Glossary of Industry Terms¹
1P Reserves – Proved Reserves. Estimated quantities of crude oil, natural gas, and natural gas liquids that geological and engineering data demonstrate with certainty to be commercially recoverable, from a given date forward, from known reservoirs, and under current economic conditions, operating methods, and government regulations. Proved Reserves can be further divided into Proved Developed (PD) and Proved undeveloped (PUD).
3P Reserves – Proved plus Probable plus Possible Reserves. Represents the high estimate scenario where there is at least a 10% probability that the actual quantities recovered will equal or exceed the estimates.
Accumulate (A) – The stock should be purchased consistently at current prices. The stock has above average risk/reward and is expected to outperform peer stocks over the next 12 months.
Acreage – Land leased for oil and gas exploration and/or land for which a company owns mineral rights.
AFE – Authorization for Expenditure budgets and details the costs to be incurred in drilling operations. Specifically, AFEs should include estimates for intangible drilling and equipment costs to be incurred in drilling the well, completion costs if the well is determined to be successful and plugging and abandonment costs if the well is determined to be dry.
AMZ Index – Alerian MLP Index. A float-adjusted, capitalization-weighted index of the 50 most prominent energy master limited partnerships.
API – American Petroleum Institute. National trade association that represents all aspects of America’s oil and natural gas industry.
AT – After Tax.
Base (cushion) gas – The volume of natural gas that must remain in the storage facility to provide the required pressurization to extract the working gas.
Base load plant – Efficient, low-cost hydro, nuclear or coal –fired generating plants that generally run around the clock, serving the minimum load requirements of a region.
Basis differential – The difference between the Henry Hub spot price and the corresponding cash spot price for natural gas in a given location. Often relates to factors like product quality, location and takeaway capacity.
Bbl – Barrel of oil. 1 bbl = 42 gal. 1 mmbbl = 1,000,000 bbl.
Bitumen – Oil based substance. Dense, highly viscous, petroleum-based hydrocarbon found in oil sands and pitch lakes deposits, or is obtained as a residue of the distillation of crude oil. In some areas, bitumen is often called asphalt.
BLM – Bureau of Land Management. Approves permits for companies to produce oil and gas resources on Federal and Indian lands.
BOE – Barrels of Oil Equivalent. Amount of energy contained in a barrel of crude oil. Approximately 6,000 cubic feet of natural gas is considered equivalent to one barrel of oil. 1 mmboe = 1,000,000 boe
BOP – Blowout Preventer. Large valve that can seal off an oil or natural gas well being drilled.
Bps – Basis Points. Used to denote change in a financial instrument. 1% change = 100 bps.
Brent crude – A light and sweet crude oil (of lesser quality than WTI) sourced from the North Sea.
Brownfield site – A site with existing generation that has the potential for further generation capacity development .
Btu – British thermal unit. A measure of the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit. 1 mmbtu = 1,000,000 btu.
Buy (B) – The stock should be purchased aggressively at current prices. The stock has among the best combination of risk/reward and positive company specific catalysts within the sector. Stock is expected to trade higher on an absolute basis and be a top performer relative to peer stocks over the next 12 months.
Cap-and-trade – Regulation that places a cap on the amount of greenhouse gas emissions allowable from certain sources (i.e. power plants). Cap for each year is set as a reduction from total emissions of previous year until targeted overall reduction is reached. Allowances (credits) for emissions equal to the cap are auctioned to companies, who can then transfer/trade these credits amongst themselves.
Capex – Capital Expenditures. Funds used by a company to acquire or upgrade assets such as property, buildings or equipment with the purpose of creating future benefits.
CAGR – Compound Annual Growth Rate. Year-over-year growth rate of an investment over a specified period of time.
Capacity factor – the ratio of the actual electrical energy produced by a generating unit divided by the potential output over a given period of time.
Capacity payment – A fee paid to a generator to ensure the availability of that facility for a given period of time, generally expressed as $/kW-month or $/kW-year. Separate from and incremental to an Energy payment.
Casing – Large diameter pipe inserted into a recently drilled section of a borehole, typically held into place with cement, with the purpose of isolating formation fluids and preventing borehole collapse.
CCGT – Combined Cycle Gas Turbine. A power plant that, while generating electricity via a gas turbine, uses waste heat to make steam to generate additional electricity via a steam turbine. Enhances the efficiency of the plant.
CDD – Cooling Degree Days. A measure used to assess weather’s impact on natural gas usage. Each degree (°F) by which the average temperature rises above 65°F represents one CDD (i.e. a day with average temperature of 80°F would have 15 CDDs).
CE – Capital Empolyed
CFFO – Cash Flow From Operations. It is revenue less all operating expenses.
CFPS – Cash Flow Per Share.
CNG – Compressed Natural Gas.
CO2 – Carbon Dioxide. A chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom.
Cogeneration (cogen) – Uses surplus steam produced during the power generating process to supply a customer with steam for use in that customer’s operations.
Condensate – Mixture of hydrocarbons that are in gaseous state under reservoir condition and become liquid as the temperature and pressure is reduced.
CWC – Completed Well Cost.
D/C – Debt-to-Cap Ratio. Indicator of a company’s financial leverage, calculated as debt divided by total capital. A high debt-to-cap ratio indicates higher debt in relation to equity.
DACF – Debt Adjusted Cash Flow
Dark spread – the difference between the cost of coal in generating electricity and the market price of electricity.
Day-ahead and hour-ahead markets – Forward markets where electricity quantities and market clearing prices are calculated for each hour of the day based on participant bids for energy sales and purchases.
DD&A – Depreciation, Depletion, and Amortization. Tangible property and equipment is depreciated, intangible property is amortized, and natural resources are depleted.
Development well – A well drilled into a known producing formation in a previously discovered area.
Dir Well – Directional well.
Discounting – The present value of a payment to be received in the future.
DJIA – Dow Jones Industrial Average. Compiled by Dow Jones as a way to gauge the performance of the industrial component of America’s stock markets. It is the oldest continuing U.S. market index.
DOE – Department of Energy. Department of the United States government responsible for energy policy and nuclear safety.
Downspacing – An increase in the number of available drilling locations as a result of a regulatory commission order.
DPS (segment) – Drilling and Production Systems.
Dry hole – a well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
Dual-fuel unit – A generating unit that can produce electricity using two or more input fuels; most often natural gas and fuel oil.
e – Estimate.
E&C – Engineering and Construction.
E&D – Exploration and Development.
EPX Index – SIG Oil Exploration & Production Index. Equal-dollar-weighted index of 22 companies that own, lease, and operate oil and gas facilities.
EBIT – Earnings Before Interest and Taxes. Indicator of a company’s profitability, calculated as revenue minus expenses, and excluding interest and taxes. Also referred to as Operating Income.
EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization. Indicator of a company’s financial performance, calculated as revenue minus expenses, excluding interest, tax, depreciation and amortization.
EBITDAX – Earnings Before Interest, Taxes, Depreciation, Amortization, and Exploration Expenses. Indicator of a company’s financial performance, calculated as revenue minus expenses, excluding interest, tax, depreciation, depletion, amortization and exploration expenses.
Economic (or Mineral) Interest – The rights that a company will seek to explore, develop, produce, and share in proceeds from the sale of any minerals that might exist beneath the property (unless it already holds that right).
EG – Equatorial Guinea.
EIA – Energy Information Administration, within the U.S. Department of Energy. Provides policy-neutral data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy.
Emission allowances – a regulatory “right to pollute”; generally a certificate that allows the holder to emit one ton of a controlled pollutant.
Energy payment – The revenue earned by a generator for the actual production of a MWh of power; can be incremental to a Capacity payment.
EPA – U.S. Environmental Protection Agency. Leads the Nation’s environmental science, research, education and assessment efforts. The mission of the Environmental Protection Agency is to protect human health and the environment.
EPS – Earnings Per Share. Indicator of a company’s profitability, it is the portion of its profits allocated to each outstanding share of common stock. It is calculated as net income minus dividends on preferred stock, divided by the number of outstanding shares.
ERCOT (ISO) – Electric Reliability Council of Texas
EUR – Estimated Ultimate Recovery.
EV – Enterprise Value. Measure of a company’s value, calculated as market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Exploratory well – A well drilled into a previously untested geologic prospect to determine the presence of gas or oil.
F&D Cost – Finding and Development Cost. Incurred when a company purchases, researches, and develops properties in an effort to establish commodity reserves.
FCF – Free Cash Flow. Cash a company is able to generate after laying out the money required to maintain or expand its asset base. Calculated as operating cash flow minus capital expenditures.
FCPA – Foreign Corrupt Practices Act.
FERC – Federal Energy Regulatory Commission. An independent agency that regulates the interstate transmission of natural gas, oil and electricity.
FLNG – Floating Liquefied Natural Gas. A floating facility that sits above an offshore natural gas field, that produces, liquefies, stores, and transfers LNG from the offshore projects before it is shipped to the markets.
Forced Outage Rate – the amount of time that a generating facility is unavailable to produce power due to an unexpected mechanical problem, expressed as a percentage of the total potential generation
Frac Job – An operation that involves large pumps that force water or other fluids down the casing and out into the formation, fracturing it, so oil or gas can be released.
Frac Spread – A measure of profitability for processing plants. It’s the difference between the sales price of natural gas liquids (the processing output) and the cost of natural gas (the processing input).
Generator capacity – the maximum output, commonly expressed in megawatts (MW), that generating equipment can supply.
GOM – Gulf of Mexico.
GORR – Gross Overriding Royalty interests are royalty interests that are granted out of and are attached to a leasehold or working interest (a lease or license issued by the Crown or the fee simple mineral title owner). A GORR interest is considered an “interest in land” and is therefore not subject to expiration, surrender or termination provided the underlying leasehold interest remains in good standing in accordance with its terms.
GT – Simple Cycle Gas Turbine. Heat from burning natural gas spins a generator, which produces electricity.
GTL – Gas-to-Liquids.
GW – Gigawatt. One thousand megawatts.
GWh – Gigawatt Hour. 1,000,000 times a kilowatt-hour (kWh) and is used for measuring the energy output of large power plants.
HDD – Heating Degree Days. A measure used to assess weather’s impact on natural gas usage. Each degree (°F) by which the average temperature falls below 65°F represents one HDD (i.e. a day with average temperature of 45°F would have 20 HDDs).
Heat rate – A measure of the amount of fuel required to produce a unit of power (for example, 10mmbtu of natural gas per megawatt hour of electricity).
Hold (H) – Do nothing with the stock at current prices. The stock has average risk/reward and is expected to perform in line with peer stocks over the next 12 months.
Hz Well – Horizontal well.
IEA – International Energy Agency.
IOC – International Oil Companies (i.e. Exxon Mobil Corp.)
IP – Initial Production Rate.
IPM – Integrated Project Management. Typically a large E&P project where one oil service contractor is chosen to oversee and procure the majority of required tools and services.
IPP – Independent Power Producer. Produces and sells power to wholesale markets. IPPs are unregulated, so they are not guaranteed a return on capital like utilities. The market determines the IPPs’ income – returns are based on whether or not plants are dispatched or contracted.
IRR – Internal Rate of Return. It is the rate required to generate a net present value of zero. The higher the internal rate of return, the better the investment.
ISO – Independent System Operator. Organization formed at the direction or recommendation of the FERC that coordinates, controls, and monitors the operation of the electrical power system, usually within a single state, but sometimes encompassing multiple states.
JV – Joint Venture. Agreement of two or more parties to share in profits, losses, and control of the enterprise.
LAM – Latin America.
LMRP – Lower Marine Riser Package.
LNG – Liquefied Natural Gas. Natural gas that is liquefied by reducing the temperature to -260°F. Usually used to supplement traditional natural gas supplies during periods of peak demand.
LOE – Lease Operating Expense. Cost of maintaining and operating property and equipment on a producing oil and gas lease.
M&A – Mergers and Acquisitions.
M/M – Month-to-Month change.
M-t-M – Mark-to-Market. Accounting method that assigns value to a position held in a financial instrument based on its current market value.
Market heat rate – The market price of power stated in terms of gas price. For example, a $70/MWh power price, given a $ 7/mmbtu gas price has a market heat rate of 10,000 btu/kWh.
Mcf – Standard unit for measuring natural gas. 1 mcf = 1,000 cubic feet.
MISO (ISO) – Midwest Independent System Operator
MW – Megawatt. A measure of power generation or consumption capacity. One MW equals 1,000 kilowatts or one million watts.
MWh – Megawatt Hour. 1,000 times larger than the kilowatt-hour and is used for measuring the energy output of large power plants.
NAM – North America.
NAPE – North American Prospect Expo. Created in 1993 to provide a marketplace for the buying, selling, and trading of oil and gas prospects and producing properties via exhibit booths.
NAV – Net Asset Value.
ND – Net Debt
NEPOOL – New England power pool.
NERC – North American Reliability Council. Responsible for overseeing operations, developing standards and enforcing mandatory reliability standards in the electric power industry.
NGLs – Natural Gas Liquids. Liquid hydrocarbons that are extracted and separated from the natural gas stream. NGLs produced include ethane, propane, butane and natural gasoline.
NOL – Net Operating Loss. Period in which a company’s tax-deductible expenses are greater than its taxable revenues.
NOX – Nitrogen oxides, pollutant.
NPV – Net Present Value. Total present value of a time series of cash flows.
NYMEX – New York Mercantile Exchange. A futures market in which a seller promises to deliver a given quantity of a commodity at a specified place, price, and time in the future.
OCTG – Oil Country Tubular Goods. Pipe used in wells in oil and gas industries, consisting of casing, tubing and drill pipe.
OECD – Organization for Economic Co-Operation and Development. Its goals are to promote economic stability and democracy in its member countries and in developing countries.
Off peak – Period of relatively low system demand; generally, late evening and early morning during the week and the weekend.
OIH – Oil Services HOLDRS Trust. Issues depositary receipts called Oil Service HOLDRS. The Trust will hold shares of common stock issued by companies that, among other things, provide drilling, well-site management and related products and services for the oil service industry. These companies are among the 20 largest and most liquid with U.S. traded securities involved in the oil service industry.
On peak – Periods of relatively high system demand; generally weekday mornings through evening.
OPEC – Organization of Petroleum Exporting Countries. It is an economic cartel of oil-producing countries that coordinate production and drilling in order to manage the world price of oil. It was founded in 1960 and its members are: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.
Ops – Operations.
OSX Index – Oil Service Sector Index. A price-weighted index composed of fifteen companies that provide oil drilling and production services, oil field equipment, support services and geophysical/reservoir services.
Outage – The removal of a generating unit from service to perform maintenance or repair work.
P/B – Price-to-Book Ratio. Calculated as current stock price divided by the book value per share.
P/E – Price-to-Earnings Ratio. Calculated as current share price divided by earnings per share (EPS). In general, higher P/E ratio signifies a higher expected earnings growth. Also referred to as the earnings multiple.
P/CF – Price-to-Cash Flow Ratio. A measure of the market’s expectations of a company’s future financial health. Calculated as share price divided by cash flow per share.
P&L – Profit and Loss Statement. Also known as the Income Statement.
PD – Proved Developed Reserves. The portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.
PDP – Proved Developed Producing assets.
Peaker plant – A power plant that runs only in times of short supply or high demand (normally during peak demand), when prices are high.
PJM – Pennsylvania, New Jersey and Maryland power pool.
Porosity – Measure of a rock’s ability to hold fluid. Normally expressed as a percentage.
PPA – Power purchase agreement. A long-term contract between an electricity generator and a purchaser of energy or capacity.
PT – Price Target.
PUC – Public Utility Commission. A regulatory body in each state that governs public utilities within its jurisdiction, such as electricity, gas, and oil utilities.
PUD – Proved Undeveloped Reserves. The portion of proved reserves which can be expected to be recovered from new wells on undrilled, proved acreage or from existing wells where a relatively major expenditure is required for completion.
Pullback – Price decline from its peak by at least 5%. It is seen as a reversal of an upward price movement.
Q/Q – Quarter-over-Quarter change.
R/P – Reserves-to-Production. Measures years of supply (lifetime of oil/gas reserves) by dividing the remaining recoverable reserves at year-end by actual annual production volumes.
Rally – Period of sustained increases in the prices of stocks, bonds, or indexes. Generally an upward trend of at least 10%.
Repos – Repurchase Agreement. Allows a borrower to use a security as collateral for a cash loan at a fixed rate of interest.
Reserve margin – the amount of available plant reserve capacity above the system’s peak electricity requirements.
Revolver – Revolving credit agreement.
RFP – Request for Proposal. An invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. Usually references a request for power.
RGGI – Regional Greenhouse Gas Initiative. A regional carbon emission reduction scheme in ten north eastern states.
ROCE – Return On Capital Employed. Indicates the efficiency and profitability of a company’s capital investments. Calculated as EBIT divided by the difference between total assets and current liabilities.
RoR – Rate of Return. It is the ratio of the money gained or lost on an investment relative to the amount invested. It evaluates the efficiency of a single or various investments.
ROV – Remotely Operated Vehicle. Underwater, unoccupied, and highly maneuverable robot used to assist in the development of offshore oilfields.
RPS – Renewable Portfolio Standards. State policies mandating a state to generate a percent of its electricity from renewable sources. Some RPSs will specify the technology mix (i.e. wind, solar), while others leave it up to the market.
S&P 1500 – S&P Supercomposite Oil & Gas Exploration & Production Index. Capitalization-weighted index of 33 exploration & production companies.
SEC – Securities Exchange Commission.
Secondary recovery – Process of injecting water, gas, etc., into a formation in order to produce additional oil/gas otherwise unobtainable by initial recovery efforts.
Sell (S) – The stock should be sold aggressively at current prices. The stock’s risk/reward is skewed to the downside with possible negative company specific catalysts or excessive valuation. The stock is expected to trade lower on an absolute basis and be among the worst performers relative to peer stocks over the next 12 months.
SG&A – Selling, General and Administrative Expenses. These consist of combined payroll costs, as well as advertising expenses.
Shale – fine-grained, clastic sedimentary rock formed by the consolidation of clay, mud, or silt. Certain formations contain large amounts of oil and natural gas.
SOX – Sulfur oxides, pollutant.
Spark spread – A measure of profitability for power plants. It’s the difference between the sales price of power (per megawatt hour) and the cost of fuel to produce it.
Spud date – The date the rotary drilling bit touches ground.
SPSIMM Index – S&P Metals and Mining Select Industry Index. Equal weighted index that represents the US securities that are members of the S&P Total Stock Market Index which are classified through GICS as part of the Metals and Mining sector.
SPX – S&P 500 Index. Capitalization index of 500 stocks. This index measures the performance of the broad domestic economy through the changes in the market value of 500 leading companies in leading industries of the U.S. economy.
Trim (T) – The stock should be sold consistently at current prices. The stock has below average risk/reward and is expected to underperform peer stocks over the next 12 months.
TD – Total Depth. Maximum depth reached in a well by drilling or logging.
TIL – Turn-in-line; a well turned to sales.
TTM – Trailing Twelve Months.
UTY Index – Philadelphia Stock Exchange Utility Index. A capitalization-weighted index of twenty utility companies involved in the production of electrical energy.
Ver Well – Vertical well.
W/W – Week-over-Week change.
WACC – Weighted Average Cost of Capital.
WI – Working Interest. A company’s equity interest in a project before reduction for royalties or production share owed to others under applicable fiscal terms.
Working gas – The volume of natural gas in a storage reservoir that can be extracted during the normal operation of the storage facility.
Workover – A major operation on a completed well to restore, maintain, or improve the well’s production (i.e. deepening the well).
WTI – West Texas Intermediate Crude Oil. A light (low density) and sweet (low sulfur) crude oil. WTI is the underlying commodity of the New York Mercantile Exchange’s oil future contracts.
XNG Index – AMEX Natural Gas Index. An equal-dollar weighted index designed to measure the performance of highly capitalized companies in the natural gas industry primarily involved in a natural gas exploration and production, natural gas transmission or natural gas distribution.
XOI Index – AMEX Oil Index. A price-weighted index of the leading companies involved in the exploration, production, and development of petroleum. It measures the performance of the oil industry through changes in the sum of the prices of component stocks.
Y/Y – Year-over-Year change.
¹Source: 10Ks, Bloomberg, FactSet, Investopedia, SPE, TPH