The Book of Jargon® – Oil & Gas

An interactive glossary of oil and gas acronyms, slang, and terminology.

The Book of Jargon® – Oil & Gas is one in a series of practice area and industry-specific glossaries published by Latham & Watkins.

The definitions provide an introduction to each term and may raise complex legal issues on which specific legal advice is required. The terms are also subject to change as applicable laws and customary practice evolve.

This glossary is an essential tool to help readers talk the talk of the oil and gas industry. Drill into this reservoir of terminology.

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The information contained herein is not legal advice and should not be construed as such. 

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  • A&D:
    abbreviation of Acquisitions & Divestitures.
    acronym for American Arbitration Association.
    acronym for American Association of Petroleum Landmen.
    AAPL Form JOA:
    abbreviation of AAPL Model Form 610 Joint Operating Agreement.
    AAPL Model Form 610 Joint Operating Agreement (AAPL Form JOA):

    a standard form of Operating Agreement published by the AAPL and designed for use in the joint development of domestic oil and gas interests. To date, the AAPL has promulgated four versions of the AAPL Form JOA, and the 1989 form and 1982 form are the most commonly used. Generally, the AAPL Form JOA governs the relationship between two or more parties, establishes procedures and obligations for the operation of a Tract for oil and/or gas Development, specifies the party to serve as Operator and provides for the sharing of operating expenses and Proceeds of Production.

    The AAPL recently published a modified version of the 1989 form designed to address matters unique to Horizontal Drilling operations.

    Abandon / Abandonment:

    in the oil and gas context, discontinuing the use of a Well or other property, oftentimes due to a Well’s or other property’s failure to yield Production in Paying Quantities. In the case of a Well, Abandonment may be temporary (i.e., shut-in pending a change in market conditions) or permanent (i.e., Plugged & Abandoned).

    See also Shut-In Well.

    Abstract / Abstract of Title:
    a chronology of the title of a Tract comprised of all of the recorded instruments affecting the title to the Tract, which may include complete copies of the recorded instruments or only a summary of the instruments’ effects. A complete Abstract covers the period from the land patent (i.e., the original grant issued from a sovereign power or government) granted for the Tract through to the present day and tracks all grants, Conveyances, gifts, severances, Encumbrance, liens and other legal actions taken in relation to the Tract, including both the Surface Estate and the Mineral Estate related thereto. An Abstract is most commonly used during a Title Examination.
    Accommodation Doctrine:
    with respect to a Severed Property, the Accommodation Doctrine provides that, although the Mineral Estate is the Dominant Estate (and the Surface Estate is the Servient Estate), the owner of the Mineral Estate may nevertheless be required to accommodate the Surface Estate owner’s use of the surface. The Accommodation Doctrine applies when: (i) there is an existing use of the Surface Estate prior to the Development of the Mineral Estate; (ii) the Development of the Mineral Estate interferes with or impairs the existing use of the Surface Estate; and (iii) reasonable alternatives are available to develop the Mineral Estate without interfering with the existing use of the Surface Estate.
    Production enhancing process that pumps hydrochloric acid into an oil-bearing rock under high pressure, thereby dissolving the rock and enlarging the pores in the rock, which allows the oil to flow into the Wellbore more freely.
    Acquisition Agreement:
    another term for PSA or Purchase Agreement.
    Acquisition Costs:
    the costs a party incurs to secure an Oil and Gas Lease, which will typically primarily consist of the Lease Bonus, but may also include broker fees, legal fees, filing and recording fees, title insurance and examination costs, and transfer taxes.
    Acquisitions and Divestitures (A&D):
    a term used to describe a transaction wherein an entity or person purchases or sells an asset, as opposed to a transaction that includes the purchase and/or sale of equity or stock of an entity or a joint venture arrangement.

    a general term most commonly used to describe and identify the Lands subject to an Oil and Gas Lease. Acreage is used as a measure of the amount of land that is the subject of an agreement or proposed transaction.

    An acre is equal to 43,560 square feet.

    See also Producing Acreage and Undeveloped Acreage.

    Acreage Exchange / Acreage Swap / Acreage Trade:
    a type of oil and gas transaction in which the parties to the transaction exchange lease or fee Acreage or other interests in oil and gas that the parties deem to be of substantially similar or equal value. In contrast to a typical purchase and sale transaction, often the consideration for these transactions does not include a cash payment, though a cash component may exist in the form of a true-up in the event that the Acreage or rights exchanged are not substantially equivalent.
    Ad Valorem Taxes:
    taxes imposed on property owners based on the value of the property owned. Many counties and other political subdivisions impose these taxes on owners of Mineral Interests.
    Adjusted Purchase Price:
    a term used to describe the amount paid at the Closing of a purchase and sale transaction after all adjustments allowed under the applicable PSA have been made to the original purchase price. In the oil and gas context, these adjustments may include adjustments to account for Title Defects, Casualty Losses, Environmental Defects, Pref Rights, ConsentsWorking Capital adjustments, revenues and expenses attributable to the applicable assets for the period between signing of the PSA and Closing, and the exclusion of certain properties.
    Advance Royalty:

    a specified Royalty paid under an Oil and Gas Lease by the Lessee prior to the date that operations begin. An Advance Royalty is typically not contingent upon whether any oil or gas is extracted during the term of the Lease.

    See also Shut-in Royalty.

    abbreviation of Authority for Expenditure.
    After Payout (APO):

    the period after Payout has occurred.

    In the context of a JOA or similar agreement, APO is often used to describe the period after the Consenting Parties have recovered the costs of Production plus the Non-Consent Penalty.

    In the context of a PSA, a buyer will often want to know the seller’s BPO Working Interest and APO Working Interest for Title Defect purposes and in order to verify certain of the seller’s Representations and Warranties. A party’s BPO interest and APO interest will often differ due to the existence of a Back-In Interest, which will cause a reduction in the amount of the party’s interest once Payout occurs.

    Aggregate Defect Deductible:
    a limitation on the remedies available to a buyer under a PSA or similar agreement. An Aggregate Defect Deductible operates to require that a buyer assume the risk and liability associated with Title Defects and Environmental Defects up to a specified amount (which is often measured as a percentage of the applicable purchase price). Once the aggregate amount of Title Defects and Environmental Defects exceeds the Aggregate Defect Deductible, then the buyer will be entitled to remedies from the seller for defect amounts over and above the Aggregate Defect Deductible only.
    acronym for Association of International Petroleum Negotiators.
    AIPN Form JOA:
    abbreviation of AIPN Model Form International Operating Agreement.
    AIPN Model Form International Operating Agreement (AIPN Form JOA):
    a standard form of Operating Agreement published by the AIPN and designed for use in the joint Development of international oil and gas interests. Like the AAPL Form JOA, the AIPN Form JOA governs the relationship between two or more parties, establishes procedures and obligations for the operation of a Tract or offshore block for oil and/or gas Development, specifies the party to serve as Operator, and provides for the sharing of operating expenses and Proceeds of Production.
    Allocated Value:

    that portion of the purchase price in a purchase and sale transaction that is allocated to a specific asset pursuant to the applicable PSA. The Allocated Values are often set forth on an exhibit to the PSA. Allocated Values are commonly used in PSA purchase price adjustments, particularly with respect to title issues.

    See also Adjusted Purchase Price.


    the amount of Crude Oil or Natural Gas that a WellLease or Field is permitted to produce in a set period of time as prescribed by the applicable governmental authority.

    See also Overages and Permitted Overages.

    American Arbitration Association (AAA):

    a non-profit organization focused on alternative dispute resolution. The AAA administers arbitration proceedings and mediations, provides administrative services in the US and abroad, and develops alternative dispute resolution systems for businesses, government agencies, unions and the courts.

    The AAA is the most commonly designated governing arbitration organization used in US domestic arbitration agreements and provisions.

    American Association of Petroleum Landmen (AAPL):

    a non-profit, professional association for Landmen and land-related personnel in the US focused on “landwork ,” including negotiating Mineral Rights, arranging property-related business agreements, determining ownership and title to Mineral Rights, and managing the rights and obligations of pooled or unitized Mineral Interest owners.

    The AAPL provides seminars, programs and workshops for oil and gas industry professionals and promulgates various model form agreements used in domestic oil and gas operations (e.g., the AAPL Form JOA).

    American Petroleum Institute (API):

    a national trade association that represents all facets of the US oil and gas industry and has traditionally been focused on domestic projects. Among its most notable contributions to the industry is the development of petroleum and petrochemical equipment as well as operating standards.

    See also API Gravity and API Well Number.

    American Society for Testing and Materials / ASTM International (ASTM):

    an international testing organization that creates standards for various products, systems and services through research and development.

    See also Reid Vapor Pressure and True Vapor Pressure.

    abbreviation of Area of Mutual Interest.
    Ancillary Documents:
    additional agreements, instruments and other documents that all or some of the parties to a central agreement (e.g., a PSA) may execute in connection with the consummation of the transaction(s) contemplated by the central agreement. Examples of ancillary documents include: Assignments and Bills of Sale, TSAs, Officer’s Certificates, Secondment Agreements, JOAs, parent guarantees, Recording Memoranda and Tax Partnership Agreements, among others.
    a void or gap between two concentric objects such as the piping or Casing of an Oil Well that allows fluid (e.g., Crude Oil) to circulate in the gap. We’ll save you from our juvenile humor on this one.
    in structural geology, an Anticline is an arch-shaped fold formed because of the compression and thrusting of rock formations due to the Earth’s tectonic processes. In the context of oil and gas, Anticlines are a very common type of Trap and often indicate the presence of Hydrocarbons.
    acronym for American Petroleum Institute.
    API Gravity:
    a standard which the API has adopted to measure the density of a liquid. Gravity, which is a liquid’s weight per unit of volume, is expressed in degrees based on a system which the API has promulgated. Less dense, lighter oils have a higher API Gravity.
    API Well Number:
    a unique permanent 12-digit identifier that the API assigns to each Oil Well and Gas Well drilled in the US.
    abbreviation of After Payout.
    Appalachian Basin:
    a regional Basin that includes the states of Alabama, Georgia, Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia, and contains the Marcellus Shale and the Utica Shale.
    Appraisal Well:
    Well drilled after the discovery of oil and gas in order to determine the physical extents, Reserves and likely production rate of a Field, as well as the characteristics of the Hydrocarbons to be produced therefrom.
    Approved for Development:

    in connection with Reservoir Engineering and management, Approved for Development means that all approvals have been obtained and the necessary capital is committed to the development project.

    See also On Production and Justified for Development.

    an underground layer of Permeable and porous rock that either contains or transmits Groundwater. The amount of Groundwater in an Aquifer is measured by the Aquifer’s water table and can vary at any given time depending on the season and the amount of Groundwater that has passed through the Aquifer at that point in time.
    Area of Mutual Interest (AMI):
    a geographic area generally defined by a contract (e.g., Farmout, JOAJDA or similar agreement) within which two or more persons hold an interest. Under the AMI provision of an agreement, the parties to the agreement agree to offer to share all new acquisitions of oil and gas interests located in the AMI according to certain negotiated percentages.
    Arms-Length Transaction:
    a transaction between two unaffiliated parties or entities acting independently. The phrase is used to describe a transaction in which both parties are presumed to have equal bargaining power and equal information regarding the transaction, and that the agreed upon price or determination of Fair Market Value is fair without influence from the shared interests of, or relationship between, the parties (if any).
    Artificial Lift:
    a process used to enhance the production rate of a Well by increasing the pressure within the Reservoir. Artificial Lift generally falls into two categories: (i) pumping systems (e.g.Beam Pumping and electrical submersible pump systems); and (ii) Gas Lifts.
    As Is, Where Is:

    a phrase used in PSAs and related real property Conveyance instruments pursuant to which the seller states that the property is being sold in its present condition, with whatever faults or defects that may exist, and disclaims all Representations and Warranties as to the applicable property other than those contained in the applicable documents at the time of the sale.

    Also seen as a colloquial term used to describe a transaction in which the seller gives no title, environmental, or other representations or warranties with respect to the applicable assets being sold. What you see (or even if you don’t see it) is what you get.

    Asset Taxes:
    a term often used to describe taxes assessed with respect to the ownership and/or operation of oil and gas assets or the Production therefrom, which typically include Ad Valorem, property, excise, Severance, Production and similar taxes.
    Assignment and Bill of Sale:
    an instrument used to evidence the sale, transfer or Conveyance of an ownership interest in real property (including oil and gas rights).
    Assignment of Production:
    the Conveyance or transfer of an interest in the Hydrocarbons produced from a certain WellUnit or area based on a pre-agreed metric. The assignment may be for a set term (e.g., until a certain amount of Production has been received or for a set period of time) or may be indefinite.
    Associated Gas:

    Natural Gas produced from a Reservoir in connection with the Production of Crude Oil. Associated Gas can manifest itself as either free gas or in a solution with water and/or oil.

    In contrast, see Unassociated Gas.

    Association of International Petroleum Negotiators (AIPN):
    a non-profit professional association that supports international energy negotiations. The AIPN provides seminars, programs and workshops for oil and gas industry professionals, and promulgates various model form agreement documents that are recognized as the standard in international energy transactions (e.g., the AIPN Form JOA).
    Assumed Obligations:

    the specific risks, liabilities and obligations that a buyer (in an asset or equity transaction) expressly agrees to assume pursuant to the applicable PSA. Assumed Obligations may be, but are not always, delineated by the time period (e.g., prior to Closing or the Effective Time) in which the obligations arose. Assumed Obligations often serve as the basis for a buyer’s indemnity obligations under a PSA.

    See also Our Watch, Your Watch.

    acronym for American Society for Testing and Materials.
    Authority for Expenditure (AFE):
    a document or invoice detailing the estimated costs of a particular oil and gas operation. If utilized in connection with an oil and gas operation, the Operator typically prepares the AFE and submits the AFE to the non-operating parties for approval prior to the commencement of the operation.
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