GLOSSARY OF OIL AND GAS TERMS

3-D Seismic
Technology that bounces sound waves off underground rock formations and processed to create a three-dimensional picture of the subsurface. Identifies rock formations most likely to contain accumulations of oil and gas.

BCF
Billion cubic feet

BCFE
Billion cubic feet (of gas) equivalent

Bbl
Barrel of oil

BOE
Barrel of oil equivalent. A method of equating oil, gas and natural gas liquids. Gas is converted to oil based on its relative energy content at the rate of six Mcf of gas to one barrel of oil. Natural gas liquids are converted based upon volume where one barrel of natural gas liquids equals one barrel of oil.

Capital Contributions
The total investment in the Well by a Participant or by all Participants, as the case may be.

Code
The Internal Revenue Code of 1986, as amended.

Completion Costs
The costs incurred after Casing Point to complete the well either as a dry hole (plug) or as a producing well.

Development Well
A well drilled within a proven area of an oil and gas reservoir to the depth of a stratigraphic horizon known to be productive, but which may or may not be present at the site of the well.

Downdip
A term used in a hydrocarbon reservoir that is not flat, i.e., a dipping formation. In such a formation, oil is found downdip from the gas.

Dry Hole
A well that does not provide oil or gas in sufficient quantities to justify completion.

Enhanced Recovery
Techniques used to increase or prolong production from oil and natural gas fields.

Exploratory Well
A well drilled to find and produce oil or gas in an unproven area, to find a new reservoir in a field previously found to be productive of oil and gas in another reservoir, or to extend a known reservoir.

Fee Land
The most extensive interest that can be owned in land, including surface and mineral (including oil and gas) rights.

Field Formation
A geographical area with one or more oil and gas reservoirs. An identifiable layer of rocks named after its geographical location and dominant rock type.

"Frac", or Fracturing
A well is "fraced" to stimulate or prolong oil & gas production. Special fluids are pumped into a wellbore with powerful hydraulic pumps to cause enough pressure to crack or fracture the formation. This process creates a plane of high-permeability sand, which usually allows the hydrocarbons to flow more freely into the wellbore.

Full Cycle Economics
Current year cash margin (reserves less current year operating and administrative costs) minus 5-year finding cost.

Gross Acres
The total number of acres in which the company owns a working interest.

Gross Well
A well in which a working interest is owned.

Injection Well
A well where gas or water is injected back into the reservoir, usually to increase pressure and thereby stimulate production. In a gas injection well, gas is reinjected into the upper gas portion of the reservoir. Water injection wells are typically found offshore.

Intangible Drilling Costs
Those items of costs relating to drilling, testing and completion operations on the Well which are not Tangible Costs.

Landowner's Royalty
The interest customarily retained under an oil and gas lease by the person who has the power to grant an oil and gas lease and which bears no part of the cost of drilling or producing the oil and natural gas.

Lease
A legal contract that specifies the terms of the business relationship between an energy company and a landowner or mineral rights holder on a specific tract.

MCFE
Thousand cubic feet (of gas) equivalent

MMBOE
Million barrels of oil equivalent

Mcf
A standard measurement unit for volumes of natural gas that equals one thousand cubic feet. Six Mcf of natural gas is approximately the energy equivalent of one barrel of oil.

MMcf
Million cubic feet

Mud, or Drilling Mud
A specialized mixture of fluids and solids, or liquid and gaseous fluids, used in drilling wellbores. There are many types of these drilling fluids, usually categorized by the major component such as water-base drilling fluid, gyp mud, emulsion mud, etc.

Net Acres
Gross acres multiplied by the fractional working interest in the property.

Net Revenue Interest
The amount of the interest owned in the proceeds derived from a producing well less all Royalty interests.

Offering
The offering of Working Interest Participation for the purpose of drilling and potentially completing the Wells.

Overriding Royalty Interest
A royalty interest which is typically retained by geologists or third parties which interest bears no part of the cost of drilling, completing or operating the well.

Pay Zone
The target of any drilling operation--a reservoir containing hydrocarbons that can be recovered in enough quantity to "pay" an income.

Perforate, or "Perf"
"Perfing" a well means to create holes in the casing or liner of the wellbore through which oil and gas flows from the reservoir up to the surface. Perforation is accomplished with a perforating gun containing strategically placed explosive charges that is lowered into the wellbore.

Production
Total production refers to all the oil and gas produced from a property. Gross Production: Total production before deducting royalties. Net Production: Gross production, minus royalties, multiplied by the company's fractional working interest.

PV10 Value
Pre-tax present value of estimated future net revenues discounted at 10% using SEC guidelines.

Recompletion
The modification of an existing well for the purpose of producing oil or gas from a different producing formation.

Reserves
Oil or gas contained in underground rock formations called reservoirs. Proved reserves are the estimated quantities that geologic and engineering data demonstrate can be produced with reasonable certainty from known reservoirs under existing economic and operating conditions. Recoverable reserves are those that can be produced using all known primary and enhanced recovery methods.

Royalty Interest
An interest in an oil and gas property entitling the owner to a share of oil and gas production free of costs of exploration, development and production.

Tangible Costs
Those items of costs which in themselves have a salvage value and are ordinarily required to be capitalized for federal income tax purposes and which relate to the equipment placed on the Well.

Turnkey
A drilling contract that calls for a drilling contractor to drill a well, for a fixed price, to a specified depth and to adequately equip it so that the well is able to produce oil or gas.

Updip
A term used in a hydrocarbon reservoir that is not flat, i.e., a dipping formation. In such a formation, gas is found updip from the oil.

Waterflood
A method of increasing oil recovery from an existing reservoir. Water is injected to force unrecovered oil out of reservoir rock and into nearby oil wells.

Working Interest
The interest in an oil and gas leasehold which is subject to the payment of the expenses of development, operation and maintenance of a well and is subject to the payment of Landowner's Royalty and Overriding Royalty Interests.

Workover
To repair or stimulate an existing production well to restore or increase production.