GLOSSARY OF TERMS
BLOWOUT - An uncontrollable escape of oil and/or gas from a well being drilled. The pressure thousands of feet beneath the earth surface is intense, and can shoot oil out at dramatic rates if efforts are not carefully calculated.
CASING - A steel pipe or tubing used in oil and gas wells to keep the drilled hole from caving in.
CRUDE OIL - Oil extracted from the well; also known as unrefined petroleum.
DERRICK - Used around oil wells and other drilled holes to provide support for drilling equipment; a drilling rig.
DIRECT PARTICIPATION PROGRAM - Allows investors to actively participate in tax benefits and cash flow; allows investors to own a percentage of working interest in the wells they invest in.
FRACKING - Process wherein a hole is drilled and fluid is injected at high pressures to fracture shale to obtain oil and natural gas that’s “trapped” inside.
HYDROCARBON - A chemical compound containing only hydrogen and carbon. This chemical compound is found in the basis of all petroleum products.
INTANGIBLE DRILLING COSTS - Costs in developing elements for oil and gas wells that are not part of the final operating well and have no salvageable value, such as labor and necessary drilling materials like water. 100% tax deductible.
LOG/ WELL LOG - Reports that result from the process of recording various information of the rock/fluid mixtures of beneath-surface formations. Gives teams an interpretation of whether or not oil/gas exists in an area and how much.
OFFSET WELL - A well beside another well; a drilled well close to another one that is already producing; typically increases the likelihood of recovering oil/gas.
OPERATOR - The individual or company responsible for the production of an oil or gas well.
PERMEABILITY - To measure how resistant rocks are to the movement of fluids.
PLUGGING A WELL - Filling an abandoned well’s borehole with cement.
POROSITY - Measure of how much open space a rock contains; gives a read on how well oil can travel through rock in a certain area.
PROVEN RESERVE - Oil and gas resources that have not been extracted yet, but have been located and are recoverable with reasonable level of certainty.
RESISTIVITY - Electrical resistance of a rock layer.
SHALE - A type of sedimentary rock formed by compression. It is hard packed and therefore does not disintegrate when wet.
TANGIBLE DRILLING COSTS – The actual cost of the equipment needed to drill a well. These are 100% tax deductible when appreciated over 7 years.
VISCOSITY - The measure of how easily (or not) a fluid flows. Mud will not flow as easily as water. Water therefore has a high viscosity and mud has a low viscosity.
WORKING INTEREST – Working interests are afforded to investors who share in the profits of a well or multiple wells and share in the operational and completion costs.
Source: Homebound Resources, LLC