Glossary of Terms

A B C D E F G H I M N O P R S T U V W

A

Accountability - responsibility to someone for a particular activity. Everyone is accountable for delivering specific results or products as part of their job.

Annual Allowance - an amount of money provided to employees in certain locations; provides employees with the flexibility to use the allowance in the manner most meaningful to them, rather than the Company specifying how it is to be used.

Approval Matrices - defines an individual's range of spending authority to purchase goods or services on behalf of the Company, and indicates when a supervisor's approval is required.

B

Battery - a place where oil is collected from various pipelines.

Benchmark - a standard point of reference by which something can be measured or judged.

Best Practice - a process, practice or solution judged as the ultimate way to reach a goal or result; held up as a model to be learned from or followed.

Bitumen - petroleum in semi-solid or solid forms. Requires unconventional production methods such as mining or steam assisted gravity drainage.

Business unit - segment of the Company with operations focused on a specific area of expertise or geography.

C

Coalbed Methane (CBM) - a sweet natural gas found in coal and used for home heating, natural gas-fired electrical generation and as an industrial fuel.

Code of Conduct - policies defining the manner in which an organization, employees, contractors and service providers are expected to conduct business.

Common Share - an ownership stake in the Company. A common share of a publicly traded company can be bought or sold at the current market price on the stock exchange(s) where it is listed, e.g., New York.

Compressor Site - a field location comprised of one or more compressor stations.
Compressor Station - a location on the system where the pressure of the gas is increased so the transportation of the gas can continue. Basic hydraulic theory for the transportation of gas is that gas will naturally flow from higher pressure locations to lower pressure locations. The actual increase in pressure happens inside compressor units. A station may have one or more units arranged in parallel or in a series. Additional units in parallel increase the allowable amount of flow while maintaining a pressure increase. Additional units in a series increase the allowable pressure while supporting the same flow. Compressing gas increases the volume.

Contractor - independent incorporated business entities engaged to perform services for a Company. Services and deliverables are outlined in a written agreement between the entity and Company. Individuals performing the services are engaged by the business entity, which provides the business infrastructure to manage its workforce. Contractors can be companies from whom the organization has selected one or more specific individuals to perform a service (e.g. professional or technical specialists, temporary staffing agencies), or companies selected to perform a service without specifying the individuals who will provide the service (i.e. service providers such as services for drilling, completions and workovers). The term contractor can refer to the business entity or an individual it employs.

Control Valve - a physical device that can regulate or control the flow within a pipeline, or upstream or downstream pressure.

Core Competencies - the areas of expertise on which a business is built, those tasks or deliverables for which a company is considered expert. An individual's competencies are those attributes that make up their expertise or suitability to a particular job.

Crude Oil – petroleum found in liquid form, flowing naturally or capable of being pumped without further processing or dilution.

D

Delineation Well - a well drilled just outside the proved area of an oil or gas reservoir in an attempt to extend the known boundaries of the reservoir.

Development Well - a well drilled within the area of an oil or gas reservoir known to be productive. Development wells are relatively low risk.

Discount Rate – the rate at which a series of future cash flows are discounted in order to determine their present value.

Downstream - closer to the point of sale than to the point of production.

Downstream Sector - the refining and marketing sector of the petroleum industry.

Dry Hole - a well found to be incapable of producing oil or gas in sufficient quantities to justify completion.

E

eBusiness - a means of doing business that uses electronic technologies, such as EDI (Electronic Data Interface), the internet, and web-based supply chain integration, to the benefit of the Company.

Employee - an individual on the Company's payroll.

Established Reserves - the portion of the discovered resource base that is estimated to be recoverable using known technology under present and anticipated economic conditions. Includes proved plus a portion of probable (usually 50%).

Exploitation - various methods of optimizing oil and gas production or establishing additional reserves from producing properties through additional drilling or the application of new technology.

Exploration - the act of searching for new, undiscovered oil and gas resources.

Exploratory Well - a well drilled in an unproved area, either to find a new oil or gas reservoir or to extend a known reservoir. Sometimes referred to as a wildcat.

F

Field - a geographical area under which one or more oil or gas reservoirs lie.

Firewall - a set of technologies used for security that allow the Company to test, filter and route all incoming internet messages.

Flaring/Venting - controlled burning (flare) or release (vent) of natural gas that can't be processed for sale or use because of technical or economic reasons.

Flow-Through Evaluation - an approach to project economic evaluation that assumes taxes payable are calculated on a corporate basis that allows a project to take maximum tax deductions. Flow-through evaluations are required for large projects that require corporate impact analysis.

Flow Rate - the amount of volume per unit of time that is moving on the pipeline system.

Fracture, Refracture - the process of applying hydraulic pressure to an oil or gas bearing geological formation to crack the formation and stimulate the release of oil and gas.

G

Gross Acres - the total acres covered by a lease.

H

Horizontal Drilling - drilling a well that deviates from the vertical and travels horizontally through a producing layer.

I

Increased Density/Infill Well - a well drilled in addition to the number of wells permitted under initial spacing regulations, used to enhance or accelerate recovery, or prevent the loss of proved reserves.

Internal Rate of Return (IRR) - after tax rate of return for the project life, at which net present value (NPV) equals zero.

M

Market Capitalization - value of a corporation as determined by the market price of its issued and outstanding common stock. It is calculated by multiplying the number of outstanding shares by the current market price of a share.

Market Price - last reported traded price (if on an exchange) of a share, or its current bid and ask prices (if over-the-counter); i.e., the price as determined by buyers and sellers in an open market. Also called market value.

Meter Station - a pipeline location with metering or measuring of gas flow as its primary function.

Midstream - the processing, storage and transportation sector of the petroleum industry.

Miscible Flooding - an oil-recovery process in which a fluid, capable of mixing completely with the oil it contacts, is injected into an oil reservoir to increase recovery.

N

Natural Gas Liquids (NGLs) - liquid hydrocarbons that are extracted and separated during natural gas production. NGL products include ethane, propane, butane and natural gasoline.

Net Acres - Company's working interest times the total acres covered by a lease.

Netback - Linkage of the price of crude oil to the market price of products refined from it.

Net Present Value (NPV) - sum of all discounted after-tax cash flows, including capital costs. Often reported for 0%, 9%, and 15% discount rate.

O

Oilsands - a complex mix of sand, water and clay trapping very heavy oil known as bitumen.

Onshore - exploration and production taking place on land.

P

Policy - A clear and concise statement by the organization's executive leadership indicating the Corporation's intentions, principles and performance expectations relative to the Corporate Constitution and to its legal, regulatory, legislative, social and/or governance responsibilities.

Practice - A universally applied standard defining the Corporation's execution expectations relative to one or more corporate policies.

Profit Investment Ratio (PIR) - Net Present Value divided by discounted capital investment. Reported for 0% and 9% discount rates.

Proved Reserves - estimates of oil, gas and NGL quantities thought to be recoverable from known reservoirs under existing economic and operating conditions.

P Mean - the expected average value or risk-weighted average of all possible outcomes.

P90 - the outcome for which the probability of occurrence of that value or greater is 90%. Nine times out of 10 the actual value is expected to be larger.

P10 - the outcome for which the probability of occurrence of that value or greater is 10 percent. The actual value is expected to be larger only one time out of 10.

R

Recavitate - the process of applying pressure surges on the coal formation at the bottom of a well in order to increase fracturing, enlarge the bottomhole cavity and thereby increase gas production.

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

Resource Play - a term used to describe an accumulation of hydrocarbons known to exist over a large area expanse and/or thick vertical section, which when compared to a conventional play, typically has a lower geological and/or commercial development risk and lower average decline rate.

Royalty - the owner's share of the value of minerals (oil and gas) produced on the property.

S

Seismic - a tool for identifying underground accumulations of oil or gas by sending energy waves or sound waves into the earth and recording the wave reflections. Results indicate the type, size, shape and depth of subsurface rock formations. 2-D seismic provides two-dimensional information while 3-D creates three-dimensional pictures. 4-C, or four-component, seismic is a developing technology that utilizes measurement and interpretation of shear wave data. 4-C
seismic improves the resolution of seismic images below shallow gas deposits.

Service Providers - a subset of contractors, service providers are independent incorporated business entities engaged to provide services to a Company. Services and deliverables are outlined in a written agreement between the entity and Company. Individuals performing the services are engaged by the business entity, which provides the business infrastructure to manage its workforce. Service providers are generally companies selected to perform a service without specifying the individuals who will provide the service (e.g. services for drilling, completions and workovers). Service providers may conduct their work onsite at Company facilities or offsite from their own facilities.

Severance Tax – a tax imposed upon nonrenewable natural resources that are removed from the earth.

Sour Gas - natural gas at the wellhead may contain hydrogen sulphide (H2S), a toxic compound. Natural gas that contains more than 1% of H2S is called sour gas.

Stakeholders - people with an interest in the activities of the oil and gas industry are considered stakeholders. They may include landowners, municipalities, recreational land users, other industries, environmental groups, governments and regulators.

Station - remote pipeline facility including meter stations, compression stations, block valve sites, and control valve sites.

Steam Injection - a recovery technique in which steam is injected into a reservoir to reduce the viscosity of the crude oil.

Supplier - an organization that offers goods or services to a purchaser and may recommend opportunities for savings and improvements. Examples of suppliers include companies that sell pipe, valves and fittings, coiled tubing services or steel products.

Sweet Oil and Gas - petroleum containing little or no hydrogen sulfide.

T

Take-In-Kind - used to denote that a royalty may be paid/received in product (e.g. oil or gas) rather than fiscally.

Tight Gas - gas found in sedimentary rock that is cemented together so tight that flow rates are very low. Extracting tight gas usually requires enhanced technology like"hydraulic fracturing" where fluid is pumped into the ground to make it more permeable.

U

Undeveloped Acreage - lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or gas.

Upstream - companies who explore for, develop and produce petroleum resources are known as the upstream sector of the petroleum industry.

V

Valve - a physical device that can regulate or control the flow of oil or gas on a pipeline.

Vendor - a supplier that can arrange to offer specified goods on a pre-determined schedule. Examples of vendors include companies that sell office paper or safety supplies.

W

Wildcat - a well drilled in an area where no oil or gas production exists.

Workover - the process of conducting remedial work, such as cleaning out a well bore, to increase or restore production.

A Resource Provided by the Kansas Independent Oil & Gas Association