20 of 20 terms
A
Accredited Investor
An individual or entity meeting SEC income, net-worth, or professional-credential thresholds, permitting participation in private securities offerings.
AFE
Authorization for Expenditure, the itemized budget an operator circulates to working-interest partners estimating the cost to drill and complete a well.
B
Barrel (bbl)
The standard unit of crude oil volume, equal to 42 U.S. gallons. Gas is measured in MCF (thousand cubic feet).
Bonus Payment
An up-front, per-acre payment from a lessee to a mineral owner for signing a lease, paid regardless of whether a well is ever drilled.
D
Decline Curve
The characteristic falloff in a well’s production rate over time, used to forecast future volumes and estimate reserves.
Depletion Allowance
A deduction that lets mineral owners recover the cost or value of a depleting resource, available as cost depletion or 15% percentage depletion.
Division Order
A document confirming each owner’s decimal share of revenue from a well before a purchaser will release payment.
Dry Hole
A well that fails to find commercially producible hydrocarbons. The capital invested is generally lost.
I
IDC
Intangible Drilling Costs, non-salvageable expenses of drilling (labor, fuel, mud, site prep) that are largely deductible in the first year.
L
Lease Operating Expense (LOE)
The recurring cost of operating a producing well, pumping, maintenance, water disposal, electricity, and field labor.
M
Mineral Rights
Ownership of the hydrocarbons beneath a tract of land, separate from ownership of the surface. Can be sold, leased, or inherited.
N
Net Revenue Interest (NRI)
An owner’s share of production revenue after royalties and other burdens are deducted from the gross working interest.
O
Operator
The company responsible for drilling, completing, and managing a well on behalf of all working-interest owners.
P
PDP
Proved Developed Producing, reserves expected from existing wells using existing equipment; the lowest-risk reserve category.
Pooling / Unitization
Combining multiple tracts or leases into a single drilling unit so a well can be drilled and production shared proportionally.
R
Royalty Interest
A share of production revenue free of drilling and operating costs, retained by the mineral owner under a lease.
S
Severance Tax
A state tax on the value or volume of hydrocarbons produced (“severed”) from the ground.
Spud
To begin drilling a well — the moment the bit first touches the ground.
W
Working Interest
An ownership stake that bears a proportionate share of drilling and operating costs in exchange for a share of revenue.
Workover
Remedial work on an existing well to restore or increase production, distinct from routine operating expense.
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