNER ROYALTY – A share of the gross production of the oil and gas on a property by the landowner without bearing any of the cost of producing the oil or gas.
LAYING DOWN and/or LAY DOWN THE TUBING – To pull the tubing from the well, a joint at a time, and remove it from the derrick floor to a nearby horizontal pipe rack. As each joint is unscrewed from the string, the lower end of the joint is placed on a low cart and pulled out to the rack as the driller lowers the pipe, which is held up by the elevators.
LAY OFF AN INTEREST – To sell off a portion of one’s interest in a well to another person to reduce the financial loss should the well be non-commercial or dry. For example, an investor who has a 30 percent interest in a well to be drilled may lay off five or ten percent of his interest for cash he needs and/or to minimize his risk or to reduce his “exposed position.”
LEASE – (1)The legal instrument by which a leasehold is created in minerals. A contract that, for a stipulated sum, conveys to an operator the right to drill for oil or gas. (2) The location of production activity; oil installations and facilities; location of oil field office, tool house, garages.
LEASE BROKER – A person whose business is securing leases for later sale at a profit.
LIFTING AND OPERATING EXPENSE (L.O.E.) – In respect to any period, all cash costs incurred in connection with the running and maintenance of production wells.
LOSS OF CIRCULATION – A condition that exists when drilling mud pumped into the well through the drill pipe does not return to the surface. This serious condition results from the mud being lost in porous formations, a crevice or cavern penetrated by the drill bit.
LOST CIRCULATION MATERIAL – Material that is added to the drilling mud when circulation is lost to assist in plugging the breached area of the well bore.


MARGINAL WELL – A low-producing well, a well with marginal returns.
MCF – One thousand cubic feet of natural gas at atmospheric pressure..
MILL – To grind up; to pulverize with a milling tool.
MINERAL LEASE – Refers to any interest in an oil or gas lease or other right authorizing the owner to explore for and produce oil and gas.
MONOCLINE – A geological term for rock strata that dip in one direction.
MUD LOG – A progressive analysis of the well-bore cuttings washed up from the bore hole by the drilling mud. Rock chips are retrieved and examined by the geologist.
MUD PITS – See Reserve Pits. Excavations near the rig into which drilling mud is circulated. Mud pumps withdraw the mud from one end of the pit as the circulated mud, bearing rock chips from the bore hole, flows in at the other end. As the mud moves toward the suction line, the cuttings drop out leaving “clean” mud ready for another drip down the well bore.


NET REVENUE INTEREST (N.R.I.) – An interest in an oil and gas property which entitles the owner to a specific portion of the production from such property.
NON-OPERATOR – The working-interest owner or owners other than the one designated as the operator of the property.


OFFSET WELL – A well drilled on the adjacent location to the original well.
ONE-THIRD FOR A QUARTER – A term used by independent oil operators who are selling interests in a well they propose to drill. An investor who agrees to the one-third for a quarter deal will pay one-third of the cost of the well to the casing point and receive one-fourth of the well’s net production. When the operator sells three of these one-third interests he will have the cost of the well to casing point paid by his investors.
OPEN HOLE – An uncased well bore; the section of the well bore below the casing; a well in which there is no protective string of pipe.
OPERATOR – A person or entity engaged in the business of exercising direct responsibility and supervision over drilling, completion, operation, maintenance and production from an oil/gas well.
OVERRIDING ROYALTY – An interest in oil and gas produced at the surface free of any cost of production; royalty in addition to the usual landowner’s royalty.


PACKER – An expanding plug used in a well to seal off certain sections of the tubing or casing when cementing, acidizing or when a production formation is to be isolated. Packers are used on the tubing or the casing and when in position can be expanded hydraulically or mechanically against the pipe wall or the wall of the well bore.
PAYOUT – The recovery from production of the costs of drilling, completing and equipping a well. Sometimes included in the costs is a pro-rata share of lease costs.
PERCENTAGE DEPLETION – A method of computing the allowance for depletion of an oil or gas well, or other mining of minerals, for Federal income tax purposes.
PERFORATING – To make holes through the casing opposite the producing formations to allow oil and gas to flow into the well.
PERMEABILITY – A measure of the resistance offered by rock to the movement of fluids through it.
PINCH-OUT – The disappearance or “wedging out” of a porous, permeable formation between two layers of impervious rock.
PLUGGED & ABANDONED – To fill a well’s bore hole with cement or other impervious material to prevent the flow of water, gas or oil from one strata to another when a well is abandoned.
PLUGGING A WELL – To fill a well’s bore hole with cement or other impervious material to prevent the flow of water, gas or oil when a well is abandoned.
POROSITY – The state or quality of being porous; the volume of the pore space expressed as a percentage of the total volume of the rock mass. An important property of oil-bearing formations. Good porosity indicates an ability to hold large amounts of oil in the rock. Porosity must be coupled with good permeability to allow the oil to flow to the well bore.
PROVEN RESERVES – Oil and gas which has been discovered and determined to be recoverable but is still in the ground.
PULLING UNIT – A portable, truck-mounted mast equipped with winch, wire lines and sheaves, used for pulling rods and well work over.


RAT HOLE – A slanted hole drilled near the well’s bore hole to hold the kelly joint when not in use. The kelly is unscrewed from the drill string and lowered into the rat hole as a pistol into a scabbard.
RESERVE PIT – See Mud Pits. An excavation connected to the working mud pits of a drilling well to hold excess or reserve drilling mud; a standby pit containing already-mixed drilling mud for use in an emergency when extra mud is needed.
RESERVOIR PRESSURE and or DOWNHOLE PRESSURE – The pressure at the face of the producing formation when the well is shut in. It is equal to the shut-in pressure (at the wellhead) plus the weight in pounds of the column of oil in the hole. The hydrostatic pressure exerted by a column of oil 5,000 feet high, for example, would be several thousand pounds. In a flowing well, the reservoir pressure would be sufficient to overcome the pressure of the hydrostatic head.
RIG DOWN – A term meaning to disassemble or take apart after operations are complete. This term applies to any complex operation where multiple parts were assembled for an activity.
RIG UP – A term meaning to assemble or put together in preparation to go into operation. This term applies to any complex operation where multiple parts are assembled for an activity.
ROUND TRIP – Pulling the drill pipe from the hole to change the bit and running the drill pipe and new bit back in the hole. On deep wells, round trips or “a trip” may take 24 hours, three 8-hour shifts.
ROYALTY INTEREST (R.I.) A share of the minerals (oil and gas) produced from a property by the owner of the property. Originally, the right of the king to receive a percentage of the gold or silver taken from the mines of his realm. Entitles the owner to a share of gross proceeds which is free of expense of drilling, completion and production, but having no control over field activities.
RUN TICKET – A record of the oil run from a lease tank into a connecting pipeline.


SALT WATER DISPOSAL WELL – A well, sometimes a formerly producing well, that is used to inject produced salt water into a formation or formations for disposal.
SANDS – Common terminology for oil-bearing sandstone formations.
SCOUT TICKET – a standard form of information about activities on a drilling location or well. The information includes date, the well’s depth, formations encountered, well logs and tests. Completion information is briefly described as is the fate of the well, whether put in production or plugged.
SEDIMENTARY BASIN – An extensive area where substantial amounts of sediments occur. Most sedimentary basins are geologically depressed areas. The sediments are usually thickest in the middle, thinning toward the edges.
SEDIMENTARY ROCK – Rock formed by the laying down of matter by seas, streams, or lakes; sediment deposited in bodies of water through geologic ages. Limestone, sandstone and shale are sedimentary rocks.
SEVERANCE TAX – A tax levied by some states on each barrel of oil or each thousand cubic feet of gas produced.
SHUT-IN PRESSURE – Pressure as recorded at the wellhead when the valves are closed and the well is shut in.
SOUR GAS – Natural gas containing chemical impurities, notably hydrogen sulfide or other sulfur compounds that make it extremely harmful to breathe even small amounts.
SPUD – To start the actual drilling of a well. The first section of the hole is drilled with a large-diameter spudding bit down several hundred feet to accommodate the surface pipe which may be 8 to 20 inches in diameter, depending upon the depth of the well to which the well will ultimately be drilled. The surface pipe is cemented into this hole to protect the surface formations which might contain potable water.
SQUEEZE A WELL – A technique to seal off with cement a section of the well bore where a leak or incursion of water or gas occurs; forcing cement to the bottom of the casing and up the annular space between the casing and the wall of the bore hole to seal off a formation or plug a leak in the casing; a squeeze job.
STAND – When tubing is pulled from a well it will often be pulled in multiple joint lengths, often in three-joint lengths of up to ninety-feet. These multiple joints of tubing are called “Stands” and are stacked in the rig during the “trip”
STEP-OUT WELL – A well drilled adjacent to a proven well but located in an unproven area; a well located a “step out” from proven territory in an effort to determine the boundaries of a producing formation.
STIMULATION – The technique of getting more production from a down hole formation. Stimulation may involve acidizing, hydraulic fracturing, shooting or simply cleaning out to get rid of and control sand.
STRATIGRAPHIC TRAP – A type of reservoir capable of holding oil or gas, formed by a change in the characteristics of the formation – loss of porosity and permeability, or a break in its continuity – which forms the trap or reservoir.
STRIPPER WELL – An oil well in the final stages of production.
STRUCTURAL TRAP – A type of reservoir containing oil and/or gas formed by movements of the earth’s crust which seal off the oil and gas accumulation in the reservoir forming a trap.
SUCKER RODS – Steel rods that are screwed together to form a “string” that connects the pump inside a well’s tubing down hole to the pumping jack on the surface.
SWAB – To clean out the bore hole of a well with a special tool attached to a wire line. Swabbing a well is often done to start it flowing. By evacuating the fluid contents of the hole the hydrostatic head is reduced sufficiently to permit the oil in the formation to flow into the bore hole.


TANK BATTERY – Two or more stock tanks connected together to receive oil production from a well or a producing lease.
TIGHT HOLE – A drilling well about which all information – depth, formations encountered, drilling rate, logs — is kept secret by the operator.
TRIPPING THE BIT – Removing the bit from the hole and running it in again.
TURNKEY CONTRACT – A contract to drill and or complete and equip oil or gas well for a set, predetermined price. The turnkey format is designed to limit the liability of an investor to the amount of their capital contribution for drilling and completion.


WATER-DRIVE RESERVOIR – An oil reservoir or field in which the primary natural energy for the production of oil is from edge, or bottom-water in the reservoir.
WATER-FLOOD – One method of secondary recovery in which water is injected into an oil reservoir to force additional oil out of the reservoir rock and into the well bores of producing wells.
WORKING INTEREST (W.I.) – An interest in an oil and gas lease or prospect that bears the costs of development and operation of the property; the mineral interest less the royalty