EV/2P Ratio

AAA

DEFINITION of 'EV/2P Ratio '

The EV/2P ratio is an investment term that refers to the valuation of oil and gas companies. The enterprise value (EV) divided by the proven and probable (2P) reserves shows what multiples the company is trading at. The enterprise value reflects the company's total value. Proven and probable (2P) refers to geologic reserves, such as oil, that are more likely than not able to be recovered. This is determined through geological and engineering modeling.

INVESTOPEDIA EXPLAINS 'EV/2P Ratio '

The EV/2P ratio calculates the enterprise value per proven and probable reserves. These values constantly fluctuate and are used by investors to speculate on the future value of a potential investment. When the multiple is high, the company of interest would be trading as a premium for a given amount of oil in the ground; a low valuation would suggest a potentially undervalued firm.

RELATED TERMS
  1. Oil Field

    A tract of land used for extracting petroleum, or crude oil, ...
  2. Oil Refinery

    An industrial plant that refines crude oil into petroleum products ...
  3. Probable Reserves

    After an oil exploration firm conducts a seismic survey of a ...
  4. Proven Reserves

    After an oil exploration firm conducts a seismic survey on a ...
  5. Oil Reserves

    An estimate of the amount of crude oil located in a particular ...
  6. Enterprise Value - EV

    A measure of a company's value, often used as an alternative ...
Related Articles
  1. Fundamental Analysis

    Using Enterprise Value To Compare Companies

    Learn how enterprise value can help investors compare companies with different capital structures.
  2. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  4. Investing

    What Happened To Obama’s Amnesty Bill?

    The sweeping Republican majorities were supposed to trigger change, but now they are preparing to embrace the Obama immigration policy.
  5. Mutual Funds & ETFs

    These Oil ETFs Offer Cheap, Easy Access

    Interested in investing in oil and the companies that extract and refine it? Here's a list of ETFs. Just be wary of fees.
  6. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  7. Fundamental Analysis

    Equity Multiplier

    The equity multiplier is a straightforward ratio used to measure a company’s financial leverage. The ratio is calculated by dividing total assets by total equity.
  8. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  9. Chart Advisor

    3 Energy Related Stocks Poised For A Pop

    A sharp decline in energy prices have created an interested opportunity in several oil-and-gas related companies. Given the strong downtrends apparent on the charts, most traders would use recent ...
  10. Economics

    Sanctions & Falling Oil Prices Hit Ruble Hard

    Russia, through its aggressive actions, has brought upon itself sanctions which, coupled with falling oil prices, have adversely impacted its economy.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center