Oil and Gas Exploration Industry Terminology

AFE (Authorization for Expenditure)

A formal internal budget and approval document that authorizes spend for a defined oil and gas project (e.g., a well, pad, or facility), detailing scope, cost estimates, contingencies, and account coding.

Submit the AFE for the two-well pad by Friday | The partner approved the AFE with a $1.2MM contingency | Cost overruns require an AFE revision

API gravity

A measure (in degrees) of petroleum liquid density relative to water, used to classify crude/condensate quality; higher API means lighter fluids.

We’re targeting 38° API crude in this play | Blends above 45° API may be classified as condensate | The separator is tuned for 32° API

Appraisal well

A well drilled within or near a discovery to delineate reservoir extent, quality, and productivity, supporting resource classification and development planning.

The second appraisal well extended the oil-water contact 20 m deeper | Appraisal confirmed commercial thickness across the block | Appraisal drilling will de-risk the full-field development plan

Basin

A large-scale geologic depression with sediment accumulation and petroleum systems; a key unit for play concepts and regional prospectivity.

Permian Basin horizontals dominate the U.S. growth outlook | The basin modeling predicts a Late Cretaceous charge | This frontier basin is underexplored due to limited seismic

Blowout Preventer (BOP)

Critical well-control equipment at the wellhead to seal, control, and monitor wells, preventing uncontrolled flow (blowouts).

Pressure test the BOP to 10,000 psi before spud | The BOP stack was upgraded to include a double ram | A failed annular in the BOP triggered a well control drill

Brent (benchmark crude)

A major international crude benchmark used for pricing and hedging oil; often the reference in contracts and fiscal models.

Brent-WTI spread narrowed to $3/bbl | The PSC uses Brent as the pricing reference | Our lifting price is Brent minus $1.50 quality differential

CAPEX

Capital expenditures spent on long-lived assets like wells, facilities, and infrastructure; a key lever in project economics.

We’re trimming 2026 CAPEX by 15% | Drilling and completion CAPEX per well is $8.5MM | The FPSO topsides CAPEX escalated with steel prices

Casing

Steel pipe cemented in the wellbore to stabilize the hole, isolate formations, and enable safe drilling and production.

Run 13-3/8'' surface casing to 1,000 m | The production casing will be 5-1/2'' 20# P110 | A collapsed casing caused a loss of integrity

CCS (Carbon Capture and Storage)

Technologies and projects that capture CO2 from sources or the atmosphere and permanently store it underground to reduce emissions.

We’ll inject 1 Mtpa CO2 into the saline aquifer | CCS eligibility unlocks 45Q tax credits | Subsurface storage integrity is verified via 4D seismic

Completion

The process and hardware that enable a drilled well to produce, including perforating, tubing, packers, stimulation, and artificial lift.

We’ll perforate three stages and pump a slickwater frac | The completion design uses 2-7/8'' tubing | ESP installation is part of the completion plan

Contingent resources

Discovered hydrocarbons not yet commercial due to contingencies (market, technology, approvals), classified under PRMS as 1C/2C/3C.

The discovery adds 150 mmboe 2C | We need a tieback tariff to mature 2C to reserves | 1C volumes assume conservative recovery factors

Decline Curve Analysis (DCA)

A method of forecasting production over time using empirical decline models (exponential, hyperbolic, harmonic).

Fit a hyperbolic decline to the first 18 months | DCA suggests a 600 mboe EUR per well | The type curve underpins the reserve report

Drilling fluid (mud)

Engineered fluid circulated in the well to cool the bit, transport cuttings, maintain pressure control, and stabilize the wellbore.

Switch to OBM in the build section | Mud weight increased to 12.5 ppg to control influx | LCM was added to cure severe losses

Dry hole

A well that does not discover commercial hydrocarbons; typically plugged and abandoned, with costs recognized as expense.

We expensed $18MM as dry-hole costs | The well was P&A’d after encountering water | Insurance covered part of the dry-hole risk

E&P (Exploration & Production)

The upstream segment focused on finding and producing oil and gas, distinct from midstream and downstream.

Our E&P portfolio spans onshore U.S. and deepwater Brazil | The company is spinning off its E&P business | E&P margins improved with lower lifting costs

EOR (Enhanced Oil Recovery)

Techniques beyond primary and secondary recovery to increase oil recovery, such as CO2/miscible gas, chemical, and thermal methods.

We’re piloting CO2 EOR in the carbonate | ASP flooding could add 10–15% recovery | Steam injection is planned for the heavy-oil field

EUR (Estimated Ultimate Recovery)

The total expected recoverable hydrocarbons from a well or field over its life, informed by type curves, DCA, and simulation.

EUR per lateral is modeled at 900 mboe | Parent-child effects reduced EUR in infill wells | DCA and simulation triangulate the EUR

Exploration license

A contractual right granted by a government to explore a defined block, with obligations on work, timelines, and fiscal terms.

The round awards a five-year exploration license | The work program includes 800 km² of 3D seismic | License relinquishment is phased by acreage

Farm-in / Farm-out

Transactions where one party earns working interest by funding work (farm-in) and the other reduces exposure (farm-out), often via well carries.

We’ll farm out 30% WI in exchange for a three-well carry | The partner farmed in to access our seismic | Farm-in terms include an optional back-in after FID

Flaring

The controlled combustion of natural gas at facilities or wellsites, used for safety or when takeaway capacity is constrained; a focus of emissions reduction.

Routine flaring must be eliminated by 2030 | Flaring increased due to gathering outages | We installed VRUs to cut flaring intensity

Floating Production Storage and Offloading (FPSO)

A ship-shaped facility that processes, stores, and offloads hydrocarbons offshore, enabling deepwater field development without pipelines.

First oil is tied to FPSO arrival | The turret allows weathervaning | The FPSO’s nameplate capacity is 150 kbopd

Formation pressure

The pressure of fluids within the pore spaces of a formation; critical for well control, completion design, and reservoir management.

MDT data show overpressure in the Deep Sand | The reservoir is at bubble point pressure | We’ll maintain voidage replacement to stabilize pressure

G&G (Geology & Geophysics)

The subsurface disciplines of geology and geophysics that characterize basins, plays, reservoirs, and prospects for exploration and development.

G&G integration upgraded the prospect to drill-ready | The G&G team is reprocessing legacy 3D | G&G interpretation maps the structural closure

Gas-Oil Ratio (GOR)

The volume of produced gas to oil, typically in scf/bbl; a key indicator of fluid type, well performance, and facilities design.

GOR increased as the well watered out | We model 1,500 scf/bbl initial GOR | Separator pressure changes affect measured GOR

Gathering system

A network of flowlines and pipelines that collect wellstream fluids and deliver them to central processing or trunk lines.

A new gathering system will debottleneck the pad | High line pressure curtailed production | Tariffs on the gathering system impact netbacks

Geosteering

Real-time directional drilling adjustments using LWD/MWD data to keep the wellbore within the target reservoir interval.

Real-time gamma helped geosteer within the sweet spot | We corrected the toolface to stay in zone | Geosteering minimized doglegs and improved EUR

Horizontal well

A well with a near-horizontal section through the reservoir, increasing contact area and productivity compared to vertical wells.

The 10,000-ft lateral will target the A-sand bench | Horizontal wells outperformed verticals twofold | A tighter frac spacing is planned for horizontals

HSE (Health, Safety, and Environment)

The management systems, practices, and metrics that safeguard people, assets, and the environment in operations.

HSE KPIs include TRIR and spill rate | Conduct an HSE risk assessment before SIMOPS | HSE onboarding is mandatory for rig crews

Hydraulic fracturing

A stimulation technique that creates conductive fractures in rock by high-pressure fluid injection, often with proppant, to enhance flow.

We’ll pump 2,000 lb/ft of proppant | A zipper frac schedule reduces cycle time | Microseismic monitors frac half-length

IDC (Intangible Drilling Costs)

Non-salvageable drilling-related costs (e.g., services, mud, rentals) that may be expensed for tax purposes, affecting cash flow.

We expensed $3MM of IDC this quarter | Tax treatment of IDC improves project IRR | IDC includes services, mud, and rentals

Infill drilling

Drilling additional wells within a developed field to improve recovery, manage pressure, or access bypassed reserves.

The 2026 program includes 12 infill wells | Infill spacing tightened to 660 ft | Infill wells showed parent-child interference

IOC (International Oil Company)

A privately owned, globally focused oil and gas company, contrasted with state-owned NOCs; often operates across multiple basins.

IOCs bid aggressively in the offshore round | The IOC partnered with the NOC on a PSC | IOC portfolio rotation favors short-cycle barrels

IOR (Improved Oil Recovery)

Broader set of methods to increase recovery beyond primary, including secondary (e.g., waterflood) and tertiary (EOR) techniques.

Waterflooding lifted field recovery from 22% to 35% | IOR options include conformance control and polymer | IOR screening preceded EOR pilots

Jack-up rig

A mobile offshore drilling unit with legs that jack down to the seafloor, elevating the hull above the sea surface for shallow-water drilling.

Mobilize a premium jack-up for the shelf well | The jack-up’s leg penetration was within limits | Jack-up dayrates rose 20% this year

Joint Operating Agreement (JOA)

A contract among working-interest owners that sets governance, roles, cost sharing, audits, and decision-making for a joint venture.

The JOA designates the operator and voting thresholds | A non-consent clause applies to the sidetrack | Cost recovery is governed by the JOA and PSC

Kick (well control)

An undesired influx of formation fluids into the wellbore due to underbalanced conditions, requiring immediate well-control actions.

Shut in the well—signs of a kick while tripping | The influx volume was estimated at 15 bbl | We circulated out the kick using the Driller’s method

KPI (Key Performance Indicator)

Quantifiable metrics used to track operational, financial, safety, or environmental performance against targets.

Cycle time is a key KPI for pad efficiency | Emissions intensity is now a corporate KPI | The rig met all HSE KPIs this quarter

Lease (mineral/acreage)

A legal agreement granting the right to explore and produce hydrocarbons from a defined area, specifying term, royalty, and obligations.

We paid a $3,000/acre lease bonus | Lease terms include a 20% royalty | The lease will expire unless we spud by year-end

Logging-While-Drilling (LWD)

Downhole measurements acquired during drilling (e.g., gamma ray, resistivity, density) to characterize formations in real time.

LWD resistivity identified the pay zones | We ran LWD gamma and density-neutron | LWD data supported real-time geosteering

Measurement-While-Drilling (MWD)

Downhole tools that provide drilling mechanics and wellbore position (inclination, azimuth, toolface) and transmit data to surface.

MWD provided inclination and azimuth | Toolface from MWD guided the curve | Mud-pulse MWD telemetry limited data rate

Mud logging

Surface monitoring of drilling returns (gas, cuttings, parameters) to describe lithology and hydrocarbon shows in real time.

Gas peaks at 1,500 units indicated a sand | The mud log shows lithology changes at 10,200 ft | Cuttings describe a fine-grained sandstone

Net pay

The thickness of reservoir rock that meets cutoffs (e.g., porosity, saturation, permeability) and is expected to produce economically.

Net pay is 35 ft with 18% porosity | Net-to-gross improved downdip | Petrophysics updated the net pay cutoff

NGLs (Natural Gas Liquids)

Liquid hydrocarbons like ethane, propane, butanes, and natural gasoline separated from gas; valuable for petrochemical and fuel markets.

We recover ethane, propane, and butane from the stream | NGL realizations improved with petrochemical demand | Y-grade is shipped to the fractionator

NPV (Net Present Value)

The discounted sum of project cash flows (often at 10%, NPV10), used to compare and rank investments under price and cost assumptions.

Project NPV10 is $240MM at $75/bbl | Sensitivities show NPV leverage to CAPEX | Hedging lifted the downside NPV

Offset well

A nearby well used as an analog for planning, regulatory obligations, or performance benchmarking.

We used offset well data to set mud weight | The lease has an offset obligation clause | Offset producers indicate pressure depletion

OPEX (Operating Expenditure)

Ongoing costs to operate assets (e.g., labor, fuel, chemicals, maintenance), distinct from capital costs.

We cut lifting OPEX to $7/boe | OPEX escalators in the model are 3%/yr | Outsourcing maintenance reduced OPEX

Original Oil in Place (OOIP)

The total oil present in a reservoir before production; only a fraction is recoverable, depending on drive mechanisms and recovery methods.

Static OOIP is 1.2 billion bbl | A higher Soi reduces calculated OOIP | Simulation history match refined the OOIP estimate

Production Sharing Contract (PSC)

A fiscal regime in which the contractor recovers costs from ‘cost oil/gas’ and shares ‘profit oil/gas’ with the state per agreed terms.

Cost oil is capped at 70% under the PSC | Profit oil splits are R-factor based | The PSC term includes a five-year exploration period

Proved reserves (1P, 2P, 3P)

Reserves classification under PRMS/SEC: 1P (proved), 2P (proved+probable), 3P (proved+probable+possible), with increasing uncertainty.

Year-end 2P reserves rose 8% | SEC proved developed reserves increased | Booking 3P volumes requires additional evidence

Quantitative Risk Assessment (QRA)

A structured, probabilistic analysis of safety and environmental risks, quantifying frequencies and consequences to guide risk reduction.

QRA shows ALARP for the new facility | We quantified event frequencies and consequences | QRA informed the emergency response plan