The following are words or terms commonly used in the Oil and Gas Industry. We’ve included these definitions strictly for clarification and information purposes.
Any person defined as an “accredited investor” in Reg. §230.501 of Regulation D. Currently, an Accredited Investor is an investor which falls into any one of the following eight categories: (I) institutional investors as listed in Section 2(15) (I) of the Securities Act of 1933; (ii) private business development companies; (iii) all tax-exempt organizations; (iv) directors, executive officers, or general partners of the issuer or of a general partner of the issuer; (v) an investor (or an investor and such investor’s spouse) who have a net worth (including home, home furnishings and automobiles) in excess of $1,000,000.00 at the time of sale (vi) a person who has had income in excess of $200,000.00 (excluding the income of such person’s spouse) in each of the last two years and who reasonably expects an income in excess of $200,000.00 in the year of purchase; (vii) a person who together with such person’s spouse has had a combined joint income in each of the last two years in excess of $300,000.00 and who reasonably expects their joint income in excess of $300,000.00 in the year of purchase; (viii) an entity in which all of the equity owners qualify as an Accredited Investor under (I), (ii), (iii), (iv), (v), (vi), or (vii).
An “Affiliate” of another person means (a) any person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of such other person; (b) any person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by such other person; (c) any person directly or indirectly controlling, controlled by or under common control with such other person; (d) any officer, director or partner of such other person; and (e) if such other person is an officer, director or partner, any company for which such person acts in any such capacity.
The cost of tangible equipment installed upon productive wells within 180 days of completion, Leasehold Acquisition Costs incurred in acquiring oil and gas properties that are attributable to Completed Joint Venture Wells, and other costs that under the law and the interpretations thereof as in effect at the Effective Date must be capitalized for federal income tax purposes, provided that the foregoing specifically identified costs will be allocated and charged as “Capital Costs” in the manner herein described regardless of the manner in which such costs are ultimately treated for federal income tax purposes.
Carried Working Interest
A working interest which will be carried through the completion of the well. The owner of a Carried Working Interest, is not obligated to pay for any drilling and completion costs, but will pay for its proportionate share (based upon working interest ownership) of the Administrative and Operating Costs incurred after the wells are placed into production.
The Internal Revenue Code of 1986, as amended.
Any cost of an operation on Joint Venture Properties in excess of the amount estimated.
A well drilled in an area reasonably believed to be proven productive due to its location with reference to known oil, gas or other mineral deposits, and which, because of it’s relation to such deposits, is reasonably expected to yield oil, gas or other minerals in commercial quantities. A development well is generally deemed to involve lower risks than an exploratory well as it is intended to penetrate the same geological formation in which the known deposits are located.
The costs and expenses incurred directly by or for the benefit of the drilling operation, including: legal, accounting, audit, engineering and reserve evaluation fees; fees and expenses for preparing tax returns, investor reports required by federal and state securities authorities; fees and expenses for qualification of the Joint Venture in various jurisdictions; all associated printing, duplicating, and postage charges; the project operator allocable direct costs, including salaries and employee benefits, of providing the foregoing services; and all other costs incurred directly by or for the benefit of the drilling operation and not otherwise reimbursed or paid under any other category of expense, other than Leasehold Acquisition Costs and Drilling and Development Costs.
A well that, in the opinion of the project operator, is not capable of producing oil or gas in quantities sufficient to yield a return in excess of operating costs.
A well drilled to find and produce gas or oil in an unproved area, or to find a new reservoir in a field previously found to be productive of gas and oil in another reservoir, or to extend the limits of a known gas or oil reservoir. It involves a relatively high degree of risk, because it is drilling in a relatively unproven area to an unproven formation.
Field Operating Agreement
The particular operating agreement between all Working Interest Owners of each Joint Venture Property which governs the development and operations of the Joint Venture Property.
The Operator named in the Field Operating Agreement.
Intangible Drilling and Development Costs
All expenditures made for wages, fuel, repairs, hauling and supplies or any of them, incident to and necessary for the drilling of any well and the preparation of such well for the production of oil or gas, as the case may be. Included are the costs of any drilling and development work (excluding amounts payable only out of production or gross or net proceeds of production, if such amounts are depletable income to the recipient, and amounts properly allocable to the cost of depreciable property) performed by drilling contractors under any form of contract. Examples of such costs include amounts paid for wages, fuel, repairs, hauling, supplies, and similar items, or any of them, which are used (a) in the drilling and completion of any well; (b) in such clearing of ground, draining, road making, surveying and geological works as are necessary in preparation for the drilling of any well; and (c) in the construction of tanks, pipelines and other physical structures as are necessary for the drilling of any well and the preparation of such well for the production of oil or gas. In general, these expenditures shall include only those drilling and development items that in themselves do not have a salvage value. For these purposes, labor, fuel, repairs, hauling, supplies and similar items are not considered as having a salvage value even though used in connection with the installation of physical property which has a salvage value.
An instrument executed by the mineral owner with respect to certain real property entitling the lessee under such instrument to oil and gas mineral rights and other rights in the leased property and authorizing the lessee to drill for, reduced to possession and produce oils and gas and related hydrocarbons on the leased property.
Leasehold Acquisition Cost
The cost and expenses associated with acquiring Joint Venture Properties, including property rentals, lease bonuses and equipment costs associated therewith and other capitalized costs relating to the business operations of the Offeror, title insurance and title examination costs, brokers’ and finders’ fees, filing fees and recording costs, taxes (including ad valorem taxes), engineering, land, legal, geological, geophysical, nominee seismic, drafting and accounting and audit costs and any other costs or expenses incurred in connection with acquisition of Joint Venture Properties.
Net Operating Revenue
The revenue generated by the sale of production from the Joint Venture Properties after payment of royalties, overriding royalties, taxes, Operating Expenses and Direct Expenses.
Intangible Drilling and Development Costs, the cost of non-salvageable tangible equipment installed in dry holes, delay rentals, plugging and abandonment costs, and Leasehold acquisition Costs of Joint Venture Wells which produce less than 180 days, and other costs incurred within 180 days of completion of a Joint Venture Well.
The customary expenses of operating oil or gas wells, including expenses related to producing and marketing of the oil or gas therefrom. Any drilling or completion costs, the expenses for recompletion costs, the expenses for recompletion in a horizon or deepening to a new horizon, depletion, depreciation and amortization are not operating expenses.
A person or entity, whether lessee or contractor, who conducts the operation, exploration, drilling and other related activities in connection with a Lease, including production once a producing well is completed.
A fractional interest in the gross production of oil and gas and other minerals under a lease, in addition to the usual royalty paid to the Lessor, free of any expenses of exploration, drilling, development, operating and other costs incident to the production and sale of oil and gas and other minerals produced from the lease. An overriding royalty is an interest carved out of the working interest, as distinguished from the Lessor’s reserved royalty interest. The main characteristics of an overriding royalty are that it is limited to the terms of the lease under which it is created and its duration runs concurrently with the term of such lease.