For example, one energy company might produce from an area containing only natural gas while another might operate in a more oil-rich region. By converting their production into BOE, investors can see which produces more total energy.
How to use barrels of oil equivalent
Investors can use barrels of oil equivalent to make comparisons when evaluating energy stock investments. They can use it to see how much an oil and gas producer's production changes from period to period on an oil-equivalent basis. They can also use BOE to compare the production of various energy companies.
Another great use of BOE is to see how much of its product a company sells during a period. Many energy companies will report the average price they realized for their production on a BOE basis. Investors can see how that number compares to the price of crude oil. It could suggest that a company sells higher volumes of lower-valued energy like NGLs or natural gas.
For example, two energy companies might both have produced 1 million BOE during a period. However, if one company realized $90 per BOE produced and another realized $50 per BOE produced, the company with the higher realized price would have likely made more money in the period.
Finally, many companies also report their costs on a BOE basis. This metric can help investors see how their cost structure compares to others in the sector. Companies with lower production costs per BOE will have a higher profit margin.
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