Last Updated on The vast, often complex world of oil, gas, and mineral rights is a critical yet intricate part of the energy sector and real estate industry.
This glossary is designed to demystify the terminology, providing a complete list with more than 300 terms essential for stakeholders, from landowners to investors, ensuring a foundational understanding of this lucrative field.
All Mineral Rights and Oil and Gas Terms You Need to Know
1031 Exchange
A tax-deferred exchange allowing property owners to sell a property, invest the proceeds in a new property, and defer all capital gain taxes. In the context of mineral rights, this can apply to the exchange of similar kinds of properties to optimize investment returns without immediate tax liability.
Abandon
The decision to cease production or not to develop a well because it is non-productive or no longer economically viable. This term signifies the end of attempts to extract oil, gas, or minerals from a specific location.
Abandoned Well
A well that has been permanently decommissioned due to depletion of resources or lack of economic viability. These wells are typically sealed to prevent environmental contamination.
Abstract of Title
A document that summarizes the history of ownership for a particular piece of land, including changes in ownership, grants, wills, and conveyances. It’s essential for verifying clear title in oil, gas, and mineral transactions.
Acre-Foot
A unit of volume used in the United States to measure large-scale water resources, such as reservoirs and river flows. One acre-foot equals the volume of water that would cover an acre of land to a depth of one foot. In the oil and gas industry, it may also refer to the volume of reserves.
Ad Valorem Taxes
Taxes based on the assessed value of property, including mineral rights. Ad valorem taxes are local and vary by jurisdiction, directly impacting the net revenue from oil and gas production.
Aggregate Pay Laws
Regulations that govern the cumulative payment of wages, often relevant in the context of overtime and minimum wage requirements for workers in the oil and gas industry.
Aliquot Part
A term used in land surveying to describe a fractional part of a section within the Public Land Survey System of the United States, often used in describing land parcels for lease or sale.
Assignee
The party to whom rights, interests, or properties are transferred via an assignment. In mineral rights, the assignee receives the interest from the assignor, gaining the right to explore, drill, and produce from the land.
Assignee/Assignor
Reflects the relationship in transactions where one party (assignor) transfers rights or interests to another party (assignee). This is common in lease agreements where the original holder of mineral rights transfers their interest.
Assignment
A legal document transferring rights or interests from one party to another. In the context of mineral rights, assignments are used to transfer leases, royalties, or other interests in oil, gas, and minerals.
Assignor
The party that transfers rights, interests, or properties to another in an assignment. The assignor gives up their interest to the assignee under agreed terms.
Associated Gas
Natural gas found in association with oil, either dissolved in the oil or as a cap of free gas above the oil in the reservoir. It is an important byproduct of oil drilling and production.
BBL (Barrel)
A unit of measure for oil and petroleum products. One barrel equals 42 U.S. gallons, a standard measurement for oil production, pricing, and trading.
BCF (Billion Cubic Feet)
A volumetric measure used to quantify large quantities of natural gas. It’s used in the energy sector to assess reserves, production, and consumption on a large scale.
BOE (Barrels of Oil Equivalent)
A unit of energy based on the approximate energy released by burning one barrel of crude oil. It’s used to aggregate oil and gas resources into a single measure of energy output.
BOE20
A variation of the BOE measure, adjusted for specific energy content. This term is less commonly used but may appear in technical assessments or reports.
BOPD (Barrels of Oil Per Day)
A rate of production measurement indicating how many barrels of oil are produced from a well or field in one day. It is a key metric for assessing the productivity and potential profitability of oil extraction operations.
BS&W (Basic Sediment and Water)
The percentage of sediment and water in crude oil. High levels of BS&W can reduce the quality and price of crude oil, affecting the revenue from oil production.
BTU (British Thermal Unit)
A measurement of energy representing the amount needed to raise the temperature of one pound of water by one degree Fahrenheit. In the oil and gas industry, BTUs are crucial for understanding the energy content of different fuels.
Bakken Shale
A large rock formation spanning parts of Montana, North Dakota, and Canada, known for its significant oil and natural gas reserves. The development of hydraulic fracturing and horizontal drilling technologies has unlocked its potential, making it a key player in the U.S. energy boom.
Bank Draft
A payment method often used in transactions involving mineral rights and oil and gas leases. It’s a written order by a buyer to a bank to pay a specified sum to the seller, providing a secure form of payment.
Barnett Shale
Located in Texas, this geological formation is recognized for its extensive natural gas reserves. Its development has been pivotal in demonstrating the economic viability of extracting gas from shale formations through hydraulic fracturing.
Base line
In land surveying, particularly within the Public Land Survey System (PLSS) used in the United States, a base line is a primary east-west line from which land measurements and divisions are made.
Basin
A large depression on the earth’s surface in which sediments accumulate. In the context of oil and gas, basins often contain valuable reserves of fossil fuels, making them areas of significant exploration and production activity.
Bonus (or Lease Bonus)
An upfront payment made to the landowner or mineral rights holder by a lessee (usually an oil and gas company) upon signing a lease agreement. The bonus compensates the owner for granting exploration and production rights.
Borehole
The hole drilled by a rig to explore for or produce oil and gas. Boreholes are critical components of oil and gas extraction operations, allowing for the assessment and extraction of subsurface resources.
Bottom Hole Pressure (BHP)
The pressure at the bottom of a well, which is a key factor in understanding reservoir behavior, designing wells, and managing production operations efficiently.
Brine
Salty water that often accompanies oil and gas as it’s brought to the surface. Managing and disposing of brine is an important environmental consideration in oil and gas production.
CFEB
Cubic Feet Equivalent Barrels, a unit used to compare volumes of natural gas with volumes of oil based on their energy content. This conversion allows for the aggregation of oil and gas production into a single measure.
Cadastral
Relating to the detailed and comprehensive register of the real estate or property in an area, including boundaries and ownership details. Cadastral surveys are essential for defining property lines and ownership for land use and development.
Casing
The steel or metal pipe used to line the borehole of a well. The casing prevents the well from collapsing and helps protect groundwater from contamination.
Check Stub
A document that accompanies a royalty or revenue check, detailing the amount of production, prices, taxes, and other deductions. It provides transparency and accountability in the payment process.
Clear Title
A title that is free of liens, disputes, or legal questions, confirming the owner’s rightful possession and the ability to transfer the property or rights.
Cloud on Title
Any claim, lien, or circumstance that could invalidate or impair the title to real estate or mineral rights, making it unclear who has a rightful claim to the property.
Commercial Well
A well that is capable of producing enough hydrocarbons to cover the costs of drilling, completion, and production, making it financially viable. Commercial wells are essential for the economic success of oil and gas projects.
Commodity Price
The market price for raw materials, including oil and natural gas. These prices are influenced by global supply and demand dynamics, geopolitical events, and market speculations, impacting revenues for mineral rights owners.
Completion
The process of making a drilled well ready for production. This involves setting up the necessary equipment to bring oil or gas from the reservoir to the surface safely and efficiently.
Compression
A method used in the oil and gas industry to increase the pressure within a reservoir to facilitate the extraction of oil or natural gas. Compression is crucial for enhancing recovery rates, especially in fields with low reservoir pressure.
Condensate
A mixture of hydrocarbons that exist in a gaseous state underground but condense into liquid at surface conditions. Condensates are valuable by-products of gas production, used in various petrochemical processes.
Contiguous Tract
Refers to parcels of land adjacent to one another without any intervening land owned by others. In the context of mineral rights, contiguous tracts can be developed more efficiently due to their proximity.
Conventional Development
The process of extracting oil and natural gas through traditional drilling techniques. This method typically targets reservoirs where hydrocarbons are readily accessible without the need for advanced fracturing or extraction technologies.
Conveyance
A legal term denoting the transfer of property rights, including mineral rights, from one party to another. Conveyance documents are crucial for establishing clear ownership and the right to exploit mineral deposits.
Crude Oil
A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil is refined into various products, including gasoline, diesel, and jet fuel, making it a critical energy source globally.
Curative
Actions or legal measures taken to rectify defects or issues in the title of a property, ensuring clear ownership. In mineral rights, curative work is essential to prevent disputes and secure the legal exploitation of resources.
DUC (Drilled but Uncompleted Wells)
Wells that have been drilled but not yet made ready for production. These wells represent potential future production and are often completed when market conditions are more favorable.
Decline
The decrease in production rate from an oil or gas well over time. Managing decline rates is crucial for maximizing recovery and extending the productive life of wells.
Decline Curve
A graphical representation that shows the rate at which an oil or gas well’s production decreases over time. It is used to estimate future production and reserve sizes.
Deed
A legal document representing the ownership of property, including land or mineral rights. A mineral deed is crucial for establishing and transferring ownership in the oil and gas industry.
Defects in Title
Legal issues or discrepancies in the documentation of property ownership that can affect the transfer of mineral rights or land. Identifying and resolving these defects is vital for clear title conveyance.
Dehydration of Natural Gas
The process of removing water vapor from natural gas to meet pipeline specifications and prevent corrosion or hydrate formation. This is an essential step in preparing gas for transportation and sale.
Delay Rental
Payments made to the landowner or mineral rights holder by a lessee to keep the lease agreement valid during periods when no drilling or production is occurring. These payments compensate the owner for the opportunity cost of leasing their land.
Depletion Allowance
A tax deduction allowed for the exhaustion of mineral resources as they are produced. Depletion allowance acknowledges that the resource is being depleted and offers a form of compensation to the resource owner.
Depository Bank
A bank authorized to hold funds or documents in escrow for a transaction, such as the sale of mineral rights or oil and gas leases. It ensures secure and impartial handling of payments and documents.
Depth Rights
Specific rights granted within a lease or agreement that pertain to the exploration and production of minerals or hydrocarbons from certain depths below the surface. These rights can be crucial in areas with multiple productive layers.
Development Well
A well drilled in a proven area for the production of oil or gas. Unlike exploratory wells, development wells are drilled with the expectation of finding hydrocarbons in commercially viable quantities.
Deviation Survey
A survey conducted to measure the direction and degree of deviation of a wellbore from vertical. This is crucial for directional drilling operations and ensuring the well reaches the targeted reservoir.
Distillate
A liquid product derived from the distillation process of crude oil, including diesel, heating oil, and kerosene. Distillates are characterized by their boiling point range within the refining process.
Divided Interest
Refers to ownership of mineral rights that is split among multiple parties. Each party holds a fractional interest in the minerals under a specific tract of land.
Division Order
A document issued by an oil or gas producer to spell out the ownership and distribution of revenues from the production. Division orders detail the proportional ownership and payment calculations among the parties involved.
Division of Interest
The apportionment of ownership, revenues, and costs among the various parties involved in oil and gas production. This division is based on the agreements and leases governing the mineral rights and operations.
Downstream
Refers to the sector of the oil and gas industry that involves the refining of crude oil, the processing and purifying of natural gas, and the marketing and distribution of products derived from oil and gas.
Drilling Permits
Official documents issued by regulatory bodies granting permission to drill wells at specified locations. These permits are required before drilling operations can commence and ensure compliance with environmental and safety regulations.
Drilling Spacing Units
Designated areas established by regulatory authorities that determine the spacing between wells. This is to prevent over-drilling in a particular area and ensure the efficient and equitable extraction of resources.
Dry Hole
A well that does not find commercially viable quantities of oil or gas. Despite the initial geological assessments and explorations, a dry hole indicates a lack of sufficient hydrocarbons for profitable extraction.
Eagle Ford Shale
A geological formation in Texas known for its rich deposits of oil and natural gas. The development of this shale play has significantly contributed to the U.S. energy renaissance through the application of hydraulic fracturing and horizontal drilling techniques.
Easement
A legal right to use another’s land for a specific limited purpose. In oil and gas, easements are often granted for the construction of pipelines or access to drilling sites.
Effective Date
The date on which an agreement, such as a lease or contract, becomes legally binding. In the context of oil and gas leases, the effective date may dictate when drilling operations must commence or when payments are due.
Enhanced Oil Recovery (EOR)
Techniques used to increase the amount of crude oil that can be extracted from an oil field. EOR methods include injecting water, gas, or chemicals into the reservoir to boost oil flow.
Escheated
The process by which ownership of a property reverts to the state in the absence of legal heirs or claimants. In the context of mineral rights, escheated properties can include unclaimed royalties or interests.
Executive Rights
The authority to negotiate and sign oil and gas leases, granting development rights to another party. This right includes deciding on lease terms, royalties, and other critical aspects of mineral development.
Exploratory Well
A well drilled to find and evaluate oil or gas in an unproven area. The main goal is to discover new reserves of hydrocarbons.
Extension Bonus
Additional compensation paid to the mineral rights owner for extending the primary term of a lease beyond its original expiration without drilling activity.
Extraction Loss (Shrinkage)
The reduction in volume or mass that occurs when oil and gas are extracted and processed. Factors contributing to shrinkage include the removal of water, condensates, and natural gas liquids.
Farm-in
An agreement where one party (the “farmee”) gains an interest in a lease owned by another party (the “farmor”) by performing specific obligations, typically including drilling or completing a well.
Farm-out
A contractual agreement where the owner of an oil and gas lease (the “farmor”) agrees to assign a portion of the lease to another party (the “farmee”), in exchange for the completion of certain activities, such as drilling a well.
Fee Simple Ownership
The absolute ownership of property, including both the surface and the mineral rights, without any limitations or conditions. This form of ownership grants the holder complete control over the land and its resources.
Field
A geographical area underlain by one or more reservoirs containing oil or gas. A field may consist of multiple wells producing from a common source.
Field Run Ticket
A document issued at the oilfield when crude oil is transferred from the lease to a transporter. It details the quantity and quality of the oil being transported.
First Purchaser
The initial buyer of crude oil or natural gas directly from the producer. The first purchaser plays a crucial role in the distribution chain, often dealing with the logistics of moving the product from the field to the market.
First Right of Refusal
A contractual right that gives the holder the opportunity to enter a business transaction with the owner of a property before the owner is entitled to enter into the transaction with a third party.
Flaring
The controlled burning of natural gas that cannot be processed or sold. Flaring is used to dispose of excess gas for safety reasons or in areas where there is no infrastructure to capture and transport the gas.
Flush Production
The initial surge of oil or gas production from a well, characterized by a higher-than-average flow rate. Flush production occurs shortly after drilling is completed and declines as the well matures.
Forced Pooling
A legal process that allows a producer to develop a mineral property without having leases from all mineral owners in the proposed drilling unit. This process ensures that resources are extracted efficiently and that all owners receive fair compensation.
Formation
A layer of rock with specific properties that contains or is capable of containing oil or gas. Formations are identified based on their geological characteristics and are the target for drilling operations.
GOR (Gas to Oil Ratio)
A measure of the amount of gas produced from a reservoir per unit of oil. It is expressed in cubic feet of gas per barrel of oil and is used to evaluate the productivity and characteristics of a well.
Gas Lift
A method of enhancing oil production by injecting gas into the reservoir to reduce the density of the oil, allowing it to flow more easily to the surface.
Gathering System
A network of pipelines that transports crude oil or natural gas from wells to processing facilities or larger pipelines. Gathering systems are crucial for the efficient and safe transport of hydrocarbons.
Government lot
A subdivision of land used in the Public Land Survey System, especially in irregularly shaped tracts that cannot be divided into standard quarter-sections. These lots are often found along bodies of water or irregular boundaries.
Grantee
The party to whom property, rights, or interests are granted. In mineral rights transactions, the grantee is the recipient of the rights or property transferred by the grantor.
Grantee/Grantor
Terms that describe the parties involved in a transfer of rights or property. The grantor is the party transferring the rights, while the grantee is the recipient.
Grantor
The party that transfers property, rights, or interests to another. In the context of mineral rights, the grantor may be the landowner or mineral rights holder who is leasing or selling these rights.
Gross Mineral Acres
The total acreage of a tract of land, without accounting for the divided interest in the minerals. This term is used to describe the extent of a property before considering any partial interests or ownerships.
Gross Production Tax
A tax imposed on the value or volume of hydrocarbons produced. The rate and method of calculation can vary by jurisdiction but generally apply to the gross production of oil and gas before costs.
Gross Working Interest
This refers to the total ownership interest in an oil or gas well, encompassing both operational responsibilities and financial obligations. It is a critical concept for those involved in the exploration and production sectors, delineating the share of production before the deduction of royalties and other interests.
Held By Production (HBP)
A clause in oil and gas leases that extends the lease beyond its initial term as long as the property is producing oil or gas in paying quantities. HBP is pivotal for lease agreements, ensuring that as long as the land produces oil or gas, the lease remains in effect, safeguarding both the lessee’s rights and the lessor’s royalties.
Horizontal Drilling
An advanced drilling technique that allows for drilling at various angles, not just vertically. This method significantly increases the well’s exposure to the oil or gas reservoir, enhancing production rates and efficiency. Horizontal drilling is a cornerstone of modern hydrocarbon extraction, enabling the development of previously inaccessible or uneconomical reserves.
Hydraulic Fracturing (Fracing)
A technique used to extract oil and gas from rock formations deep beneath the earth’s surface. By injecting high-pressure fluid into the rock, hydraulic fracturing creates fractures, allowing oil or gas to flow more freely to the wellbore. This process has revolutionized oil and gas extraction, particularly in shale formations.
Hydrocarbon
Organic compounds consisting primarily of hydrogen and carbon. Hydrocarbons are the main constituents of petroleum and natural gas, serving as a primary energy source worldwide. Their extraction and refinement meet a significant portion of global energy demand, emphasizing the importance of hydrocarbons in the energy sector.
IP (Initial Production)
The initial phase of production from a well, indicating its potential output. IP rates are closely monitored to estimate the well’s long-term productivity and overall viability. This early production data is crucial for decision-making processes in exploration and development projects.
Independent Producer
Companies or individuals that operate in the exploration and production segment of the oil and gas industry without retail operations. Independent producers play a vital role in the energy sector, often focusing on niche markets or unconventional resources.
Infill Drilling
The process of drilling additional wells within an established oil or gas field to increase extraction rates and recover more resources. Infill drilling optimizes the field’s output, enhancing recovery while minimizing additional environmental impact.
Initial Point
A reference point used in surveying to establish land boundaries. In the context of mineral rights and oil and gas leases, the initial point aids in delineating the lease area, ensuring clarity and precision in agreements and operations.
Injection Well
A well designed for injecting water, gas, or other substances into the earth, often used to enhance oil recovery or dispose of waste fluids from oil and gas operations. Injection wells are integral to maintaining reservoir pressure and extending the productive life of oil and gas fields.
Interest Type
Specifies the nature of an individual’s or entity’s interest in an oil and gas operation, such as royalty interest, working interest, or overriding royalty interest. Understanding the types of mineral interests is essential for comprehending one’s rights, responsibilities, and financial stakes in oil and gas projects.
Intestate Death
Refers to the scenario where a person dies without a will, impacting the distribution of their assets, including mineral rights. The intestate succession laws of the state determine how these rights are allocated among heirs, underlining the importance of estate planning in managing mineral rights.
Joint Operating Agreement (JOA)
A contractual framework among co-owners of an oil or gas lease, outlining the operational and financial responsibilities of each party. The JOA is a cornerstone of collaborative exploration and production efforts, facilitating the efficient management and development of shared resources.
Land Broker
A professional specializing in the buying, selling, and leasing of land, including properties with potential mineral rights. Land brokers serve as intermediaries, offering expertise in negotiations, valuations, and transactions related to land and mineral estates.
Land Brokerage Company
A company that provides services related to the transaction of land and its associated rights, including mineral, oil, and gas rights. They play a pivotal role in negotiating terms and ensuring legal compliance.
Land Department
A division within an oil and gas company or a government agency that manages land acquisition, leasing, and record-keeping for exploration and production activities.
Land Grant
A grant of public land, especially to an individual or organization for a specific purpose such as settlement or development of mineral resources.
Landman
A professional in the oil and gas industry responsible for researching land titles, securing mineral rights leases, and negotiating terms. Landmen serve as the liaison between oil companies and landowners.
Landowner
An individual or entity that holds the title to land property. In the context of mineral rights, landowners may own the surface rights, mineral rights, or both.
Lease
A legal agreement where a landowner grants another party the right to extract minerals, oil, or gas from the property for a specified period and under agreed-upon conditions.
Lease (or Lease Agreement Mineral Lease)
An agreement between a mineral rights owner and a lessee that outlines the rights to explore, drill, and produce oil or gas from the land for a certain percentage of the production, known as royalty.
Lease Agreement
A contract between a landowner (lessor) and a lessee allowing the lessee to use the land, typically for oil and gas extraction, in exchange for payments or royalties.
Lease Bonus
An upfront payment made by the lessee to the landowner upon signing a lease agreement, serving as an incentive for granting the lease.
Lease Term
The duration for which a lease agreement is valid. It specifies the time frame during which the lessee has the right to operate on the land under the terms of the lease.
Leased Mineral Rights
Mineral rights that have been leased to a third party, granting them the right to explore, drill, and produce minerals from the land according to the lease terms.
Legal Description
A formal description of a piece of property that identifies its specific location and boundaries, often used in lease agreements and land transactions.
Legal Location
The precise geographical location of a property or well site, defined by a legal description that includes coordinates, lot numbers, or other identifying details.
Lessee
The party who acquires the rights to explore, drill, and produce oil or gas from a property under a lease agreement with the landowner or mineral rights holder.
Lessee/Lessor
Terms that denote the relationship in a lease agreement; the lessee is the party leasing the rights to extract minerals, while the lessor is the owner of those rights.
Lessor
The landowner or mineral rights holder who grants a lease to another party, allowing them to extract minerals, oil, or gas from the property.
Letters Testamentary
Legal documents issued by a court authorizing an executor or personal representative to administer the estate of a deceased person, including the management of mineral rights and property.
MBBLS
Thousand Barrels of oil, a volume measurement used in the oil industry to quantify oil production or reserves.
MBO
Thousand Barrels of Oil, similar to MBBLS, it’s a unit of measure indicating the quantity of oil.
MBW
This term is not commonly used in the oil and gas industry and may be a typographical error. It’s important to verify the correct terminology and its application.
MCF
Thousand Cubic Feet – A standard unit of measurement for volumes of natural gas.
MCFE
Thousand Cubic Feet Equivalent – Used to describe the amount of energy released by burning one thousand cubic feet of natural gas, often compared to barrels of oil equivalent (BOE).
MMBBLS
Million Barrels – A volume measurement used in the oil industry to quantify large quantities of oil production or reserves.
MMBO
Million Barrels of Oil – A measurement unit for quantifying large volumes of crude oil.
MMBOE
Million Barrels of Oil Equivalent – This term combines the energy equivalent of oil and gas production into a single measure.
MMCF
Million Cubic Feet – A volume measurement for natural gas, representing large quantities.
MMCFE
Million Cubic Feet Equivalent – Similar to MCFE but scaled up to a million cubic feet of natural gas.
Marcellus Shale
A large shale formation in the Eastern United States known for its abundant natural gas reserves accessible through hydraulic fracturing.
Midstream
Midstream refers to the segment of the oil and gas industry involved with the transportation, storage, and wholesale marketing of crude or refined petroleum products.
Mineral Acres
A unit of area used in the context of mineral rights, representing the ownership interest in minerals beneath a specific plot of land.
Mineral Interest
The ownership of the minerals under the ground. The mineral interest can be leased to companies for development.
Mineral Lease
An agreement in which a mineral owner allows another party to explore, drill, and produce oil, gas, or other minerals for a period of time in exchange for payments.
Mineral Owner
The person or entity that holds the ownership rights to underground minerals on a piece of land.
Mineral Rights
Mineral rights are the legal rights to the minerals in the ground beneath a property. These can be sold or leased separately from the land itself.
Mineral Title
The documentation that proves ownership of mineral rights.
Minerals
Minerals are naturally occurring substances found in the earth. In the context of mineral rights, this usually refers to valuable resources like oil, gas, coal, and metals.
Monthly Cash Flow
In the context of oil and gas, this refers to the monthly revenue generated from the sale of oil, gas, and other minerals.
NGL (Natural Gas Liquids)
Hydrocarbons found in natural gas which are separated out during the processing of gas. These liquids include propane, butane, and ethane.
NGL Fractionation
A process separating natural gas liquids into individual hydrocarbons, such as ethane, propane, butanes, and pentanes plus, based on their boiling points.
NORM (Naturally Occurring Radioactive Materials)
Radioactive substances that are naturally present in the Earth’s crust; they can sometimes be concentrated in oil and gas production streams.
NRI (Net Revenue Interest)
The ownership interest in the revenue from the production of oil and gas, net of royalty burdens. Net revenue interest represents the proportion of production revenue that the interest owner actually receives.
Natural Gas Processing Plant
Facilities designed to clean raw natural gas by separating impurities and various non-methane hydrocarbons and fluids to produce pipeline-quality dry natural gas.
Neighboring Offset Production
Production from wells adjacent to or near a particular tract of land or lease, indicating potential reserves in the nearby area.
Net Mineral Acres
Nite mineral acres are a measure of the ownership interest in mineral rights, taking into account the fraction of the minerals owned in a specific tract of land.
Net Revenue Interest (NRI)
Net revenue interest represents the percentage of production revenues allocated to the working interest after royalties and other burdens are paid.
Net Royalty Acres
A measure that represents the net acres owned under a mineral lease, multiplied by the royalty interest.
Net Working Interest
The percentage of ownership in the production of oil and gas after accounting for royalties and other interests. It reflects the proportion of costs and revenues for which the working interest owner is responsible.
Non Operating Working Interest
An ownership stake in oil and gas production that shares in the revenue and possibly some of the expenses but does not participate in the operation of the well.
Non-Producing Mineral Rights
Rights to minerals in the ground that have not been developed or are not currently producing oil or gas.
Non-participating Royalty Interest
Similar to NPRI, non-participating royalty interest is a share in the production revenue without the obligation or right to explore, develop, or operate the land.
OPEC (Organization of the Petroleum Exporting Countries)
An intergovernmental organization of oil-exporting countries that coordinates and unifies the petroleum policies of its member countries.
Offset Drilling Permits
Permits issued for drilling operations adjacent to existing producing wells or properties to exploit a common reservoir or to prevent drainage to an adjoining property.
OPEC
The Organization of the Petroleum Exporting Countries is an intergovernmental organization of oil-exporting nations that coordinates and unifies petroleum policies among its members, aiming to ensure the stabilization of oil markets in order to secure an efficient, economic, and regular supply of petroleum to consumers.
Offset Drilling Permits
These permits are issued for wells planned near existing wells to exploit a common reservoir. Offset drilling helps in efficiently extracting resources while minimizing the environmental footprint and ensuring equitable access to shared underground resources.
Offset Operator
Refers to the company responsible for drilling and operating an offset well. This operator works adjacent to other operations to exploit the same reservoir, often requiring coordination to manage the shared resource effectively and avoid conflicts over property and resource rights.
Oil Gravity
A measure of the density of crude oil as compared to water. Oil gravity affects the value of the oil, with lighter (higher gravity) oils generally being more valuable because they yield a higher percentage of gasoline and diesel fuel when refined.
Oil and Gas Mineral Lease (OGML)
A legal agreement where the mineral rights owner grants another party the right to explore, drill, and produce oil and gas from the land for a specified period, usually in return for a royalty on the produced oil and gas. This term encompasses the essence of both “Oil Gas And Mineral Lease” and “Operating Agreement,” focusing on the contractual relationship between the mineral rights owner and the operator.
Operating Expense (Operating Expenses)
These are costs associated with the day-to-day operations of drilling, producing, and maintaining oil and gas wells. Operating expenses can include labor, maintenance, and the costs of materials and supplies used in the extraction process.
Operating Interest
The ownership stake or right held by a company or individual in an oil and gas operation, entitling the holder to a proportionate share of the production revenues, less the operating expenses. Operating interest holders are directly involved in the exploration, development, and production activities.
Operator
The company or individual responsible for the exploration, development, and production of an oil or gas well or lease. The operator makes daily decisions regarding the management and operation of the well or lease, ensuring compliance with regulatory requirements and the efficient extraction of resources.
Overlapping Spacing Unit
In oil and gas production, a spacing unit established by regulatory authorities that overlaps with one or more existing spacing units. This can occur in areas with multiple reservoirs or to accommodate modern drilling techniques, such as horizontal drilling, requiring careful management to ensure equitable resource extraction among rights holders.
Overriding Royalty Interest (ORRI)
A non-operating interest in the production of oil and gas, carved out of the lessee’s working interest. ORRI owners receive a percentage of production revenues, free of exploration, drilling, and production costs, and their interest does not affect the mineral rights owner’s royalty.
Owner Adjustments/Taxes
Financial adjustments or taxes levied on the owner’s share of production. These can include property taxes, severance taxes, and other levies specific to the production and sale of oil and gas, impacting the net revenue received by the owner.
Owner Decimal Interest
The fraction of the total production revenue that an individual or entity is entitled to receive, based on their ownership stake in the mineral rights or working interest in the production unit.
Owner Gross Value
The total value of oil or gas produced from a property before the deduction of any expenses, taxes, or royalties. This figure represents the pre-expense revenue generated from the production activities.
Owner Net Value
The value that remains after all operating expenses, taxes, royalties, and other deductions have been subtracted from the owner gross value. This net figure represents the actual revenue that the mineral rights or working interest owner can expect to receive.
Owner Relations
The department or function within an oil and gas company that manages communications and transactions with the owners of mineral rights and interests. This includes handling inquiries, payments, and documentation related to ownership interests and revenues.
PLSS (Public Land Survey System)
A method used in the United States to survey and divide land into a series of rectangular parcels. The PLSS helps in defining property boundaries and is essential for delineating mineral rights and leases on public and private lands.
Paid Up Lease
A lease agreement in which the lessee pays the full lease bonus upfront during the signing of the lease, covering the primary term of the lease. This arrangement means that no additional rental payments are required for the lessee to maintain the lease during its primary term.
Participating Royalty (Participating Royalty Interest)
This is a type of royalty interest that allows the holder to receive a portion of the mineral production or revenue, without bearing the cost of production. It differs from other royalty interests by allowing participation in certain decisions regarding the production and development of the property.
Peak Oil
The hypothetical point in time when global oil production reaches its maximum rate, after which production will gradually decline. This concept is crucial for understanding long-term supply and demand dynamics in the global energy market.
Percent Liquids
In the context of natural gas production, this term refers to the percentage of liquid hydrocarbons (such as condensate and natural gas liquids) present in the gas stream. It’s important for determining the value and commercial viability of a gas reservoir.
Perforation (Perforations)
The process of creating holes in the casing or liner of an oil or gas well to allow hydrocarbons to flow into the wellbore from the reservoir. This technique is essential for initiating production after drilling and casing a well.
Permeability
A measure of the ability of a rock formation to transmit fluids through its pore spaces. High permeability means fluids can flow through the rock easily, which is crucial for the extraction of oil and gas.
Permian Basin
A large sedimentary basin located in the southwestern part of the United States. Known for its rich petroleum and natural gas deposits, the Permian Basin is one of the most prolific oil and gas producing regions in the country.
Permit
An authorization granted by a regulatory or governmental body to explore for or produce oil and gas. Permits are necessary for drilling wells, seismic exploration, and other activities related to oil and gas production.
Plat Maps
Detailed maps that show the division of land into plots. In the oil and gas industry, plat maps are used to delineate drilling units, lease boundaries, and the location of wells, aiding in the planning and development of resources.
Play
A term used in the oil and gas industry to refer to a set of known or anticipated oil or gas accumulations sharing similar geological characteristics. Identifying plays is a key step in exploration strategies.
Plugged and Abandoned (P&A)
A status indicating that a well has been permanently closed. This involves sealing the well with cement and other materials to prevent the movement of fluids, ensuring environmental and public safety.
Pooled Unit
A combination of leasehold interests in a designated area for the purpose of shared oil or gas production. Pooling is often used to comply with regulatory spacing requirements and to efficiently develop a reservoir.
Pooling
The practice of combining multiple small tracts of land or mineral rights to form a single unit for development. Pooling is critical for the economic and efficient extraction of oil and gas, especially in areas with fragmented ownership.
Porosity
The percentage of void space in a rock formation that can hold hydrocarbons or water. High porosity indicates a greater potential to store oil or gas, making it a key factor in evaluating reservoir quality.
Possible Reserves
Those quantities of petroleum which are less certain to be recovered than probable reserves but more certain than purely speculative resources. Possible reserves represent a conservative estimate of potentially recoverable oil or gas.
Post Production Costs
Expenses incurred after the extraction of oil or gas, including costs related to processing, treating, and transporting the product to market. These costs can affect the net revenue received by mineral rights owners and operators.
Primary Lease Term
The initial fixed duration of an oil and gas lease, during which the lessee has the exclusive right to drill and produce hydrocarbons. If production is established, the lease can extend beyond this term.
Primary Recovery
The initial phase of oil and gas production, using the natural pressure of the reservoir to extract hydrocarbons. Primary recovery typically recovers a fraction of the reservoir’s oil or gas.
Principal Meridian
A reference line used in the Public Land Survey System (PLSS) for surveying and describing land in the United States. Principal meridians, together with base lines, define meridian lines for mapping and land division.
Probable Reserves
Those additional reserves which are less certain to be recovered than proved reserves but more certain than possible reserves. This category represents a reasonable estimate of recoverable oil and gas based on existing data and technology.
Producer
In the context of oil and gas, a producer is an individual or company that operates wells to extract hydrocarbons from the ground. Producers play a crucial role in the energy supply chain, contributing to the exploration, extraction, and sale of oil and gas resources.
Producing Mineral Rights
These are rights that have been leased for oil and gas production and are currently generating production. Owners of producing mineral rights receive royalties from the extraction of oil or gas from their property.
Producing Well
A well that is actively extracting oil or gas. Producing wells are the physical manifestation of successful exploration and development efforts, providing revenue to both the operators and mineral rights owners through the sale of extracted hydrocarbons.
Production Decline Rates
This term refers to the rate at which the production from an oil or gas well decreases over time. Understanding decline rates is crucial for forecasting the well’s economic lifespan and planning for future development to sustain production levels.
Production Payment
A financial arrangement in an oil and gas lease where the mineral rights owner or lessee receives payments derived from the production of oil or gas, up to a specified amount. This is one form of compensation in addition to or instead of royalties.
Production Type
Classifies the kind of hydrocarbons produced by a well, such as oil, natural gas, or a combination thereof. The production type influences the methods used for extraction, treatment, and sale, as well as the overall value of the production.
Production Unit
An area designated for the development and production of oil or gas, often encompassing multiple leases or interests pooled together to optimize resource extraction. Production units are established to ensure efficient and equitable extraction of resources across different ownerships.
Property Adjustments/Taxes
Financial adjustments or taxes applied to the value of property, including mineral rights and production equipment. These may affect the net income from production received by the property owner.
Property Gross Value
The total value of a property before any deductions, including the value of both surface rights and mineral rights. This figure is essential for assessments, sales, and taxation purposes.
Property Net Value
The value of a property after accounting for debts, liens, and other encumbrances. For mineral properties, this value considers the net income potential from oil and gas production after expenses and taxes.
Proration Unit
A regulatory mechanism used to limit oil and gas production to prevent waste and ensure fair resource allocation. Proration units are defined by governmental bodies to control production rates and maintain reservoir pressure.
Proved Reserves
Quantities of oil and gas that geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operational conditions. Proved reserves are a key indicator of a company’s value and potential future revenue.
Public Domain
Land owned by the federal government that has never been transferred to private ownership. Public domain lands may be leased for mineral exploration and production under specific regulatory guidelines.
Public Lands
Lands owned by the government, including those available for public use and those designated for specific purposes such as conservation or mineral production. In the context of oil and gas, public lands may be leased to producers under regulated terms.
Pugh Clause
A provision in an oil and gas lease that limits the holding of non-producing lands or depths beyond the primary term. Pugh clause allows portions of the lease not containing production to expire, thereby protecting the mineral rights owner from indefinite hold by the producer without activity.
Purchase And Sale Agreement
A legal document outlining the terms and conditions of the sale of property, including mineral rights or interests in oil and gas projects. This agreement specifies the rights transferred, the purchase price, and other terms of the sale.
Purchaser (Purchasor)
The individual or entity acquiring property, mineral rights, or interests in an oil and gas project through a purchase and sale agreement. The purchaser assumes ownership and any associated rights and responsibilities from the seller.
Qualified Buyer
An individual or entity deemed financially capable and legally qualified to purchase property or interests in oil and gas projects. Qualified buyers often must meet specific criteria or regulatory standards to complete a transaction.
Qualified Intermediary
A neutral third party that facilitates the exchange of property or rights, such as in a 1031 exchange for tax purposes. In the context of oil and gas, a qualified intermediary may handle the transfer of mineral rights or interests to ensure compliance with legal and tax requirements.
Quick Claim Deed
Often a misnomer for “Quitclaim Deed,” this document does not exist in legal terminology related to property rights. The correct term, Quitclaim Deed, is detailed below.
Quitclaim Mineral Deed
A legal document that transfers any ownership interest the grantor may have in mineral rights, without any warranty of clear title. It’s used in situations where ownership is uncertain or when a quick transfer of rights is desired.
Range
In the context of land surveying, particularly under the Public Land Survey System (PLSS) in the United States, range refers to the east-west dimension of land, designated by sequential numbers east or west of a principal meridian.
Ratification
The act of formally approving an agreement or contract, making it officially valid. In oil and gas, ratification often refers to mineral rights owners approving a lease or agreement entered into by another party, such as a leaseholder or operator.
Recompletion
A procedure performed on an existing well to target a different producing zone within the reservoir. This process can extend the life of a well by accessing previously untapped or bypassed hydrocarbons.
Recorder Of Deeds
A government office responsible for recording, maintaining, and retrieving public documents, including property deeds, mineral rights transfers, and leases. This office is crucial for establishing legal ownership and encumbrances on property.
Regulatory Agency
A governmental body responsible for overseeing and enforcing laws and regulations within a specific industry. In the context of oil and gas, regulatory agencies manage drilling permits, environmental compliance, and production standards.
Rental Lease
Not typically used in the context of oil and gas, where leases involve the extraction of minerals rather than the rental of property. In mineral rights, the term “lease” usually refers to an agreement granting the lessee the right to extract oil or gas in exchange for royalty payments to the lessor.
Reserve Mud Pit
A containment area on a drilling site designed to hold drilling mud and cuttings, which are used and generated during the drilling process. Reserve mud pits are essential for managing drilling fluids and minimizing environmental impact.
Reserves
Estimated quantities of oil and gas that are anticipated to be commercially recoverable from known reservoirs under existing economic and operational conditions.
Reservoir
subsurface pool of hydrocarbons contained in porous or fractured rock formations. Reservoirs are the source of oil and gas extracted via drilling.
Reservoir Rock
The porous and permeable geological formation containing the oil or gas reservoir. The quality of reservoir rock directly influences the ease and efficiency of hydrocarbon extraction.
Revenue Check
A payment made to royalty owners, derived from the sale of oil or gas production. Revenue checks are typically distributed monthly and are based on a royalty owner’s proportionate share of production.
Revenue Statement
A document accompanying a revenue check that details the amount of production, sales, and deductions, providing transparency for royalty owners on how their payment was calculated.
Revocable Trust
A legal entity that holds assets, including mineral rights or property, which can be altered or revoked by the grantor during their lifetime. Revocable trusts are used for estate planning and can ease the transfer of assets upon the grantor’s death.
Rig
The structure and equipment used for drilling oil and gas wells. Rigs can be land-based or offshore and are essential for accessing subsurface hydrocarbon reservoirs.
Royalties
Payments made to the owner of mineral rights by the lessee (usually an oil and gas company) based on a percentage of the gross production or revenue from the oil and gas extracted from their land.
Royalty Deed
A legal document that transfers royalty interests from one party to another. Unlike mineral deeds, royalty deeds do not convey ownership of the mineral rights themselves, but rather a right to receive income from the production.
Royalty Interest
The right to receive a portion of the production or revenue from oil and gas without bearing the cost of production. Oil and gas royalty interests are typically retained by the mineral rights owner after leasing their property for development.
Royalty Statements
Royalty statements are detailed reports provided to royalty interest owners, showing the amount of oil or gas produced, the revenues generated, and the calculations used to determine the owner’s royalty payments.
Run Stub
A document associated with the transportation of oil, detailing the volume, source, destination, and other relevant data for a specific batch or run of oil. It’s crucial for accounting and royalty payment calculations.
SCF (Standard Cubic Feet)
A unit of measure for volume, commonly used to quantify natural gas at standard pressure and temperature conditions. It’s essential for reporting, selling, and purchasing gas.
Salt Water Disposal Well (SWD)
A well designed for the disposal of saltwater, a byproduct of oil and gas production. These wells inject saltwater into underground formations, safely away from freshwater resources, to prevent contamination.
Seal Rock
A geologic formation with low permeability that traps hydrocarbons in a reservoir rock, preventing them from escaping. Effective seal rocks are critical for the accumulation and commercial extraction of oil and gas.
Secondary Recovery
An oil extraction method that involves injecting water or gas into the reservoir to maintain pressure and stimulate production. Secondary recovery follows the initial (primary) recovery phase, helping to extract additional oil that cannot be produced through natural reservoir pressure alone.
Secondary Term
Refers to the period during an oil and gas lease that extends beyond the primary term, activated by the production of oil or gas in paying quantities. The lease remains in effect as long as production continues.
Section
In land measurement, particularly within the Public Land Survey System (PLSS) in the United States, a section is an area of land that is one square mile, or 640 acres. Sections are used to describe the location of mineral rights and wells.
Separator
Equipment used to separate produced fluids into their constituent components of oil, gas, and sometimes water. Separators are vital for preparing hydrocarbons for sale and reducing environmental impacts.
Severance
The act of separating mineral rights from surface rights on a piece of land. Severance can lead to different parties owning the surface and the minerals below, affecting land use and development.
Severance Tax
A tax levied on the extraction (severance) of natural resources, such as oil and gas, from the ground. Severance taxes are paid by producers and are often a significant source of revenue for resource-rich states.
Severed Minerals
Minerals that have been legally separated from surface land ownership. Owners of severed minerals retain rights to extract or lease these minerals, independent of the surface land’s use or ownership.
Shale
A fine-grained sedimentary rock that can contain significant amounts of oil and natural gas, particularly in formations where these resources are trapped within the rock matrix. Shale plays have become major sources of hydrocarbons through advances in hydraulic fracturing and horizontal drilling.
Shut In Royalty
A payment made to mineral rights owners when a well is capable of producing but is temporarily not in operation (shut in), often due to lack of infrastructure or market conditions. The shut-in royalty clause in a lease ensures that the mineral rights owner receives compensation during these periods.
Sour Gas
Natural gas that contains significant amounts of hydrogen sulfide (H2S), making it “sour.” Sour gas requires special handling and treatment to remove the H2S due to its toxicity and corrosiveness, affecting the cost and complexity of production.
Source Rock
The geological formation where oil and gas originates. It contains organic material that, under the right conditions of temperature and pressure, generates hydrocarbons. Understanding the location and characteristics of source rock is crucial for exploration efforts.
Spud
The commencement of drilling a well. The term marks the start of the drilling process and is a significant milestone in the development of oil and gas projects.
Stacked Pay
Refers to multiple layers of hydrocarbon-bearing formations that can be accessed and produced from a single well. This can significantly increase a well’s productivity and is a key consideration in well planning and development.
State Permits
Regulatory approvals required by state agencies for various aspects of oil and gas operations, including drilling, water disposal, and production. Obtaining these permits is a critical step in ensuring compliance with environmental and safety regulations.
Stimulation
A set of operations performed on a well to enhance or restore its productivity. Common methods include hydraulic fracturing and acidizing, which improve the flow of hydrocarbons from the reservoir into the wellbore.
Stripper Well
A well that produces oil or gas at a very low rate, typically near the end of its productive life. Despite their low output, stripper wells collectively contribute significantly to total oil and gas production.
Substandard Acreage
Land that is deemed less desirable or valuable for oil and gas production due to factors such as poor location, difficult terrain, or unfavorable geological characteristics.
Surface Casing
A steel pipe installed in the upper portion of a well to protect fresh water zones, provide structural support for deeper drilling, and isolate the wellbore from surface soils and shallow groundwater. It is a critical component for environmental protection and well integrity.
Surface Estate
The ownership rights to the surface of the land, which can be separate from the mineral rights below. The surface estate includes rights to use the land for agricultural, residential, or commercial purposes, excluding the extraction of subsurface minerals.
Surface Owner
The individual or entity that holds title to the surface estate. Surface owners may or may not own the underlying mineral rights, depending on whether the estate has been severed.
Surface Rights
The rights to use and enjoy the surface of the land. These rights can be leased or sold separately from mineral rights, leading to situations where the surface owner and mineral rights owner are different parties.
Surface Use Agreement
A surface use agreement is a legal agreement between the surface owner and the holder of the mineral rights (or a leasing oil and gas company) that outlines how the surface of the land can be used for oil and gas operations. It often includes compensation for the surface owner and provisions to minimize impact on the land.
Suspended Funds
Funds that are held or frozen due to disputes, unclear ownership, or other legal issues. In the context of oil and gas, suspended funds may relate to royalties or other payments that cannot be distributed until the issue is resolved.
Sweet Gas
Natural gas that contains little to no hydrogen sulfide (H2S). Sweet gas is easier and safer to process and transport than sour gas, making it more desirable in the marketplace.
Term
The duration of a lease or agreement. In oil and gas leases, the term specifies how long the lessee has the right to explore for and produce hydrocarbons, subject to certain conditions.
Texas Abstract
A legal document in Texas that summarizes the history of a parcel of land, including ownership, leases, and liens. It’s used to establish clear title before transactions or development.
Texas Abstract Number
A unique identifier assigned to a land abstract in Texas, used to track and reference the legal history and documentation of land parcels within the state.
Texas Block Number
A designation used in Texas to identify a specific block of land within a survey or subdivision. It’s part of the legal description used to define property boundaries for land management and development purposes.
Texas Section
A land measurement unit used in Texas, equivalent to one square mile or 640 acres. It’s part of the survey system used to describe the location of mineral rights or properties.
Texas Survey Name
The name assigned to a specific land survey in Texas. These surveys are part of the state’s method for identifying and documenting land parcels and are crucial for legal transactions and development planning.
Title Abstract
A comprehensive summary of the legal history of a piece of property, including ownership changes, liens, and any encumbrances. Title abstracts are essential for verifying clear title in real estate and mineral rights transactions.
Top Lease
An oil and gas top lease is an agreement that becomes effective after the expiration of an existing lease. Oil and gas companies may negotiate top leases to secure rights to a property as soon as the current lease ends, ensuring continuous access to potential resources.
Total Vertical Depth (TVD)
The depth measured from the surface to the bottom of the wellbore in a vertical direction. TVD is critical for understanding the geological characteristics of the well and planning production strategies.
Township
In land surveying, particularly under the Public Land Survey System (PLSS) used in the United States, a township refers to an area of land six miles square, containing 36 sections. Townships help in organizing land descriptions and are used in several states, including those with significant oil and gas activities.
Tubing
A string of pipes placed inside a wellbore through which oil or gas flows to the surface. Tubing is a key component of the well’s production system, allowing for efficient and safe transport of hydrocarbons.
Unconventional Development
The extraction of oil and gas from non-traditional reservoirs, including shale rock, tight sandstones, or coal beds, often requiring advanced techniques like hydraulic fracturing and horizontal drilling.
Undeveloped Acreage
Land that has potential for oil and gas production but has not yet been drilled or brought into production. This acreage represents future opportunities for exploration and development.
Undivided Interest
Ownership of a property by two or more parties without a division of the land into distinct portions. Each owner has rights to the entire property, common in situations with multiple heirs or investors.
Unit
A consolidated area of land pooled together for the purpose of oil and gas development and production. Units allow for more efficient resource management and regulatory compliance.
Unitization
The process of combining multiple leases or properties into a single unit for development and production purposes. Unitization can enhance reservoir management and optimize recovery of oil and gas.
Unleased Mineral Rights
Mineral rights on a parcel of land that have not been leased for exploration or production. Owners of unleased mineral rights may negotiate leases with oil and gas companies to develop the resources.
Upstream
The segment of the oil and gas industry involved in the exploration and production of hydrocarbons. Upstream activities include searching for underground or underwater oil and gas fields, drilling exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil or natural gas to the surface.
Vertical Drilling
The process of drilling a well straight down into the earth to access oil or gas reservoirs. This traditional method contrasts with horizontal drilling, which involves drilling vertically to a certain depth and then turning horizontally to access the formation.
Warranty Deed
A legal document that guarantees the grantor owns clear title to a piece of property and has the right to transfer it. In mineral rights transactions, a warranty deed ensures that the buyer receives ownership without legal encumbrances from previous owners.
Waterflood
A secondary recovery method that involves injecting water into a reservoir to increase pressure and stimulate the production of oil. Waterflooding can significantly extend the productive life of an oil field.
Wellbore Direction
The orientation or trajectory of a wellbore from the surface to the target formation. Wellbore direction can be vertical, horizontal, or slanted, depending on the drilling technique and the nature of the reservoir.
Wellbore Only
Refers to the physical hole drilled for the purpose of exploring or extracting oil or gas. This term emphasizes the distinction between the wellbore itself and the equipment or infrastructure associated with it.
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