Barrels Of Oil Equivalent Per Day - BOE/D
What Does Barrels Of Oil Equivalent Per Day Mean?
Barrels of oil equivalent each day (BOE/D) is a term that is used frequently related to the production or distribution of crude oil and natural gas. Many oil companies produce both of these commodities, however the unit of measure for each is different. Oil is measured in barrels and natural gas is measured in cubic feet. To assist with working with like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil. One barrel of oil is generally deemed to have a similar amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.
While measuring a company's natural gas production output, management frequently needs to know the number of equivalent barrels of oil they that are producing. This makes it simpler to compare themselves to other industry participants. The Society of Petroleum Engineers provides conversion tables that assist with outlining unit equivalencies and a portion of the factors that influence comparison and conversion.
Understanding Barrels Of Oil Equivalent Per Day (BOE/D)
Large oil producers are evaluated and allude to their production by the number of cubic feet of natural gas, and/or by the barrels of oil equivalent, they produce each day. This is an industry standard and a way that [investors](/financial backer) can compare the production and/or the reserves of two oil/gas companies.
BOE/D is important to the financial community since it is used as a method for deciding the value of a company. There are several different metrics equity and bond analysts use to assess the performance of an oil company. First is a company's total production, which is calculated on a total equivalent barrel basis. This assists with determining the scale of the business. Companies that produce little oil and a ton of natural gas could be unreasonably evaluated in the event that equivalent barrels were not counted.
One more important measure of a company is the size of its reserves. Equivalent barrels play an important job here too in light of the fact that excluding natural gas reserves can unreasonably impact the size of a company. At the point when banks are determining the size of a loan to extend, it is important to consider the total size of the company's reserve base. Changing over natural gas reserves to equivalent barrels is a straightforward like-for-like metric that assists with determining the amount of debt a company has relative to its reserve base. On the off chance that this isn't evaluated accurately, a company can be unreasonably impacted with higher borrowing costs.