Today's Oil Patch Jargon: "Spud"

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If you're relatively new to the oil and gas space, tuning into a company webcast can be a little daunting. You will undoubtedly hear management and analysts tossing around all sorts of jargon. As an investor, you need to brush up on the lingo if you want to get the most information out of these calls.

One frequent point of discussion is the expected timing of a particular well to be "spud." A well is considered spud at the moment the drillbit hits the ground. The same goes for offshore drilling -- passing through water on the way to the seabed doesn't count. StatoilHydro (NYSE: STO) describes "spud fever" as the moments of anticipation preceding the spudding of a new well.

A well's spud date marks the starting point from which you measure how long it takes to drill a well. So, why is this important for investors?

Ultra Petroleum (NYSE: UPL) sometimes references "spud to TD" in its press releases. TD, or total depth, marks the end of the drill bit's journey. A quicker spud to TD, assuming you're drilling a series of wells to the same approximate depth, indicates improved drilling efficiencies and can translate to significant cost savings across a drilling program. Contract driller Precision Drilling Trust (NYSE: PDS) prides itself on its industry-beating days-per-well and metres-per-day metrics, which translate to a quicker spud to TD for its Canadian E&P clients.

Variants of this measure are "spud to completion" and "spud to sales." The former refers to the time it takes to complete a well (i.e. cement casing in place), while firms like Encore Acquisition (NYSE: EAC), GMX Resources (Nasdaq: GMXR), and Quicksilver Resources (NYSE: KWK) use the latter term to quantify how long it takes to bring a well online (i.e. have it hooked up to gathering infrastructure and flowing hydrocarbons). These periods are also referred to as cycle times, and shorter is clearly better.