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Oil and Gas Glossary

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Deductions - Tax items which may be subtracted from gross income to arrive at taxable income in Federal income tax computations.

Deed - A written document by which the title to a property is transferred from one party (the grantor) to another (the grantee).

Deepwater port - An offshore marine terminal designed to accommodate large vessels such as VLCCs and tankers, connected to the shore by submerged pipelines.

Delay rental - Cash payments to the mineral rights owner (lessor) by the working interest owner (lessee), for the privilege of postponing the commencement of drilling operations on the leased property.

Deliverability - A well's tested ability to produce.

Depletion, restoration of - In federal income taxation, the adding back to income of depletion allowance taken on minerals not produced.

Development - well A well drilled in an already discovered oil or gas field.

Diesel oil - A petroleum fraction composed primarily of aliphatic (linear of unbranched) hydrocarbons. Diesel oil is slightly heavier than kerosene.

Differential-pressure sticking - A condition in which a section of drillpipe becomes stuck in deposits on the wall of the borehole.

Directional drilling - Drilling at an angle, instead of on the perpendicular, by using a whipstock to bend the pipe until it is going in the desired direction. Directional drilling is used to develop offshore leases, where it is very costly and sometimes impossible to prepare separate sites for every well; to reach oil beneath a building or some other location which cannot be drilled directly; or to control damage or as a last resort when a well has cratered. It is much more expensive than conventional drilling procedures.

Distillate - Liquid hydrocarbons, usually colorless and of high API gravity, recovered from wet gas by a separator that condenses the liquid out of the gas. The present term is natural gas.

Distillate fuel oil - A term subject to a variety of definitions. Sometimes the definition is based on the method of production, but other definitions are based on boiling range, viscosity, or use.

Distributor - A wholesaler of gasoline and other petroleum products; also know as a jobber. Distributors of natural gas are almost always regulated utility companies.

Division Order - A contract for the sale of oil or gas, by the holder of a revenue interest in a well or property, to the purchaser (often a pipeline transmission company).

Domestic production - Oil and gas produced in the United States as opposed to imported product.

Downhole - Refers to equipment or operations that take place down inside a borehole.

Downstream - All operations taking place after crude oil is produced, such as transportation, refining, and marketing.

Drill bit - The part of the drilling tool that cuts through rock strata.

Drill string - Also called drill pipe or drill stem. Thirty-foot lengths of steel tubing screwed together to form a pipe connecting the drill bit to the drilling rig. The sting is rotated to drill the hole and also serves as a conduit for drilling mud.

Drilling - The act of boring a hole through which oil or gas may be produced if encountered in commercial quantities.

Drilling break - A sudden increase in the rate of drilling.

Drilling fund - The generic term employed to describe a variety of organizations established to attract venture capital to oil and gas exploration and development. Typically the fund is established as a joint venture or limited partnership.

Drilling mud - A mixture of clay, water, chemical additives, and weighting materials that flushes rock cuttings from a well, lubricates and cools the drill bit, maintains the required pressure at the bottom of the well, prevents the wall of the borehole from crumbing or collapsing, and prevents other fluids from entering the well bore.

Drilling platform - An offshore structure with legs anchored to the sea bottom that supports the drilling of up to 35 wells from one location.

Drilling rig - The surface equipment used to drill for oil or gas, consisting chiefly of a derrick, a winch for lifting and lowering drill pipe, a rotary table to turn the drill pipe, and engines to drive the winch and rotary table.

Drillstem test - A test through the drill pipe prior to completion to determine if oil or gas is present in a formation.

Dry hole - A well that either produces no oil or gas or yields too little to make it economic to produce.

Dry natural gas - Natural gas containing few or no natural gas liquids (liquid petroleum mixed with gas).

Dual completion - Completing a well that draws from two or more separate producing formations at different depths. This is done by inserting multiple strings of tubing into the well casing and inserting packers to seal off all formations except the one to be produced by a particular string.

Due Diligence - In an offering of securities, certain parties who are responsible for the accuracy of the offering document, have an obligation to perform a "due diligence" examination of the issuer; issuer's counsel, underwriter of the security, brokerage firm handling the sale of the security. Due diligence refers to the degree of prudence that might properly be expected from a reasonable man, on the basis of the significant facts which relate to a specific case.


Economic interest - An interest in oil and gas in the ground. It entitles the owner to a deduction from gross income derived from production of that oil and gas as specified in Federal income tax regulations.

Electrical well logging - A method of oil exploration that originated with Conrad Schlumberger, who first tested it in 1927 on a 1,500-meter well in France. As used today, the process is very simple. Current passes into the ground, through the resistive medium and into the sonde. The resulting charts show the varying resistance, the conductance, and the self-potential of the strata surrounding the well at every level, and geophysicists use them to assay whether petroleum is present in a formation.

Enhanced oil recovery - Injection of water, steam, gases or chemicals into underground reservoirs to cause oil to flow toward producing wells, permitting more recovery than would have been possible from natural pressure or pumping alone.

Ethanol - The two-carbon-atom alcohol present in the greatest proportion upon fermentation of grain and other renewable resources such as potatoes, sugar, or timber. Also called grain alcohol.

Expenses (Tax Usage) - Expenditures for business items that have no future life (such as rent, utilities, or wages) and are incurred in conducting normal business activities.

Exploration - The search for oil and gas. Exploration operations include: aerial surveys, geophysical surveys, geological studies, core testing and the drilling of test wells.

Exploratory well - A well drilled to an unexplored depth or in unproven territory, either in search of a new reservoir or to extend the known limits of a field that is already partly developed.

External casing packer - A device used on the outside of the well casing to seal off formations or protect certain zones. The packer is run on the casing and expanded against the wall of the borehole at the proper depth by hydraulic pressure or fluid pressure from the well.

Extraction plant - A plant for the extraction of the liquid constituents in casinghead gas or wet gas.


Farm in - 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.

Farm out agreement - An arrangement in which the responsibility of exploration and development is shifted (by assignment) from the working interest owner to another party.

Farmer's oil - An expression that refers to the landowner's share of oil from a well drilled on his property. This royalty is traditionally one-eighth of the produced oil free of any expense to the landowner.

Fault - A break in the continuity of stratified rocks or even basement rocks. Faults are significant to oilmen because they can form traps for oil when the rock fractures, they can break oil reservoirs into noncommunicating sections, they help produce oil accumulations, and they form traps on their own.

Fault trap - A geological formation in which oil or gas in a porous section of rock is sealed off by a displaced, nonporous layer.

Fee lands - Privately owned, nonpublic lands.

Feet of pay - The thickness of the pay zone penetrated in a well.

Field - A geographical area under which one or more oil or gas reservoirs lie, all of them related to the same geological structure.

Filter cake - A plastic-like coating that builds up inside the borehole. Such buildup can cause serious drilling problems, including sticking of the drillpipe.

Fishing - Recovering the tools or pipe that have been accidentally lost down the borehole by using specially designed tools that screw into or grab the missing equipment.

Fishing tools - Special instruments equipped with the means for recovering objects lost while drilling the well.

Five-spot waterflood program - A secondary-recovery operation in which four injection wells are drilled in a square pattern with the production well in the center. Water from the injection wells moves through the formation, forcing oil toward the production well.

Flange up - To complete the drilling of a well.

Flaring - The burning of gas vented through a pipe or stack at a refinery, or a method of disposing of gas while a well is being drilled. Flaring is regulated by state agencies. Venting (letting gas escape unburned) is generally prohibited.

Flooding - One of the methods of enhanced oil recovery. Water flooding or gas flooding might be considered secondary recovery methods.

Flow Through concept - In ventures structured as partnerships (or S corporations), certain items of tax significance (profit, loss, etc.) are passed on to the partners (or S corporation shareholders) in the venture. In a venture structured as a "C" corporation, the responsible tax-paying party would be the corporation itself (not its shareholders).

Flowing well - A well that produces through natural reservoir pressure and does not require pumping.

Formation - A geological term that describes a succession of strata similar enough to form a distinctive geological unit useful for mapping or description.

Fossil fuels - Fuels that originate from the remains of living things, such as coal, oil, natural gas, and peat.

Fracturing - A well stimulation technique in which fluids are pumped into a formation under extremely high pressure to create or enlarge fractures for oil and gas to flow through. Proppants such as sand are injected with the liquid to hold the fractures open.

Front-end costs - Costs that are paid out of initial investment in a venture, first, before the venture activities actually begin.

Fuel oil - See Heating oil.

Future prices - Refers to the New York Mercantile Exchange (NYMEX) which introduced futures contracts for crude oil in 1985 and natural gas in 1990.


Gamma-ray logging - A technique of exploration for oil in which a well's borehole is irradiated with gamma rays. The varying emission of these rays indicates to geologists the relative density of the rock formation at different levels.

Gas cap - The gas that exists in a free state above the oil in a reservoir.

Gas condensate - Liquid hydrocarbons present in casinghead gas that condense when brought to the surface.

Gas lift - A recovery method that brings oil from the bottom of a well to the surface by using compressed gas. Gas pumped to the bottom of the reservoir mixes with fluid, expands it, and lifts it to the surface.

Gas-cut mud - Drilling mud permeated with bubbles of gas from downhole. The circulation of such mud can be severely impaired, seriously affecting drilling operations.

Gas-oil ratio - The number of cubic feet of natural gas produced along with a barrel of oil.

Gasoline - A volatile, inflammable, liquid hydrocarbon mixture.

General partner - In a limited partnership, the general partner is responsible for managing the partnership's activities (and is commonly the party that put the deal together). His liability to the partnership's creditors is limited.

Geophones - The sound-detecting instruments used to measure sound waves created by explosions set off during seismic exploration work.

Geophysicist - A geophysicist applies the principles of physics to the understanding of geology.

Geothermal energy - Energy produced from subterranean heat.

Gravimeter - A geophysical device that has been particularly useful in finding salt domes. Actually, it is a weight on a spring. The spring gets longer in high-gravity areas and shorter in areas of gravity-minus. Magnetism helps the oil geologist understand its measurements

Gross income - Total income from an activity, before deduction of (1) items that may be treated as expenses (such as intangible drilling costs), and (2) allowed tax items (such as depletion allowance, depreciation allowance, etc.).

Groundwater - The water in underground rock strata that supplies wells and springs.

Guaranteed payments - Payments by a partnership to one or more of its partners for services rendered.

Gun perforation - A method of creating holes in a well casing downhole by exploding charges to propel steel projectiles through the casing wall. Such holes allow oil from the formation to enter the well.

Gusher - A well drilled into a formation in which the crude is under such high pressure that at first it spurts out of the wellhead like a geyser. Gushers are rare today owning to improved drilling technology, the use of drilling mud to control downhole pressure, and oilmen's recognition of their wastefulness.


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