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Accredited Investor
In the U.S., subject to Rule 501 of Regulation D of the Securities Act of 1933, an accredited investor must meet specific criteria regarding his or her assets, income, net worth, legal status and professional experience. Accredited investors can be individuals with high net worth or insurance companies, banks, brokers or trusts. An accredited investor is also known as a registered investor.

Authority for Expenditure (AFE)
An authority for expenditure (AFE) is a type of budgeting form that includes the cost estimate for the well and incorporates the intangible and tangible drilling costs. It’s typically the final step in the well-planning process for a well that is ready for drilling.

Depletion Allowance
Depletion allowance is a tax deduction allowed by the IRS to compensate for the “using up” of a natural resource such as oil, gas, timber or minerals. It is a way to recover costs for capital investments.

Intangible Drilling Costs (IDC’s)
Intangible drilling costs are the expenses incurred while developing well sites for items that are not a part of the functioning well and have no resale value. Examples of intangible drilling costs are labor, survey work, ground clearing, repair and supplies.

Joint Operating Agreement (JOA)
A joint operating agreement (JOA) establishes the details things such as the designated operator, scope of work, equipment, types of drilling techniques, decommissioning and length of the agreement.

Lease Operating Expenses (LOE)
Lease operating expenses are recurring costs associated with an active well and its associated equipment. These costs can include rent, insurance, and payroll. If multiple parties are involved, each party’s lease operating cost is represented by their working interest in the well. Reducing lease operating costs is a significant function of a management team.

Regulation D (Reg D)
Regulation D is a Securities Act regulation that provides exemptions for qualifying companies to offer and sell their securities without first registering the offering with the SEC.

Tangible Drilling Costs (TDC)
Tangible drilling costs are the measurable cost of drilling equipment and physical items with resale value. Examples include pumps, tanks or wellheads.Tangible drilling costs are tax deductible for oil and gas investors.

Working Interest (WI)
A type of oil and gas investment in which the investor is responsible for drilling and other costs. In return, working interest owners receive a percentage of the oil and gas revenue, related to the amount of interest they hold. A carried working interest is the amount one party (typically a dealmaker) earns after the operator pays drilling costs and completes sales on the well. It is a simple equation: working interest ownership = revenue from oil production – operating expenses – burdens (landowner royalty + overriding royalty).

Net Revenue Interest (NRI)
The percentage of production that each party receives after all burdens, such as mineral or overriding royalty ownership.

Estimated Ultimate Recovery (EUR)
Is a projected volume of oil or gas that is expected to be extracted from the subsurface reservoir, and is the key indicator for investments.

Subscription agreement
An investor’s application to join a partnership that defines the terms for a party’s investment into a private placement offering or a limited partnership. Usually accompanied by a private placement memorandum.

Private Placement Memorandum (PPM)
The primary disclosure form for potential investors that details the shares/units and at what certain price each share/unit costs.