ABANDON

Term used when production is stopped from a well that is depleted and no longer capable of producing profitably. A well may also be abandoned after it has been determined that it will not produce.

ACCOUNTING DATABASES

The five databases which drive the financial accounting system consist of ¶ Divisions of Interest · Vendors ¸ Authorizations for Expenditures ¹ Cost Centres º Chart of Accounts.

ACCOUNTING MONTH

The month in which financial and production data is input into the accounting system.  This data can also be assigned a production month prior to or subsequent to the accounting month in which it is entered.

ACIDIZING

Treatment of oil-bearing limestone or carbonate formations with a solution of hydrochloric acid and other chemicals to increase production.  The acid is forced under pressure into the formation where it enlarges the flow channels by dissolving the limestones.

AFTER PAYOUT ("A.P.O.")

The point in time when the capital costs of drilling a well have been recovered from the net revenues generated by production from that well.  Generally a change in working interest is triggered by reaching the status of After Payout.

AREA OF MUTUAL INTEREST AGREEMENT ("A.M.I.")

An area designated, under an agreement for a period of time, around a well being drilled by two or more parties within which each party has the right to participate in any new drilling activities or land acquisitions of the other.

ASSIGNMENT AND NOVATION AGREEMENT

A contract between a vendor and purchaser to transfer the ownership of the mineral rights as set out in the legal land description of the lease agreement.

AUTHORIZATION FOR EXPENDITURE ("AFE")

Capital budget prepared by the operator's engineers of the projected costs of drilling the well both dry and successful.  If there are other working interests, each partner in the well must sign the AFE before drilling begins.

BACK-IN

The conversion of a (smaller) cost-free interest to a (larger) working interest in a well, normally occurring when the original capital investment in the well has been returned (at payout).

BARREL OF OIL EQUIVALENT ("BOE")

A standard of unit of measure whereby gas and NGL's are converted to an equivalent barrel of oil based on either their heat content or economic value.

BATTERY

Series of stills, tanks, wells or boilers set in continuous masonry, or set separately, but operated by means of common connections.  Wells in a battery are reported on an S-1 and S-2 production report (new forms are G-1 and G-2).

BEFORE PAYOUT ("B.P.O.")

The period of time when the capital costs of drilling a well are being recovered from the net revenues generated by production from that well.

BLOWOUT

An uncontrolled flow of gas, oil and other well fluids from a well to the atmosphere during the drilling of a well.  A well blows out when the formation pressure exceeds the pressure being applied to it by the column of drilling fluid.

BLOWOUT PREVENTOR ("BOP")

Hydraulically or mechanically operated high pressure values installed at the wellhead for the purpose of controlling pressures in the annular space between the casing and drill pipe, or in an open hole during drilling and completion operations to control pressure within the well.

BONUS

The amount which is usually paid by the lessee to the lessor as consideration for making the lease is commonly referred to as a "bonus".  The bonus is paid on a once-only basis in order to acquire the P&NG lease.  Bonus bids for crown leases are paid to the Provincial Treasurer and the highest bid acquires the lease.

BREAKOUT

Act of unscrewing one section of pipe from another section, especially in the case of drill pipe while it is being withdrawn from the well bore.

BRING IN A WELL

The act of completing and brining it into actual production status.  A well is considered complete when it has been acidized, fractured and the christmas tree or wellhead has been installed.

CAPITAL COSTS

Expenditures made in order to bring in a well to completion or plugged if D&A, such as surface and petroleum and natural gas lease acquisition costs, intangible drilling and completion costs, tangible drilling costs and production equipment.

CAPPED WELL

A well capable of production but lacking wellhead installations and a pipeline connection.

CARRIED INTEREST OR NET EARNED INTEREST

The term "carried interest", as usually used in the oil and gas industry, refers in a broad sense to situations wherein an oil and gas venture must "pay out" (i.e. all drilling, developing and operating costs must be recovered out of production) before the owner of the carried interest receives any proceeds from the venture.  A common type of carried interest is created where the owner of an undivided share in the working interest under a lease agrees to advance all funds for costs of drilling, developing and operating the property to which the lease applies.  In such a situation, the owner or owners of the other undivided shares in the working interest become "carried interests".  The person advancing the funds (operator) is said to be "carrying" the other interests in that their respective pro rata shares of the costs of drilling, developing, and operating the property are paid by him and are recoverable by him solely out of their respective pro rata shares of proceeds from oil and gas production.

CASH CALLS

Money requested in advance by operator from participants in a well for capital costs.

CASING

Steel pipe threaded together and cemented into a well as drilling progresses to prevent the wall of the hold caving in during drilling and to provide a means of extracting oil and gas if the well is productive.

CASING POINT

After the casing has been cemented, but before production tubing has been installed.

CEMENTING

The application of a liquid slurry of cement and water to various points in an oil well, inside or outside the casing.  Primary cementing refers to the cementing operation which takes place immediately after the casing has been run into the hole, and which provides a protective sheath around the casing, segregates the production formation, and prevents the migration of undesirable fluids.

CHRISTMAS TREE

Valves, pipes and fittings assembled at the top of a completed well to control the flow of oil and gas.

COMPLETE A WELL

Finish the work on a well and bring it to a productive state.  Acidizing and fracing are examples of well completion processes.

COMPRESSOR

A devise that raises the pressure of a compressible fluid, such as air or gas.  Compressors create a pressure differential in order to move or compress a vapor or a gas, consuming power in the process.  Compressors may be used in a gas processing plant, for water injection and recovery enhancement, or on pipeline transmission systems.

CORE

Cylindrical sample of rock taken from a formation for purposes of examination and analysis.

CORE ANALYSIS

A study of the core in a laboratory to determine the following properties of the formation form which the core was taken:  porosity, permeability, fluid content, angle of dip, geological age, lithology, and probable productivity.

CONVENTIONAL

With reference to natural gas reservoirs or production form them ¾ those reservoirs from which natural gas will flow in commercial quantities without application of any technology other than that usually associated with gas well completion; the production from such reservoirs.

D&A

Drilling and abandoned is a term used to describe a well that is found to be dry, then plugged and abandoned.

DAILY CONTACT QUANTITY

The average daily rate of take specified in a contract negotiated between a gas supplier and a gas purchaser.

DAY WORK CONTRACT

A drilling contract in which the drilling contractor charges a daily rate for each day the rig is on site from spud to release date.

DAILY LEASE RENTALS

Amounts paid to the lessee to the lessor for deferring the time within which drilling operations must be commenced.

DECLINE RATE

The rate at which a well's production declines due to natural and sometimes man-introduced forces.  Expressed in percent per year.

DEPLETION

Refers to consumption of natural resources which are part of a company's assets.  Producing oil, mining, gas and timber companies deal in products that cannot be replenished and, as such, are known as "wasting assets".  The recording of depletion is a bookkeeping entry similar to depreciation and does not involve the expenditure of cash.  The amount charged to expense in the company's financial statements which relates to depletable assets that have been capitalized.  This is not the earned depletion allowance calculated for income tax purposes.

DERRICK

Load-bearing, tower-like framework over an oil or gas well which holds the hoisting and lowering equipment used to drill a well.

DEVELOPMENT WELL

A well drilled within a proven field or area for the purpose of completing the desired pattern of production.

DIRECTIONAL DRILLING

A drilling operation in which the well is intentionally diverted from vertical through the use of shipstocks.  Directional drilling is resorted to in instances in which the proposed well location falls on a restricted building site, under a river or along a seacoast where the location of drilling equipment is economically impossible.  The rig is placed as near the location as possible and the hole is drilled at an angle to the  petroleum-bearing formation.

DISCOVERY WELL

An exploratory well which discovers a new oil or gas field.

DIVISION OF INTEREST ("DOI")

The identification of all joint interest partners in a cost centre or AFE who will participate in the sharing of costs and revenues.  The DOI's are recorded in one of the primary databases key to the financial accounting system.

DOWN TIME

When rig operations are temporarily suspended to effect repairs, maintenance or waiting on supplies.

DRILL STEM TEST

Conventional method of testing a formation to determine its potential productivity before installing production casing in a well.  A testing tool is attached  to the bottom of the drill pipe and placed opposite the formation to be tested which has been isolated by placing packers above and below the formation.  Fluids in the formation are allowed to flow up through the drill pipe, enabling measurement of the rate and volume of flow, as well as sampling of fluids at the surface.

DRILL PIPE

Steel pipe, usually in 9.14 metre or 30 foot lengths, screwed together to form a continuous pipe extending from the drilling rig to the drilling bit at the bottom of the hole.  Rotation of the drill pipe and bit causes the bit to bore through the rock.

DRILL STRING (or DRILLING STRING)

String of individual joints of pipe that extends from the kelly to the bit..  It carries the mud down to the bit and also rotates the bit.

DRILLER

An employee directly in charge of a particular crew as opposed to a toolpusher who is in charge of all crews on a rig.  Operations of the drilling and hoisting equipment constitute his main duties.

DRILLING DEPOSITS

Deposits must be held by provincial governments on behalf of companies drilling in the province, to ensure that the oil company can fulfill its responsibility in proper drilling operations.  The deposits usually are in the form of government bonds.  Interest is earned on these bonds and is remitted to the oil company periodically.

DRILLING FLUIDS

Liquid, usually composed of clay and water, which is circulated through the well bore during rotary drilling.  Rock cuttings from the bottom of the well bore are brought to the surface in the drilling fluid, which is also called "mud". The composition and pressure of the drilling fluid helps control down-hole pressures.  Drilling fluid also lubricates the bit.

DRILLING FUNDS

A form of venture capital in the oil and gas industry.  These funds enable individuals to invest in the oil industry and to claim all of the deductions normally available to oil companies.  The individuals usually form a limited partnership.  A general partner, usually a limited company, administers the funds and enters into joint venture activities.  The partnership then obtains a working interest in several wells, and shares in all of the revenues and deductions relating to the working interest in those wells.

DRY HOLE

Generally refers to any well that does not produce oil or gas commercial quantities. Sometimes called a "duster".

DUAL COMPLETION

The completion of a well in two separate producing formations which are produced separately and concurrently.

EASEMENT

A right that one may have on another loan.  In the petroleum industry usually it refers to the right given by the landowner for a pipeline to be laid across his land.

EQUIPPING

Preparation of a well for production.  Equipment typically includes such items as a pump-jack, bottom-hole pump, motor, rods, storage tanks, and valves and fittings.

EQUIVALENT BARRELS

Natural gas reserves are converted to equivalent barrels of oil, based on the equivalence of MCF's to barrels in BTU's (British Thermal Unit).

EXPLORATORY WELL (or EXPLORATION WELL)

Well drilled in unproven territory.  Also called a wildcat.

FARMIN

When one company drills wells or performs other activity on another company's lease in order to earn an interest in or acquire that lease.

FARMOUT

An arrangement under which a portion of an interest in petroleum and natural gas rights is assigned in consideration for the assignee agreeing to explore or drill (and perhaps equip) one well or several wells at his sole expense; subsequent development and equipment cost, if any, and income and operating expenses are shaped by participants on an agreed basis.

FIELD

An area consisting of a single reservoir or multiple reservoirs all grouped into one geological feature.

FLOW TANK

A tank in which the oil is run from the well and in which the gas and water may separate from the oil when the separator is not used.

FOOTAGE CONTRACT

Drilling contract where the contractor agrees to drill a well to target depth for an agreed amount per foot.

FRACTURING (FRACING)

Method of stimulating production by increasing the permeability of the producing formation.  Under extremely high hydraulic pressure, a fluid such as distillate, diesel fuel, crude oil, dilute hydrochloric acid, water, or kerosene is pumped downward through production tubing or drill pipe and forced out below a packer or between two packers.  The pressure causes cracks to open in the formation, and the fluid penetrates the formation through the cracks.  Propping agents (such as sand grains, aluminum pellets, walnut shells, or similar materials) are carried in suspension by the fluid into the cracks.  When the pressure is released at the surface, the fracturing fluid returns leaving the propping agent in the formation.  The cracks partially close on the propping agent, leaving channels for oil and gas to flow around them to the well.

FREEHOLD LEASE

An agreement with an individual which provides for the petroleum and natural gas rights underlying a given area.

FREEHOLD ROYALTY

A royalty based on production paid to the owner (anyone other than the crown) of the producing lease.

GAS PLANT

Processing plant for the extraction of liquid hydrocarbons, sulphur, etc. from wet gas, and for the production of residue gas.

GATHERING LINES OF GATHERING SYSTEM

Pipes connecting production tanks at oil wells with truck pipe lines.  In natural and casing-head systems, the lines that connect with the wells and carry the gas to the main pipe lines.

GAUGING TO MEASURE OIL PRODUCTION

A term which refers to measurement of oil in tanks.  This is generally done by means of a gauge line (steel tape).  To determine B.S.&W. in a tank it is necessary to chalk gauge line or thief rod.  These are, in general, two methods of gauging ¾ the "outage" method and the "innage" method.  In the outage method, oil contents are determined by gauging from the "benchmark" in the "gauge hatch" or top of the tank to the top of the oil.  The distance from the benchmark to the top of the oil is deducted from the tank height indicated on  the benchmark to arrive at the oil reading.  From this reading it is, of course, necessary to deduct the B.S.&W. reading to arrive at net oil contents of the tank.  In the innage method, oil in the tank is determined by dropping a plumb bob attached to a gauge line to the bottom of the tank.  Oil in the tank is then determined by the oil mark indicated on the gauge line.  The B.S.&W. reading is taken in the same manner as in the outage reading.  The reading recorded by gaugers are in feet and inches (generally down to an eighth-of-an-inch) are connected to barrels by means of tank tables.  The status of the tanks determines the number of times a tank is gauged in the course of a day (i.e. ordinarily, standing tanks are gauged once a day to obtain stock gauges whereas moving tanks may be gauged every hour in order to keep a close check on pumpings).

GEOLOGIST

Scientist whose duties consist of obtaining and interpreting data dealing with the earth's history and its life, especially as recorded in rocks.

GEOPHYSICAL PROSPECTING

A method of prospecting with delicate instruments which will detect sub-surface structures.  Torsion balance, seismograph and magnetometer are names of some of the instruments.