Spindletop Energy Primer Vocabulary Flashcards

Vocabulary flashcards covering fundamental industry terms, metrics, accounting practices, verticals, and financial concepts across the oil and gas sector derived from the Spindletop Energy Primer.

Hydrocarbons

Organic chemical compounds comprised entirely of hydrogen and carbon, which include crude oil, natural gas, and natural gas liquids.

Crude Oil

Unprocessed or unrefined oil pulled directly out of the ground before treatment or refining.

American Petroleum Institute (API) Gravity

A reverse measure of petroleum density where crude oil with a higher API gravity value is less dense.

Light Crude

Crude oil with an American Petroleum Institute (API) gravity of $31.1^\text{o}$ or higher.

Sweet Crude

Crude oil containing less than $0.7FIXME_PERCENT$ sulphur by weight.

Wet Gas

Natural gas containing a greater proportion of heavier natural gas liquids such as ethane, propane, and butane.

Barrel of Oil Equivalent (BOE)

A unit of energy equivalence where $1$ barrel of crude oil equals $6\text{ thousand cubic feet}$ of natural gas.

Ethane

A natural gas liquid used primarily as a petrochemical feedstock for plastics production, antifreeze, and detergents.

Liquefied Petroleum Gas (LPG)

A fuel gas mixture created when propane is combined with butane.

Associated Gas

Natural gas released as a byproduct during oil-directed drilling operations.

Liquefied Natural Gas (LNG)

Natural gas (methane) cooled to approximately $-162^\text{o}\text{C}$ ($-260^\text{o}\text{F}$), reducing its volume by more than $600\times$ for storage and ocean transport.

Seven Sisters

The colloquial term for the dominant international oil companies (including BP, Chevron, ExxonMobil, and Shell) that controlled global oil pricing before the 1970s.

Perforation Gun

A tool lowered into a wellbore to explode charges along the sides of the casing pipe, creating small cracks in the surrounding shale formation.

Proppants

A mixture of sand, water, and chemical additives injected at high pressure into fractured rock to hold open cracks and allow hydrocarbons to flow.

Master Limited Partnership (MLP)

A tax-advantaged pass-through corporate structure commonly used by midstream energy companies to distribute cash flows directly to unitholders without corporate-level income tax.

Pure Play Investment

An investment strategy targeting a company that provides exposure to only a single vertical, operating concept, or geographic basin in the energy industry.

National Oil Companies (NOCs)

State-owned energy enterprises, such as Saudi Aramco, that operate with geopolitical and state objectives alongside commercial interests.

Successful Efforts Accounting

An upstream accounting policy where exploration expenses for unsuccessful wells (dry holes) are expensed immediately, while costs for successful wells are capitalized.

Full Cost Accounting

An upstream accounting policy where exploration and drilling expenditures for both successful and unsuccessful wells are capitalized into a single asset pool.

Mineral Rights

Legal property rights granting ownership of underground mineral resources, which can be privately owned in the United States independently from surface rights.

Revenue Interest

The proportion of total production revenue allocated to the drilling syndicate, calculated as $1$ minus the landowner royalty percentage.

Working Interest

An equity interest in an oil and gas lease that obligates the owner to pay a specified share of drilling, operating, and development costs.

Seismology

A geophysical exploration method using controlled surface vibrations to map subsurface rock formations and identify potential hydrocarbon reserves.

Proved Reserves (P1)

Estimated quantities of hydrocarbons with at least a $90FIXME_PERCENT$ statistical probability of commercial recovery under current economic and operating conditions.

Dry Hole

An drilled well that fails to uncover hydrocarbons in sufficient quantities to justify commercial completion.

Differential

The difference between the realized price received for crude oil or gas at the wellhead and the benchmark price at a major pricing hub like Cushing, Oklahoma.

Lease Operating Expenses (LOE)

Recurring operational costs—such as labor, vehicles, equipment maintenance, and supplies—required to maintain daily production from an active well.

PV-10

The present value of estimated future net revenues from proved reserves, calculated after taxes using a standard annual discount rate of $10FIXME_PERCENT$.

Development Model

An upstream valuation framework aggregating single-well cash flow models to estimate Net Asset Value (NAV) over a finite resource depletion timeline.

EV/EBITDAX

An upstream enterprise valuation metric that adds back exploration expenses to EBITDA to normalize earnings comparison between successful efforts and full cost accounting firms.

Gathering Systems

Networks of small-diameter, low-pressure pipelines that collect raw crude oil or natural gas from individual wellheads and transport it to processing facilities.

Frac Spread

The difference between the market value of extracted natural gas liquids and their thermal energy value if left mixed in the dry gas stream.

Fractionation

The midstream process of separating mixed natural gas liquids into discrete products (ethane, propane, butane) using thermal distillation towers.

Incentive Distribution Rights (IDRs)

Contractual provisions in a Master Limited Partnership that grant the General Partner an escalating percentage of incremental cash distributions as payout thresholds are reached.

Minimum Volume Commitments (MVCs)

Contractual guarantees where a shipper or producer commits to providing a minimum physical volume of hydrocarbons through a midstream asset over a specified period.

Take-or-Pay Contract

A midstream service agreement requiring the customer to either pay for reserved pipeline capacity or purchase contracted volumes regardless of actual physical usage.

Distillation Tower

A high-temperature refining column that separates crude oil into distinct petroleum products based on variations in their boiling points.

Crack Spread

The gross profit margin realized by a petroleum refiner, measured as the differential between the cost of crude oil inputs and the wholesale prices of refined product outputs.

3:2:1 Crack Spread

A standard refining market benchmark assuming $3$ barrels of crude oil produce $2$ barrels of gasoline and $1$ barrel of distillate fuel.

Electrolysis

An industrial process using electrical current to split water molecules into hydrogen and oxygen gases.

Carbon Capture, Utilization, and Storage (CCUS)

A suite of technologies designed to trap industrial carbon dioxide emissions before or after release and permanently isolate them underground or repurpose them.

Backwardation

A commodity market condition where spot prices are higher than forward or futures contract prices.

Contango

A commodity market condition where futures contract prices trade at a premium to the current spot price.

Hedging

The practice of using financial derivative contracts (such as futures or options) to lock in pricing and protect against adverse commodity price movements.

Maintenance Capital Expenditure

The capital spending required to preserve operating equipment and maintain existing EBITDA levels without expanding productive capacity.

Peak Oil

The theoretical date when global petroleum production reaches its absolute historical maximum rate, followed by continuous structural decline.

Decline Rate

The non-linear percentage decrease in a well's hydrocarbon production rate over time.