The following are abbreviations and definitions of certain terms commonly used in the oil and gas industry:
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.
Bcf. One billion cubic feet of natural gas measured at standard atmospheric conditions.
Bcfe. One billion cubic feet equivalent of natural gas, calculated by converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.
Completion. The installation of permanent equipment for the production of oil or natural gas.
Developed Acreage. The number of acres that are allocated or assignable to producing wells or wells capable of production.
Exploitation. The continuing development of a known producing formation in a previously discovered field. To maximize the ultimate recovery of oil or natural gas from the field by development wells, secondary recovery equipment or other suitable processes and technology.
Exploration. The search for natural accumulations of oil and natural gas by any geological, geophysical or other suitable means.
Farmout or Farmin. An agreement where the owner of a working interest in an oil and gas lease assigns the working interest or a portion thereof to another party who desires to drill on the leased acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a farmin while the interest transferred by the assignor is a farmout.
Fracturing. The technique of improving production or injection rates of a well by pumping a mixture of fluids into the formation and cracking the rock, creating an artificial channel. As part of this technique, sand or other material may also be injected into the formation to keep the channel open, so that fluids or gases may flow more easily from the formation.
Gross Acres. The total acres in which Warren has a working interest.
Gross Wells. The total number of producing wells in which we own any amount of working interest.
Horizontal Drilling. A drilling operation in which a portion of the well is drilled horizontally within a productive or potentially productive formation. This operation usually yields a well which has the ability to produce higher volumes than a vertical well drilled in the same formation.
Injection Well or Injector. A well which is used to place liquids or gases into the producing zone during secondary/tertiary recovery operations to assist in maintaining reservoir pressure or displacing the hydrocarbons and enhancing recoveries from the field.
Intangible Drilling Costs. Expenditures made for wages, fuel, repairs, hauling and supplies necessary for the drilling or recompletion of an oil or gas well and the preparation of such well for the production of oil or gas, but without any salvage value. These expenditures are generally accepted in the oil and gas industry as being currently deductible for federal income tax purposes. Examples of such costs include:
- ground clearing, drainage construction, location work, road making, temporary roads and ponds, surveying and geological works;
- drilling, completion, logging, cementing, acidizing, perforating and fracturing of wells;
- hauling mud and water, perforating, swabbing, supervision and overhead;
- renting horizontal tools, milling tools and bits; and
- construction of derricks, pipelines and other physical structures necessary for the drilling or preparation of the wells.
Lease. An instrument which grants to another (the lessee) the exclusive right to explore for, drill for, produce, store and remove oil and natural gas on the mineral interest, in consideration for which the lessor is entitled to certain rents and royalties payable under the terms of the lease. Typically, the duration of the lessee’s authorization is for a stated term of years and “for so long thereafter” as minerals are producing.
Mbbl. One thousand barrels of oil or other liquid hydrocarbons.
Mcf. One thousand cubic feet of natural gas measured at standard atmospheric conditions.
Mcfe. One thousand cubic feet equivalent of natural gas, calculated by converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.
Mmbbl. One million barrels of oil or other liquid hydrocarbons.
Mmcf. One million cubic feet of natural gas measured at standard atmospheric conditions.
Mmcfe. One million cubic feet equivalent of natural gas, calculated by converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.
Net Acres. Gross acres multiplied by the percentage working interest owned by Warren.
PV-10 Value. The present value of estimated future revenues to be generated from the production of proved reserves calculated in accordance with SEC guidelines, net of estimated lease operating expense, production taxes and future development costs, using prices and costs as of the date of estimation without future escalation, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization or Federal income taxes and discounted using an annual discount rate of 10%.
Net Wells. The sum of all the complete and partial well ownership interests (i.e., if we own 25% percent of the working interest in eight producing wells, the subtotal of this interest to the total net producing well count would be two net producing wells).
Net Production. Production that is owned by Warren less royalties and production due others.
NYMEX. New York Mercantile Exchange.
Operator. The individual or company responsible for the exploration, exploitation and production of an oil or natural gas well or lease.
Permeability. The capacity of a geologic formation to allow water, natural gas or oil to pass through it.
Porosity. The ratio of the volume of all the pore spaces in a geologic formation to the volume of the whole formation.
Royalty. An interest in an oil and natural gas lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage, or of the proceeds of the sale thereof, but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
Secondary Recovery. An artificial method or process used to restore or increase production from a reservoir after the primary production by the natural producing mechanism and the reservoir pressure has experienced partial depletion. Gas injection and waterflooding are examples of this technique.
Tangible Drilling Costs. Expenditures necessary to develop oil or gas wells, including acquisition, transportation and storage costs, which typically are capitalized and depreciated for federal income tax purposes. Examples of such expenditures include:
- well casings;
- wellhead equipment;
- water disposal facilities;
- metering equipment;
- gathering lines; and
- storage tanks.
3-D Seismic. The method by which a three dimensional image of the earth’s subsurface is created through the interpretation of the reflection of sound waves collected over a surface grid. 3-D seismic surveys allow for a more detailed understanding of the subsurface than do conventional surveys and contribute significantly to field appraisal, exploitation and production.
Waterflood. A secondary recovery operation in which water is injected into the producing formation in order to maintain reservoir pressure and move oil towards the producing wells.
Working Interest. An interest in an oil and natural gas lease that gives the owner of the interest the right to drill for and produce oil and natural gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations.