Glossary · 108 terms

The language of the mineral estate

Every trade has its shorthand. These are the terms you'll meet in deeds, division orders, and lease negotiations — defined the way landmen actually use them.

1031 Exchange: A like-kind exchange under IRC Section 1031 that lets an owner defer capital-gains tax by reinvesting mineral-sale proceeds into other real property.

Abstract of Title: A compiled, chronological set of every recorded instrument affecting a tract, used to trace the chain of title and support a title opinion.
Ad Valorem Tax: A county property tax on producing minerals, based on their appraised value. Common in Texas and other producing states.
Affidavit of Heirship: A sworn, recorded statement identifying a deceased owner's heirs, used to clear mineral title when no probate was ever opened.
API Gravity: A measure of how light or heavy crude oil is. Higher API gravity means lighter oil, which usually commands a higher price than heavy crude.
API Number: A unique 10- to 14-digit identifier assigned to every oil and gas well in the U.S., used to track its permits, production, and history.
Artificial Lift: Equipment such as pumpjacks, ESPs, and gas lift used to lift fluids to surface once reservoir pressure can no longer flow the well naturally.
Authorization for Expenditure (AFE): An itemized cost estimate for drilling or completing a well, sent to working-interest owners so they can elect to participate or not.

Barrel of Oil Equivalent (BOE): A unit that converts natural gas and liquids into an oil-equivalent barrel on an energy basis, where roughly 6 Mcf of gas equals 1 BOE.
Basin: A large structural depression where source and reservoir rocks accumulated over time — like the Permian or Williston Basin — and where oil and gas plays are found.
Breakeven Price: The oil or gas price at which a well or drilling program just covers its costs. It governs whether operators drill, complete, or shut in wells.

Capital Gains Tax: Federal and state tax on the gain from selling minerals. Long-term rates are lower than short-term, and basis (including stepped-up basis) reduces the bill.
Cash-Flow Multiple: A fast royalty valuation rule of thumb: recent average monthly cash flow times a market multiple. It drives many unsolicited offers.
Chain of Title: The unbroken sequence of ownership transfers for a tract, from the original grant to the present owner, proving who owns the minerals.
Completion: The work done after drilling to make a well ready to produce — casing, perforating, fracturing, and tying in surface equipment.
Condensate: A very light liquid hydrocarbon that condenses out of natural gas. Often called lease condensate, it is priced near crude oil.
Correlative Rights: The principle that each owner over a shared reservoir has a fair opportunity to produce their just share — the legal check on the rule of capture.
Curative: The work of fixing title defects — missing heirs, breaks in the chain, unreleased liens — so the minerals carry marketable, payable title.

Decimal Interest: An owner's fractional share of production in a well, written as a decimal — net acres divided by unit acres, times the royalty rate.
Decline Curve: A plot of a well's production over time. Oil and gas wells start strong and fall off, so the curve maps how fast output drops.
Delay Rentals: Periodic payments an operator makes to keep an undrilled lease in force during its primary term without losing the acreage.
Depletion Allowance: An income-tax deduction for the gradual using-up of a finite mineral reserve. Royalty owners often use percentage depletion, commonly 15%.
Depth Severance: A split of mineral rights by formation or depth, so production from one zone doesn't hold the rights to deeper or shallower zones.
Devise & Bequest: Transferring property by will: a devise is a gift of real property such as minerals, while a bequest is a gift of personal property.
Division Order: A document from the operator stating each owner's decimal share of production from a well, used to set up royalty payments.
Drilling Permit: State approval an operator must obtain before drilling a well, naming the location, depth, and target formation. A public early signal.

Enhanced Oil Recovery (EOR): Tertiary recovery methods — CO2 injection, chemical, or thermal techniques — used to recover oil left behind after primary and secondary production.
Escheat / Unclaimed Property: Royalties left unclaimed for a state dormancy period are turned over to the state as unclaimed property, where owners can later reclaim them.
EUR (Estimated Ultimate Recovery): The total oil or gas a well is expected to produce over its life, from first flow to plug-and-abandon. Usually stated in barrels or Mcf.
Executive Rights: The right to lease the minerals — to sign an oil and gas lease and negotiate its terms — sometimes owned apart from the royalty.

Flush Production: The high initial output a new well delivers in its first months, before reservoir pressure drops and production declines.
Forced (Compulsory) Pooling: A state regulatory order that combines holdout or unleased tracts into a drilling unit so a well can be drilled, protecting each owner's fair share.
Formation: A named, mappable layer of rock with consistent characteristics — like the Wolfcamp or Bakken — often the producing interval listed on a drilling permit.
Frac: Hydraulic fracturing — pumping water, sand, and chemicals at high pressure to crack the rock and release oil and gas from shale.

Gas-Oil Ratio (GOR): The volume of gas produced per barrel of oil, usually in cubic feet per barrel. GOR helps classify a well as oil or gas and tracks reservoir behavior.

Held by Production (HBP): A lease kept in force past its primary term because a well is producing in paying quantities, continuing into the secondary term.
Horizontal Well: A well that drills down to a target zone, then turns and runs sideways through it for thousands of feet to expose far more reservoir rock.
Hydraulic Fracturing: Pumping fluid and sand at high pressure to crack tight rock and create flow paths — the technique that, with horizontal drilling, unlocked shale.

Intestate Succession: The state-law rules that decide who inherits minerals and royalties when an owner dies without a valid will, set by the state where the minerals are located.

Joint Interest Billing (JIB): The monthly invoice an operator sends non-operating working-interest owners for their proportionate share of drilling and operating costs.
Joint Operating Agreement (JOA): The contract governing how co-owners jointly develop and operate a unit — naming the operator, the non-operators, and how costs are shared.

Landman: A professional who researches mineral title, negotiates leases, and tracks down owners. The boots-on-the-ground role in any oil and gas deal.
Lateral Length: The horizontal distance a well runs through the target formation. Longer laterals expose more rock and generally produce more.
Lease Bonus: A one-time, up-front payment to the mineral owner for signing an oil and gas lease, usually quoted per net mineral acre.
Lease Operating Expense (LOE): The recurring cost to keep a producing well running. LOE reduces working-interest net cash flow and is a key driver of a well's breakeven.
Life Estate: An ownership interest that lasts only for the holder's lifetime; the life tenant collects royalty income but cannot sell the full interest alone.
LNG (Liquefied Natural Gas): LNG is natural gas — mostly methane — cooled to about −260°F until it becomes a liquid 1/600th its gas volume, so it can be shipped overseas where pipelines can't reach. It is not the same as NGLs.

Marketable Title: Title reasonably free of doubt and defects that a prudent buyer would accept without hesitation — the standard buyers and lessees require before they pay.
Mcf (Thousand Cubic Feet): The standard volume unit for natural gas — one thousand cubic feet. Gas is metered and sold in Mcf, with MMcf and Bcf for larger volumes.
Mineral Deed: A recorded instrument that conveys the mineral estate — typically the right to lease, develop, and receive bonus and royalty income from oil and gas.
Mineral Interest: Ownership of the oil, gas, and other minerals beneath a tract, including the right to lease them and earn royalty or bonus income.
Mineral Trust: A trust that holds title to minerals and royalties so a trustee can manage them, avoid probate, and receive royalty payments on the beneficiaries' behalf.
MMBtu: One million British thermal units — the energy-content unit natural gas is often priced on, including the Henry Hub benchmark.
MMcf (Million Cubic Feet): MMcf means one million cubic feet of natural gas — that's 1,000 Mcf. It sits on the Mcf / MMcf / Bcf ladder of gas volume units you'll see on production reports and royalty statements.

Natural Gas Liquids (NGLs): Valuable hydrocarbons — ethane, propane, butane, and others — separated from the gas stream at a processing plant, adding value beyond dry gas.
Net Mineral Acre (NMA): The unit measuring how much of the mineral estate you own: gross tract acres multiplied by your fractional mineral interest.
Net Revenue Interest (NRI): An owner's share of production revenue after royalties and other burdens are deducted — what a working-interest owner actually keeps.
Net Royalty Acre (NRA): A net mineral acre normalized to a standard 1/8 royalty, letting buyers compare positions with different lease royalty rates.
Non-Participating Royalty Interest (NPRI): A cost-free royalty carved out of the mineral estate whose owner cannot lease, sign, or collect bonus — only the royalty share.

Oil and Gas Lease: A contract where a mineral owner grants an operator the right to drill and produce, in exchange for a bonus, royalty, and other terms.
Operator: The company that drills and runs the wells on a lease — handling permits, production, and royalty payments to mineral owners.
Overriding Royalty Interest (ORRI): A cost-free royalty carved out of the working interest under a lease. It pays during production but ends when the lease terminates.

Pad Drilling: Drilling several wells from one surface location, with the rig moving short distances between them, to cut cost and surface footprint.
Paid-Up Lease: An oil and gas lease whose upfront bonus prepays all delay rentals through the primary term, so no annual rental payments are owed.
Pay Zone: The productive interval of a well that actually yields oil or gas; "net pay" is the effective hydrocarbon-bearing thickness within it that contributes to production.
PDP (Proved Developed Producing): Reserves from wells already drilled and producing right now. The safest reserve category, since the well exists and is selling oil or gas.
Percentage Depletion: Percentage depletion lets a qualifying mineral owner deduct a flat 15% of gross royalty income each year as a tax allowance for the reservoir being used up — and it can continue even after the property's cost basis is fully recovered.
Permeability: A rock's ability to transmit fluids through its connected pore spaces; together with porosity it governs how readily a well produces oil or gas.
Play: A group of oil and gas prospects or fields that share the same geologic concept — such as the Permian, Eagle Ford, or Bakken — and are developed with a common strategy.
Plug & Abandon (P&A): Cementing and sealing a depleted or non-viable well to retire it safely — an operator obligation that, if neglected, can leave an orphaned well for the state to plug.
Pooling: Combining acreage from several tracts into one drilling unit so a well can produce; each owner shares output by their acreage.
Post-Production Costs: Gathering, compression, processing, and transportation deductions taken between the wellhead and the sale point that reduce a net royalty check.
Primary Term: The fixed window — commonly 3 to 5 years — in which an operator must drill or otherwise establish production to keep an oil and gas lease alive.
Probate: The court process that validates a will and settles a deceased person's estate, including the transfer of mineral and royalty title to heirs.
PUD (Proved Undeveloped): Reserves expected from wells not yet drilled but with strong evidence they'll produce. Real value, but it depends on future drilling.
Pugh Clause: A lease clause that releases acreage or depths not held by production, so one producing well can't tie up the whole tract.
PV-10: The present value of estimated future net cash flow from oil and gas reserves, discounted at 10%. An industry-standard reserve valuation benchmark.

Quitclaim Deed: A deed that transfers whatever interest the grantor happens to own — with no warranty of title — common in title curative work and family transfers.

Remainder Interest: The future ownership interest that vests in the remainderman when a life estate ends, giving them full title to the minerals at the life tenant's death.
Reservoir: The porous, permeable subsurface rock that holds oil and gas and can yield it to a well — defined by its porosity, permeability, and trapped hydrocarbons.
Reservoir Rock: Reservoir rock is the porous, permeable rock — usually sandstone, limestone, or fractured shale — that actually holds the oil and gas a well produces, as distinct from the source rock that generated it.
Royalty Deed: A recorded instrument conveying only a royalty share of production — with no right to lease or develop — often creating a non-participating royalty interest.
Royalty Interest: A share of production revenue free of drilling and operating costs, paid to the mineral owner under a lease — commonly 1/8 to 1/4.
Royalty Statement: The check stub from the operator showing production volumes, price, deductions, and your decimal interest for each well you own in.
Rule of Capture: The legal doctrine that you own the oil and gas your well produces, even if some of it migrated from beneath a neighbor's tract.
Runsheet: A landman's working document listing every recorded instrument affecting a tract in order, used to build the chain of title.

Saltwater Disposal (SWD): Injecting large volumes of produced water into permitted disposal wells — a major operating cost and logistics factor on every producing well.
Secondary Recovery: Injecting water or gas into a reservoir to repressure it and push additional oil to the wellbore after primary production has depleted natural pressure.
Severance Tax: A state tax on the value or volume of oil and gas severed from the ground. It is withheld off your royalty check, and rates vary by state.
Severed Mineral Estate: A tract where the minerals have been legally separated from the surface, so different parties own what's above and below ground.
Shale Play: An unconventional play where oil and gas are produced directly from tight source rock using horizontal drilling and hydraulic fracturing — the modern resource play.
Shut-in Royalty: A payment that keeps a lease alive when a capable well is shut in — not selling production — usually due to no market or pipeline.
Source Rock: The organic-rich rock that generated oil and gas over geologic time; in a shale play it is also the reservoir, produced directly via fracturing.
Spacing Unit: The block of acreage a regulator assigns to a well, setting well density and setbacks; your tract's share of the unit drives your royalty.
Spud Date: The date a rig first breaks ground and begins drilling a well — the official start of drilling on the record.
Stepped-Up Basis: The tax rule that resets an heir's cost basis in inherited minerals to fair-market value on the date of death, cutting capital gains tax on a later sale.
Surface Rights: Ownership of the land surface — buildings, crops, and soil — separate from the minerals beneath, which can be owned by someone else.
Surface Use Agreement: A contract between an operator and the surface owner covering well-pad locations, roads, water, damage payments, and reclamation of the land.
Suspense (Suspended Funds): Royalties an operator legally holds rather than pays out — usually due to a title problem, an unsigned division order, or a bad address.

Texas Railroad Commission (RRC): The state agency that regulates oil and gas in Texas — drilling permits, well status, spacing, and production reporting; other states use the OCC or NMOCD.
Title Opinion: An attorney's written opinion of who owns the minerals and on what terms, built from the abstract or runsheet; comes as drilling and division order types.
Top Lease: A new oil and gas lease signed on a tract that is already leased, taking effect only if and when the existing lease expires or terminates.

Unitization: Combining an entire reservoir or field — across many leases and owners — into one unit for efficient, coordinated recovery.

Warranty Deed: A deed in which the grantor guarantees title against defects, giving the buyer the strongest assurance of clean ownership; can be general or special.
Water Cut: The percentage of water in the fluids a well produces. Water cut tends to rise over a well's life and drives lifting and disposal costs.
Wellhead: The surface equipment — including the "christmas tree" of valves — that seals and controls a well; also the basis for the "wellhead price" of production.
Working Interest: The operating interest in a lease that pays its share of drilling and operating costs in exchange for production revenue after royalties.
Workover: Remedial downhole work on an existing well — cleaning out, repairing, or re-stimulating it to restore or boost production rather than drill a new hole.

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