The oil industry is complex. So is its language.
If this is your first time selling mineral interests and you found this page, you’re probably where we all started at one point; overwhelmed and frustrated.
Overwhelmed because you’re not an oil and gas professional, but you’re suddenly expected to talk like one. Frustrated because you can’t find a straight forward definition for the words you have questions about.
If that sounds like you, you’re in the right place! We created the Ilios Oilfield Glossary to define some of the terms we have gotten the most questions about over the past decade.
If there are any words you think should be here or if you would like clarification on any of the definitions, please visit our Contact Us page and we will be in touch right away!
Abandon: To temporarily or permanently cease production from a well or to cease further drilling operations.
Assignee: The person to whom the interests are assigned.
Assignor: Person who conveys interest in an assignment.
Borehole: The hole created by the drilling of the well.
Bottomhole: The lowest or deepest part of a well.
Casing: Steel pipe placed in an oil or gas well to prevent the wall of the hole from caving in, to prevent movement of fluids from one formation to another and to aid in well control.
Check stub: Stub attached to a check disclosing well name, month of production, price received, total volumes produced, and net decimal interest of payee.
Completion: After the drilling of a successful well, the “completion” includes all the work required to make the well ready for commercial production.
Conveyance: Legal term for transferring the title of a property from one party to another, typically by deed (or bill of sale, etc.)
Crude Oil: A naturally occurring mixture of liquid hydrocarbons as it comes out of the ground.
Deed: A written legal document by which the title to a property is transferred from one party to another.
Depreciation Allowance: Income tax deduction allowed for the exhaustion of a natural resource.
Division Order: A Division Order is a document that an Operator of a well issues that describes the property, the Operator, the legal description, the Owner’s remittance address and tax ID information, if known, as well as the Owner’s decimal interest in the property. The Owner is asked to sign and return the Division Order. This information is used by the Operator to remit proceeds to the Owner.
EUR: Estimated Ultimate Recovery. An estimate of the cumulative volume of reserves that will ultimately be recovered over the life of the well, field, or property.
Fracturing: A procedure undertaken to attempt to increase the flow of oil or gas from a well. A fluid (usually crude oil, diesel oil or water) is pumped into the reservoir, with such great force that the reservoir rock is broken and split open.
Grantor: The person who grants or conveys lands, minerals, etc.
Grantee: The person acquiring the grant of land, minerals, etc.
Horizontal Drilling: The newer and developing technology that makes it possible to drill a well from the surface, vertically down to a certain level, and then turn at an angle, and continue drilling horizontally within a specified reservoir, or an interval of a reservoir.
Joint Operating Agreement: A contract in which multiple partners who own the operating rights in a tract of land agree to share costs of exploration and development.
Landman: The person who secures leases and handles damages for oil and gas companies who are drilling wells or laying pipelines.
Landowner: The person who generally owns all or part of the minerals under his lands and is entitled to lease the same. The landowner’s ownership may also be limited to surface ownership.
Lease: A legal contract by which the owner of the mineral rights to a property conveys to another party, the exclusive right to explore for and develop minerals on the property, during a specified period of time.
Lessee: The person who acquires the right to drill an oil or gas well.
Lessor: The mineral owner who grants an Oil, Gas, or Mineral Lease.
Natural Gas: A mixture of hydrocarbon compounds and small amounts of various non-hydrocarbons (such as carbon dioxide, helium, hydrogen sulfide, and nitrogen) existing in the gaseous phase or in solution with crude oil in natural underground reserves.
Operating Expenses: The costs of operating a well.
Operator: The party designated by all working interest owners to conduct the operations for the well which is stated in the Joint Operating Agreement.
Paid-up Lease: An oil and gas lease that is paid-up through the primary term. It is paid to the Lessor when the lease is signed.
Reserves: The amount of oil and gas in a reservoir calculated to be recoverable and described in measurements of barrels of oil, or million cubic feet (MCF).
Royalty: A royalty is the mineral owner’s share of the gross production, which is free of the costs of production. It is probably the most important part of the lease to the mineral owner and is a negotiated term, amongst other terms, agreed to prior to executing the oil, gas & mineral lease.
Royalty Revenue: Funds received from the production of oil or gas, free of costs, except taxes and other transportation charges which are incurred in order to transport the product to the point of sale, which are paid to the lessor based upon the percentage of gross production.
Salt Water Disposal Well: A well into which oilfield salt water is disposed.
Shut-In: An oil or gas well that is capable of future production but for some stated reason, is not producing at the time.
Spacing Unit: The size (amount of surface area) of a parcel of land on which only one producing well is permitted to a specific reservoir.
Surface Owner: The person who owns the surface rights to a tract of land.