The “learnin’ is overwhelmin”
I want novices, dunces, and newbies to be able to ask questions about oil and gas. Nothing is too dumb! I did not know how to spell O-I-L until 3 years ago. I joined this forum and always felt terrible asking dumber questions than others.
It is okay to be brainless, dazed, deficient, dense, dim, doltish, dopey, dull, dumb, dummy*, foolish, futile, gullible, half-baked, half-witted, idiotic, ill-advised, imbecilic, inane, indiscreet, insensate, irrelevant, laughable, ludicrous, meaningless, mindless, moronic, naive, nonsensical, obtuse, out to lunch, pointless, puerile, senseless, shortsighted, simple, simpleminded, slow, sluggish, stolid, stupefied, thick, thick-headed, trivial, unintelligent, unthinking, witless, as long as the questions belong on this forum.
This is your chance, blondes, brunettes and red heads. Laugh while learning, but please have patience. Blonde and Polish jokes are accepted. No profanity, racial slurs or political comments please!
The rules are as follows: The questions can be dumb, dumber and dumbest. The answers have to be smart and polite and written so third graders can understand them if third graders ask them. All acronyms should be explained. I used to get answers whereby I had to sit up all night with an oil and gas dictionary.
Here are a few things we need to know:
Def. of leasing: To bring oil and gas reserves to market, minerals are leased by oil companies through a legally binding contract known as a lease. This arrangement between individual mineral owners and oil companies began prior to 1900 and still thrives today. Before exploration can begin, the mineral owner (lessor) and the oil company (lessee) must agree to certain terms regarding the rights, privileges and obligations of the respective parties during the exploration and possible production stages. Although there are numerous other important details, the basic structure of the lease is straightforward: in exchange for an up-front lease bonus payment, plus a royalty percentage of the value of any production, the mineral owner grants the oil company the right to drill for a period of time, known as the primary term. If the term of the oil or gas lease extends beyond the primary term, and a well was not drilled, then the Lessee is required to pay the lessor a delay rental. This delay rental could be $1 or more per acre. In some cases, no drilling occurs and the lease simply expires. The duration of the lease may be extended when drilling or production starts. This enters into the period of time known as the secondary term, which applies for as long as oil and gas is produced in paying quantities.
Before you go to this discussion, do yourself a favor and open this: http://jay.law.ou.edu/faculty/eking/OilGasPractice/Fall%202012/Oil%20and%20Gas%20Terms.pdf
Here is another: http://www.elexco.com/elexco_ltd_imalandowner.php
Here is a site to familiarize yourself with some of the difficult definitions of this industry. Most of us don’t know when we are drilled or frac’d unless we live nearby. The “completion” starts the ball rolling for us and interest peaks. We realize this is really happening to us, (most of us are not in the investment business) but heirs - and we all of a sudden realize how lucky we are to be part of this Eagleford world. The long long nerve wracking wait is almost over. We now get offers to sell and division orders and ratification papers and we don’t know what all that means.
If your well has been “completed” please go to www.fracfocus.org. It is fantastic.
A little about pooling: Pooling, Unitization, and Joint Leases – Oil and Gas
This is a great page for info on this mysterious rock. Scroll down for good maps. Eagle Ford Shale: Oil & Gas Resource Surprises Geologists Oil and Gas Ratio GOR
When oil is brought to surface conditions it is usual for some natural gas to come out of solution. The gas/oil ratio (GOR) is the ratio of the volume of gas that comes out of solution, to the volume of oil at standard conditions. A point to check is whether the volume of oil is measured before or after the gas comes out of solution, since the oil volume will shrink when the gas comes out. In fact, gas dissolution and oil volume shrinkage will happen at many stages during the path of the hydrocarbon stream from reservoir through the wellbore and processing plant to export. For light oils and rich gas condensates the ultimate GOR of export streams is strongly influenced by the efficiency with which the processing plant strips liquids from the gas phase. Reported GORs may be calculated from export volumes which may not be at standard conditions.
The GOR is a dimensionless ratio (volume per volume) in metric units, but in field units, it is usually measured in cubic feet of gas per barrel of oil or condensate. In the States of Texas and Pennsylvania, the statutory definition of a gas well is one where the GOR is greater than 100,000 ft³/bbl or 100 Mcf/bbl.
More brain exercise: http://gswindell.com/sp158207.pdf H2S:
Hydrogen sulfide is found in large amounts in natural gas and petroleum. Any worker involved in extracting gas and petroleum from the ground, or in storing, transporting or processing gas is at risk from exposure to H2S. Hydrogen sulfide exists in solution in crude oil, and workers are exposed when the gas begins to “pass off” as it reaches the surface or comes into contact with air. This can occur at any point, including all stages of the refining operation, and it is accelerated by heat or hot weather.
If you are looking for production numbers (how much oil and gas is being produced from your well) AFTER completion of fracking, and approximately 2 to 3 months have passed, you can probably find it here. Production Report Queries
P-12 is a bit more complicated. Remember this is what the operator/your oil co. must file with the state of Texas in order for you to be included in the pool. You sign the P-12 after this is reported.
POOLED TRACTS: File Form P-12 with the certified plat for each pooled unit. This means that you are one of many in a greater area being drilled/fracked. For example: I own 160 acres in a pool of 399 being drilled. You can search using your lease number. For major operators with lots of wells (e.g. CHK), I find it best to download the production file to EXCEL and then look at it on my own time (so that you don’t get kicked off the Tx RRC site for too many inquiries over a given time frame). This way you can sort the data and more easily manipulate through the long list of wells. When the production reports are filed by the operator with the Tx RRC, there are numbers associated with “disposition codes” for both oil and gas. e.g. “4” is flaring gas, “2” is gas to pipeline, “3” is gas to processing plant. Another number is gas for lease use (e.g. running compression or pumping equipment).
Volumes are broken out for each month as needed.
Definitions:
BO Barrels of Oil
BBLS: As in most volume units of English origin, there are several kinds of barrels. To avoid confusion, the “bbl” abbreviation is used to signify a petroleum barrel of 159 liters. I have no idea where the double “b” came from, it’s sort of like why do we abbreviate a pound as “lb”. The “s” represents a plural, i.e., 1 bbl, 2 bbls, etc.
MBO = thousand BO
MMBO = Million BO
MCF = thousand cubic feet
MMCF = Million cubic feet
BCF = Billion cubic ft
LOE = lease operating expenses
NGL = natural gas liquids
EUR = Estimated ultimate recovery
EUR and URR Estimated ultimate recovery vs ultimate recoverable reserves.
D.O.'s Division Orders
Sour Gas: Sour gas has to be taken to a special pipeline that is dedicated to take sour gas. This takes the gas to a processing plant where the sulfur and any NGL’s - Natural Gas Liquids - are stripped out (for a fee) before the residual and now clean gas goes to a “clean gas” pipeline. All these processing and transportation fees will be netted out from the gross value of the product.
WTI: West Texas Intermediate crude oil. WTI crude is deemed to be traded at Cushing, Oklahoma.
LLS: Light Louisiana Sweet. A US crude oil.
There are 55 gallons in a drum and 42 gallons (1 U.S. gallon = 3.78541178 liters) in a barrel (i.e., 1 barrel = 158.9872948 liters).
Here is another great glossary: http://www.platts.com/Glossary.