Glossary

finance

Acquisition (minerals):  The procurement of the legal right to explore for and produce discovered minerals, if any, within a specific area; that legal right may be obtained by mineral lease, concession, or purchase of land and mineral rights or of mineral rights alone.

Acquisition costs, mineral rights:  Direct and indirect costs incurred to acquire legal rights to extract natural resources. Direct costs include costs incurred to obtain options to lease or purchase mineral rights and costs incurred for the actual leasing (e.g., lease bonuses) or purchasing of the rights. Indirect costs include such costs as brokers' commissions and expenses; abstract and recording fees; filing and patenting fees; and costs for legal examination of title and documents.

Acreage:  An area, measured in acres, that is subject to ownership or control by those holding total or fractional shares of working interests. Acreage is considered developed when development has been completed. A distinction may be made between "gross" acreage and "net" acreage:

• Gross - All acreage covered by any working interest, regardless of the percentage of ownership in the interest.
• Net - Gross acreage adjusted to reflect the percentage of ownership in the working interest in the acreage.

Advance royalty:  A royalty required to be paid in advance of production from a mineral property that may or may not be recoverable from future production.

Affiliate:  An entity which is directly or indirectly owned, operated, or controlled by another entity. See Firm.

Amortization:  The depreciation, depletion, or charge-off to expense of intangible and tangible assets over a period of time. In the extractive industries, the term is most frequently applied to mean either (1) the periodic charge-off to expense of the costs associated with non-producing mineral properties incurred prior to the time when they are developed and entered into production or (2) the systematic charge-off to expense of those costs of productive mineral properties (including tangible and intangible costs of prospecting, acquisition, exploration, and development) that had been initially capitalized (or deferred) prior to the time the properties entered into production, and thereafter are charged off as minerals are produced.

Arbitrage:  The simultaneous purchase and sale of identical or similar assets across two or more markets in order to profit from a temporary price discrepancy.

Associated-dissolved natural gas:  Natural gas that occurs in crude oil reservoirs either as free gas (associated) or as gas in solution with crude oil (dissolved gas). Also see Natural gas.

Black lung benefits:  In the content of the coal operation statement of income, this term refers to all payments, including taxes, made by the company attributable to Black Lung.

Bypassed footage:  Bypassed footage is the footage in that section of hole that is abandoned as the result of remedial sidetrack drilling operations.

Carrying costs:  Costs incurred in order to retain exploration and property rights after acquisition but before production has occurred. Such costs include legal costs for title defense, ad valorem taxes on nonproducing mineral properties, shut-in royalties, and delay rentals.

Christmas tree:  The valves and fittings installed at the top of a gas or oil well to control and direct the flow of well fluids.

Circuit-mile:  The total length in miles of separate circuits regardless of the number of conductors used per circuit.

Cogeneration:  The production of electrical energy and another form of useful energy (such as heat or steam) through the sequential use of energy.

Company:  See Firm.

Company automotive (retail) outlet:  Any retail outlet selling motor fuel under the brand name of a company reporting in the EIA Financial Reporting System.

Company-lessee automotive outlet:  One of three types of company automotive (retail) outlets. This type of outlet is operated by an independent marketer who leases the station and land and has use of tanks, pumps, signs, etc. A lessee dealer typically has a supply agreement with a refiner or a distributor and purchases products at dealer tank wagon prices. The term includes outlets operated by commissioned agents and is limited to those dealers who are supplied directly by a refiner or any affiliate or subsidiary company of a refiner.

Company-open automotive outlet:  One of three types of company automotive (retail) outlets. This type of outlet is operated by an independent marketer who owns or leases (from a third party that is not a refiner) the station or land of a retail outlet and has use of tanks, pumps, signs, etc. An open dealer typically has a supply agreement with a refiner or a distributor and purchases products based on either rack or dealer tank wagon prices.

Company-operated automotive outlet:  One of three types of company automotive (retail) outlets. This type of outlet is operated by salaried or commissioned personnel paid by the reporting company.

Completion (oil/gas production):  The term refers to the installation of permanent equipment for the production of oil or gas. If a well is equipped to produce only oil or gas from one zone or reservoir, the definition of a "well" (classified as an oil well or gas well) and the definition of a "completion" are identical. However, if a well is equipped to produce oil and/or gas separately from more than one reservoir, a "well" is not synonymous with a "completion." (See Well.)

Completion date (oil/gas production):  The date on which the installation of permanent equipment has been completed as reported to the appropriate regulatory agency. The date of completion of a dry hole is the date of abandonment as reported to the appropriate agency. The date of completion of a service well is the date on which the well is equipped to perform the service for which it was intended.

Contribution to net income:  The FRS (Financial Reporting System survey) segment equivalent to net income. However, some consolidated items of revenue and expense are not allocated to the segments, and therefore they are not equivalent in a strict sense. The largest item not allocated to the segments is interest expense since this is regarded as a corporate level item for FRS purposes.

Deepest total depth:  The deepest total depth of a given well is the distance from a surface reference point (usually the Kelly bushing) to the point of deepest penetration measured along the well bore. If a well is drilled from a platform or barge over water, the depth of the water is included in the total length of the well bore.

Depletion allowance:  A term for either (1) a periodic assignment to expense of recorded amounts or (2) an allowable income tax deduction that is related to the exhaustion of mineral reserves. Depletion is included as one of the elements of amortization. When used in that manner, depletion refers only to book depletion.

Book. The portion of the carrying value (other than the portion associated with tangible assets) prorated in each accounting period, for financial reporting purposes, to the extracted portion of an economic interest in wasting natural resource.

Tax-cost. A deduction (allowance) under U.S. Federal income taxation normally calculated under a formula whereby the adjusted basis of the mineral property is multiplied by a fraction, the numerator of which is the number of units of minerals sold during the tax year and the denominator of which is the estimated number of units of unextracted minerals remaining at the end of the tax year plus the number of units of minerals sold during the tax year.

Tax-percentage (for Statutory). A deduction (allowance) allowed to certain mineral producers under U.S. Federal income taxation calculated on the basis of a specified percentage of gross revenue from the sale of minerals from each mineral property not to exceed the lesser of 50 percent of the taxable income from the property computed without allowance for depletion. (There are also other limits on percentage depletion on oil and gas production.) The taxpayer is entitled to a deduction representing the amount of tax-cost depletion or percentage (statutory) depletion, whichever is higher.

Excess statutory depletion. The excess of estimated statutory depletion allowable as an income tax deduction over the amount of cost depletion otherwise allowable as a tax deduction, determined on a total enterprise basis.

Depreciation:  See definition for Amortization.

Depth of deepest production:  The depth of the deepest production is the length of the well bore measured (in feet) from the surface reference point to the bottom of the open hole or the deepest perforation in the casing of a producing well.

Development:  The preparation of a specific mineral deposit for commercial production; this preparation includes construction of access to the deposit and of facilities to extract the minerals. The development process is sometimes further distinguished between a preproduction stage and a current stage, with the distinction being made on the basis of whether the development work is performed before or after production from the mineral deposit has commenced on a commercial scale.

Development costs:  Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering, and storing the oil and gas. More specifically, development costs, depreciation and applicable operating costs of support equipment and facilities, and other costs of development activities, are costs incurred to:

• Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling site; clearing ground; draining; road building; and relocating public roads, gas lines, and power lines to the extent necessary in developing the proved reserves.
• Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the well head assembly.
• Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, production storage tanks, natural gas cycling and processing plants, and utility waste disposal systems.
• Provide improved recovery systems.

Development well:  A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. Also see Well.

Directional (deviated) well:  A well purposely deviated from the vertical, using controlled angles to reach an objective location other than directly below the surface location. A directional well may be the original hole or a directional "sidetrack" hole that deviates from the original bore at some point below the surface. The new footage associated with directional "sidetrack" holes should not be confused with footage resulting from remedial sidetrack drilling. If there is a common bore from which two or more wells are drilled, the first complete bore from the surface to the original objective is classified and reported as a well drilled. Each of the deviations from the common bore is reported as a separate well.

Drilling:  The act of boring a hole (1) to determine whether minerals are present in commercially recoverable quantities and (2) to accomplish production of the minerals (including drilling to inject fluids).

• Exploratory. Drilling to locate probable mineral deposits or to establish the nature of geological structures; such wells may not be capable of production if minerals are discovered.
• Developmental. Drilling to delineate the boundaries of a known mineral deposit to enhance the productive capacity of the producing mineral property.
• Directional. Drilling that is deliberately made to depart significantly from the vertical.

Drilling and equipping of wells:  The drilling and equipping of wells through completion of the "christmas tree."

Drilling arrangement:  A contractual agreement under which a working interest owner (assignor) assigns a part of a working interest in a property to another party (the assignee) in exchange for which the assignee agrees to develop the property. The term may also be applied to an agreement under which an operator assigns fractional shares in production from a property to participants for cash considerations as a means of acquiring cash for developing the property. Under a "disproportionate cost" drilling arrangement, the participants normally pay a greater total share of costs than the total value of the fractional shares of the property received in the arrangement.

Dry hole charge:  The charge-off to expense of a previously capitalized cost upon the conclusion of an unsuccessful drilling effort.

Dry hole contribution:  A payment (either in cash or acreage) that is required by agreement only if a test well is unsuccessful and that is made in exchange for well test and evaluation data.

Dual-fired unit:  A generating unit that can produce electricity using two or more input fuels. In some of these units, only the primary fuel can be used continuously; the alternate fuel(s) can be used only as a start-up fuel or in emergencies.

End user:  A firm or individual that purchases products for its own consumption and not for resale (i.e., an ultimate consumer).

Energy reserves:  Estimated quantities of energy sources that are demonstrated to exist with reasonable certainty on the basis of geologic and engineering data (proved reserves) or that can reasonably be expected to exist on the basis of geologic evidence that supports projections from proved reserves (probable/indicated reserves). Knowledge of the location, quantity, and grade of probable/indicated reserves is generally incomplete or much less certain than it is for proved energy reserves. Note: This term is equivalent to "Demonstrated Reserves" as defined in the resource/reserve classification contained in the U.S. Geological Survey Circular 831,1980. Demonstrated reserves include measured and indicated reserves but exclude inferred reserves.

Equity in earnings of unconsolidated affiliates:  A company's proportional share (based on ownership) of the net earnings or losses of an unconsolidated affiliate.

Extensions, discoveries, and other additions:  Additions to an enterprise's proved reserves that result from(1) extension of the proved acreage of previously discovered (old) reserves through additional drilling in periods subsequent to discovery and (2) discovery of new fields with proved reserves or of new reservoirs of proved reserves in old fields.

Extractive industries:  Industries involved in the activities of (1) prospecting and exploring for wasting (non-regenerative) natural resources, (2) acquiring them, (3) further exploring them, (4) developing them, and (5) producing (extracting) them from the earth. The term does not encompass the industries of forestry, fishing, agriculture, animal husbandry, or any others that might be involved with resources of a regenerative nature.

Farm out (in) arrangement:  An arrangement, used primarily in the oil and gas industry, in which the owner or lessee of mineral rights (the first party) assigns a working interest to an operator (the second party), the consideration for which is specified exploration and/or development activities. The first party retains an overriding royalty or other type of economic interest in the mineral production. The arrangement from the viewpoint of the second party is termed a "farm-in arrangement."

Fee interest:  The absolute, legal possession and ownership of land, property, or rights, including mineral rights. A fee interest can be sold (in its entirety or in part) or passed on to heirs or successors.

Feeder line:  An electrical line that extends radially from a distribution substation to supply electrical energy within an electric area or sub-area.

Field:  An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature and/or stratigraphic condition. There maybe two or more reservoirs in a field that are separated vertically by intervening impervious strata or laterally by local geologic barriers, or by both.

Financial Accounting Standards Board (FASB):  An independent board responsible, since 1973, for establishing generally accepted accounting principles. Its official pronouncements are called "Statements of Financial Accounting Standards" and "Interpretations of Financial Accounting Standards."

Footage drilled:  Total footage for wells in various categories, as reported for any specified period, includes (1)the deepest total depth (length of well bores) of all wells drilled from the surface, (2) the total of all bypassed footage drilled in connection with reported wells, and (3) all new footage drilled for directional sidetrack wells. Footage reported for directional side-track wells does not include footage in the common bore that is reported as footage for the original well. In the case of old wells drilled deeper, the reported footage is that which was drilled below the total depth of the old well.

Foreign access:  Refers to proved reserves of crude, condensate, and natural gas liquids applicable to long-term supply agreements with foreign governments or authorities in which the company or one of its affiliates acts as producer.

Foreign currency transaction gains and losses:  Gains or losses resulting from the effect of exchange rate changes on transactions denominated in currencies other than the functional currency (for example, a U.S. enterprise may borrow Swiss francs or a French subsidiary may have a receivable denominated in kroner from a Danish customer). Gains and losses on those foreign currency transactions are generally included in determining net income for the period in which exchange rates change unless the transaction hedges a foreign currency commitment or a net investment in a foreign entity. Intercompany transactions of a long-term investment nature are considered part of a parent's net investment and hence do not give rise to gains or losses.

Foreign currency translation effects:  Gains or losses resulting from the process of expressing amounts denominated or measured in one currency in terms of another currency by use of the exchange rate between the two currencies. This process is generally required to consolidate the financial statements of foreign affiliates into the total company financial statements and to recognize the conversion of foreign currency or the settlement of a receivable or payable denominated in foreign currency at a rate different from that at which the item is recorded. Translation adjustments are not included in determining net income, but are disclosed as separate components of consolidated equity.

Generally accepted accounting principles (GAAP):  Defined by the FASB as the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time, includes both broad guidelines and relatively detailed practices and procedures.

Geological and geophysical (G) costs:  Costs incurred in making geological and geophysical studies, including, but not limited to, costs incurred for salaries, equipment, obtaining rights of access, and supplies for scouts, geologists, and geophysical crews.

Gross company-operated production:  Total production from all company-operated properties, including all working and nonworking interests.

Hydrocarbon:  An organic chemical compound of hydrogen and carbon in the gaseous, liquid, or solid phase. The molecular structure of hydrocarbon compounds varies from the simplest (methane, a constituent of natural gas) to the very heavy and very complex.

Improved recovery:  Extraction of crude oil or natural gas by any method other than those that rely primarily on natural reservoir pressure, gas lift, or a system of pumps.

Intangible drilling and development costs (IDC):  Costs incurred in preparing well locations, drilling and deepening wells, and preparing wells for initial production up through the point of installing control valves. None of these functions, because of their nature, have salvage value. Such costs would include labor, transportation, consumable supplies, drilling tool rentals, site clearance, and similar costs.

Investments and advances to unconsolidated affiliates:  The balance sheet account representing the cost of investments and advances to unconsolidated affiliates. Generally, affiliates that are less than 50-percent owned by a company may not be consolidated into the company's financial statements.

Kilovolt-Ampere (kVa):  A unit of apparent power, equal to 1,000 volt-amperes; the mathematical product of the volts and amperes in an electrical circuit.

Lease equipment:  All equipment located on the lease except the well to the point of the "Christmas tree."

Lifting costs:  The costs associated with the extraction of a mineral reserve from a producing property.

Mains:  A system of pipes for transporting gas within a distributing gas utility's retail service area to points of connection with consumer service pipes.

Mcf:   one thousand cubic feet

Milling:  The grinding or crushing of ore, concentration, and other beneficiation, including the removal of valueless or harmful constituents and preparation for market.

Milling capacity:  The maximum rate at which a mill is capable of treating ore or producing concentrate.

Mineral:  Any of the various naturally occurring in organic substances, such as metals, salt, sand, stone, sulfur, and water, usually obtained from the earth. Note For reporting on the Financial Reporting System the term also includes organic non-renewable substances that are extracted from the earth such as coal, crude oil, and natural gas.

Mineral lease:  An agreement wherein a mineral interest owner (lessor) conveys to another party (lessee) the rights to explore for, develop, and produce specified minerals. The lessee acquires a working interest and the lessor retains a non-operating interest in the property, referred to as the royalty interest, each in proportions agreed upon.

Mineral rights:  The ownership of the minerals beneath the earth's surface with the right to remove them. Mineral rights may be conveyed separately from surface rights.

Mining:  An energy-consuming subsector of the industrial sector that consists of all facilities and equipment used to extract energy and mineral resources.

Natural reservoir pressure:  The energy within an oil or gas reservoir that causes the oil or gas to rise (unassisted by other forces) to the earth's surface when the reservoir is penetrated by an oil or gas well. The energy may be the result of "dissolved gas drive," "gas cap drive," or "water drive." Regardless of the type of drive, the principle is the same: the energy of the gas or water, creating a natural pressure, forces the oil or gas to the well bore.

Net profits interest:  A contractual arrangement under which the beneficiary, in exchange for consideration paid, receives a stated percentage of the net profits. That type of arrangement is considered a nonoperating interest, as distinguished from a working interest, because it does not involve the rights and obligations of operating a mineral property (costs of exploration, development, and operation). The net profits interest does not bear any part of net losses.

Nonassociated natural gas:  Natural gas that is not in contact with significant quantities of crude oil in the reservoir. See natural gas.

Nonattainment area:  Any area that does not meet the national primary or secondary ambient air quality standard established by the Environmental Protection Agency for designated pollutants, such as carbon monoxide and ozone.

Nonbranded product:  Any refined petroleum product that is not a branded product.

Nonoperating interest:  Any mineral lease interest (e.g., royalty, production payment, net profits interest) that does not involve the rights and obligations of operating a mineral property.

Oil shale:  A sedimentary rock containing kerogen, a solid organic material.

Operating expenses:  Segment expenses related both to revenue from sales to unaffiliated customers and revenue from intersegment sales or transfers, excluding loss on disposition of property, plant, and equipment; interest expenses and financial charges; foreign currency translation effects; minority interest; and income taxes.

Operating income:  Operating revenues less operating expenses. Excludes items of other revenue and expense, such as equity in earnings of unconsolidated affiliates, dividends, interest income and expense, income taxes, extraordinary items, and cumulative effects of accounting changes.

Operating revenues:  Segment revenues both from sales to unaffiliated customers (i.e., revenue from customers outside the enterprise as reported in the company's consolidated income statement) and from intersegment sales or transfers, if any, of product and services similar to those sold to unaffiliated customers, excluding equity in earnings of unconsolidated affiliates; dividend and interest income; gain on disposition of property, plant, and equipment; and foreign currency translation effects.

Other energy operations:  Energy operations not included under Petroleum or Coal. "Other energy" includes nuclear, oil shale, tar sands, coal liquefaction and gasification, geothermal, solar, and other forms of on conventional energy.

Overriding royalty:  A royalty interest, in addition to the basic royalty, created out of the working interest; it is, therefore, limited in its duration to the life of the lease under which it is created.

Petrochemicals:  Organic and in organic compounds and mixtures that include but are not limited to organic chemicals, cyclic intermediates, plastics and resins, synthetic fibers, elastomers, organic dyes, organic pigments, detergents, surface active agents, carbon black, and ammonia.

Pipeline, distribution:  A pipeline that conveys gas from a transmission pipeline to its ultimate consumer.

Pipeline, gathering:  A pipeline that conveys gas from a production well/field to a gas processing plant or transmission pipeline for eventual delivery to end-use consumers.

Pipeline, transmission:  A pipeline that conveys gas from a region where it is produced to a region where it is to be distributed.

Pipelines, rate regulated:  FRS (Financial Reporting System Survey) establishes three pipeline segments: crude/liquid (raw materials); natural gas; and refined products. The pipelines included in these segments are all federally or State rate-regulated pipeline operations, which are included in the reporting company's consolidated financial statements. However, at the reporting company's option, intrastate pipeline operations may be included in the U.S. Refining/Marketing Segment if they would comprise less than 5 percent of U.S. Refining/Marketing Segment net PPE, revenues, and earnings in the aggregate; and if the inclusion of such pipelines in the consolidated financial statements adds less than $100 million to the net PPE reported for the U.S. Refining/Marketing Segment.

Plugged-back footage:  Under certain conditions, drilling operations may be continued to a greater depth than that at which a potentially productive formation is found. If production is not established at the greater depth, the well may be completed in the shallower formation. Except in special situations, the length of the well bore from the deepest depth at which the well is completed to the maximum depth drilled is defined as "plugged-back footage." Plugged-back footage is included in total footage drilled but is not reported separately.

Pole-mile:  A unit of measuring the simple length of an electric transmission/distribution line/feeder carrying electric conductors, without regard to the number of conductors carried.

PPE, additions to:  The current year's expenditures on property, plant, and equipment (PPE). The amount is predicated upon each reporting company's accounting practice. That is, accounting practices with regard to capitalization of certain items may differ across companies, and therefore this figure in FRS (Financial Reporting System) will be a function of each reporting company's policy.

Prediscovery costs:  All costs incurred in an extractive industry operation prior to the actual discovery of minerals in commercially recoverable quantities; normally includes prospecting, acquisition, and exploration costs and may include some development costs.

Preproduction costs:  Costs of prospecting for, acquiring, exploring, and developing mineral reserves incurred prior to the point when production of commercially recoverable quantities of minerals commences.

Primary recovery:  The crude oil or natural gas recovered by any method that may be employed to produce them where the fluid enters the well bore by the action of natural reservoir pressure(energy or gravity).

Primary transportation:  Conveyance of large shipments of petroleum raw materials and refined products usually by pipeline, barge, or ocean-going vessel. All crude oil transportation is primary, including the small amounts moved by truck. All refined product transportation by pipeline, barge, or ocean-going vessel is primary transportation.

Probable (indicated) reserves, coal:  Reserves or resources for which tonnage and grade are computed partly from specific measurements, samples, or production data and partly from projection for a reasonable distance on the basis of geological evidence. The sites available are too widely or otherwise in appropriately spaced to permit the mineral bodies to be outlined completely or the grade established throughout.

Probable energy reserves:  Estimated quantities of energy sources that, on the basis of geologic evidence that supports projections from proved reserves, can reasonably be expected to exist and be recoverable under existing economic and operating conditions. Site information is insufficient to establish with confidence the location, quality, and grades of the energy source. Note: This term is equivalent to "Indicated Reserves" as defined in the resource/reserve classification contained in the U.S. Geological Survey Circular 831, 1980. Measured and indicated reserves, when combined, constitute demonstrated reserves.

Processing plant:  A surface installation designed to separate and recover natural gas liquids from a stream of produced natural gas through the processes of condensation, absorption, adsorption, refrigeration, or other methods and to control the quality of natural gas marketed and/or returned to oil or gas reservoirs for pressure maintenance, repressuring, or cycling.

Producing property:  A term often used in reference to a property, well, or mine that produces wasting natural resources. The term means a property that produces in paying quantities (that is, one for which proceeds from production exceed operating expenses).

Production costs:  Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. They become part of the cost of oil and gas produced. The following are examples of production costs (sometimes called lifting costs): costs of labor to operate the wells and related equipment and facilities; repair and maintenance costs; the costs of materials, supplies, and fuels consumed and services utilized in operating the wells and related equipment and facilities; the costs of property taxes and insurance applicable to proved properties and wells and related equipment and facilities; the costs of severance taxes. Depreciation, depletion, and amortization (DDA) of capitalized acquisition, exploration, and development costs are not production costs, but also become part of the cost of oil and gas produced along with production (lifting) costs identified above. Production costs include the following subcategories of costs: well workers and maintenance; operating fluid injections and improved recovery programs; operating gas processing plants; ad valorem taxes; production or severance taxes; other, including overhead.

Production payments:  A contractual arrangement providing a mineral interest that gives the owner a right to receive a fraction of production, or of proceeds from the sale of production, until a specified quantity of minerals (or a definite sum of money, including interest) has been received.

Production, natural gas liquids:  Production of natural gas liquids is classified as follows:

• Contract Production. Natural gas liquids accruing to a company because of its ownership of liquids extraction facilities that it uses to extract liquids from gas belonging to others, thereby earning a portion of the resultant liquids.
• Leasehold Production. Natural gas liquids produced, extracted, and credited to a company's interest.
• Contract Reserves. Natural gas liquid reserves corresponding to the contract production defined above.
• Leasehold Reserves. Natural gas liquid reserves corresponding to leasehold production defined above.

Production, oil and gas:  The lifting of oil and gas to the surface and gathering, treating, field processing (as in the case of processing gas to extract liquid hydrocarbons), and field storage. The production function shall normally be regarded as terminating at the outlet valve on the lease or field production storage tank. If unusual physical or operational circumstances exist, it may be more appropriate to regard the production function as terminating at the first point at which oil, gas, or gas liquids are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal.

Proportional interest in investee reserves:  The proportional interest at the end of the year in the reserves of investees that are accounted for by the equity method.

Prospecting:  The search for an area of probable mineralization; the search normally includes topographical, geological, and geophysical studies of relatively large areas undertaken in an attempt to locate specific areas warranting detailed exploration. Prospecting usually occurs prior to the acquisition of mineral rights.

Prospecting costs:  Direct and indirect costs incurred to identify areas of interest that may warrant detailed exploration. Such costs include those incurred for topographical, geological, and geophysical studies; rights of access to properties in order to conduct such studies, salaries, equipment, instruments, and supplies for geologists, including geophysical crews, and others conducting such studies; and overhead that can be identified with those activities.

Proved (measured) reserves, coal:  Reserves or resources for which tonnage is computed from dimensions revealed in outcrops, trenches, workings, and drill holes and for which the grade is computed from the results of detailed sampling. The sites for inspection, sampling, and measurement are spaced so closely and the geologic character is so well defined that size, shape, and mineral content are well established. The computed tonnage and grade are judged to be accurate within limits that are stated, and no such limit is judged to be different from the computed tonnage or grade by more than 20 percent.

Purchased power:  Power purchased or available for purchase from a source outside the system.

Reclamation expenses:  In the context of the coal operation statement of income, refers to all payments made by the company attributable to reclamation, including taxes.

Redrill footage:  Occasionally, a hole is lost or junked and a second hole may be drilled from the surface in close proximity to the first. Footage drilled for the second hole is defined as "redrill footage." Under these circumstances, the first hole is reported as a dry hole (explanatory or developmental) and the total footage is reported as dry hole footage. The second hole is reported as an oil well, gas well, or dry hole according to the result. The redrill footage is included in the appropriate classification of total footage, but is not reported as a separate classification.

Refined petroleum products:  Refined petroleum products include but are not limited to gasolines, kerosene, distillates (including No. 2 fuel oil), liquefied petroleum gas, asphalt, lubricating oils, diesel fuels, and residual fuels.

Research and development (RD):  Basic and applied research in the sciences and engineering and the design and development of prototypes and processes, excluding quality control, routine product testing, market research, sales promotion, sales service, research in the social sciences or psychology, and other non-technological activities or technical services.

Reserves, coal:  Quantities of unextracted coal that comprise the demonstrated base for future production, including both proved and probable reserves. Also see Proved energy reserves; Probable energy reserves; Energy reserves; Proved (measured) reserves, coal; and Probable(indicated) reserves, coal.

Reserves, energy:  See Proved energy reserves.

Reservoir:  A porous and permeable underground formation containing an individual and separate natural accumulation of producible hydrocarbons (crude oil and/or natural gas) which is confined by impermeable rock or water barriers and is characterized by a single natural pressure system.

Shallow pitting:  Testing a potential mineral deposit by systematically sinking small shafts into the earth and analyzing the material recovered.

Shut in:  Closed temporarily; wells and mines capable of production may be shut in for repair, cleaning, in accessibility to a market, etc.

Shut-in royalty:  A royalty paid by a lessee as compensation for a lessor's loss of income because the lessee has deferred production from a property that is known to be capable of producing minerals. Shut in may be caused by a lack of a ready market, by a lack of transportation facilities, or by other reasons. A shut-in royalty may or may not be recoverable out of future production.

Sidetrack drilling:  This is a remedial operation that results in the creation of a new section of well bore for the purpose of (1) detouring around junk, (2) redrilling lost holes, or (3) straightening key seats and crooked holes. Directional "side-track" wells do not include footage in the common bore that is reported as footage for the original well.

Support equipment and facilities:  These include, but are not limited to, seismic equipment, drilling equipment, construction and grading equipment, vehicles, repair shops, warehouses, supply points, camps, and division, district, or field offices.

Supporting structure:  The main supporting unit (usually a pole or tower) for transmission line conductors, insulators, and other auxiliary line equipment.

Surface rights:  Fee ownership in surface areas of land. Also used to describe a lessee's right to use as much of the surface of the land as may be reasonably necessary for the conduct of operations under the lease.

Tangible development costs:  Costs incurred during the development stage for access, mineral-handling, and support facilities having a physical nature. In mining, such costs would include tracks, lighting equipment, ventilation equipment, other equipment installed in the mine to facilitate the extraction of minerals, and supporting facilities for housing and care of work forces. In the oil and gas industry, tangible development costs would include well equipment (such as casing, tubing, pumping equipment, and well heads), as well as field storage tanks and gathering systems.

Tar sands:  Naturally occurring bitumen-impregnated sands that yield mixtures of liquid hydrocarbon and that require further processing other than mechanical blending before becoming finished petroleum products.

Test well contribution:  A payment made to the owner of an adjacent or nearby tract who has drilled an exploratory well on that tract in exchange for information obtained from the drilling effort.

Timing differences:  Differences between the periods in which transactions affect taxable income and the periods in which they enter into the determination of pretax accounting income. Timing differences originate in one period and reverse or "turn around" in one or more subsequent periods. Some timing differences reduce income taxes that would otherwise be payable currently; others increase income taxes that would otherwise be payable currently.

Transfer price:  The monetary value assigned to products, services, or rights conveyed or exchanged between related parties, including those occurring between units of a consolidated entity.

Treating plant:  A plant designed primarily to remove undesirable impurities from natural gas to render the gas marketable.

Uncompleted wells, equipment, and facilities costs:  The costs incurred to (1) drill and equip wells that are not yet completed, and (2) acquire or construct equipment and facilities that are not yet completed and installed.

Vessel:  A ship used to transport crude oil, petroleum products, or natural gas products. Vessel categories are as follows: Ultra Large Crude Carrier (ULCC), Very Large Crude Carrier (VLCC), Other Tanker, and Specialty Ship (LPG/LNG). See Tanker and Barge.

Well:  A hole drilled in the earth for the purpose of:

1. finding or producing crude oil or natural gas; or
2. producing services related to the production of crude or natural gas.

Wet natural gas:  A mixture of hydrocarbon compounds and small quantities of various non hydrocarbons existing in the gaseous phase or in solution with crude oil in porous rock formations at reservoir conditions. The principal hydrocarbons normally contained in the mixture are methane, ethane, propane, butane, and pentane. Typical nonhydrocarbon gases that may be present in reservoir natural gas are water vapor, carbon dioxide, hydrogen sulfide, nitrogen and trace amounts of helium. Under reservoir conditions, natural gas and its associated liquefiable portions occur either in a single gaseous phase in the reservoir or in solution with crude oil and are not distinguishable at the time as separate substances. Note: The Securities and Exchange Commission and the Financial Accounting Standards Board refer to this product as natural gas.

Working interest:  An interest in a mineral property that entitles the owner of that interest to all of share of the mineral production from the property, usually subject to a royalty. A working interest permits the owner to explore, develop, and operate the property. The working-interest owner bears the costs of exploration, development, and operation of the property and, in return, is entitled to a share of the mineral production from the property or to a share of the proceeds there from. It may be assigned to another party in whole or in part, or it may be divided into other special property interests.

• Gross working interest. The reporting company's working interest plus the proportionate share of any basic royalty interest or overriding royalty interest related to the working interest.
• Net working interest. The reporting company's working interest is not including any basic royalty or overriding royalty interests.