What is a 'Barrel Of Oil Equivalent (BOE)'

A barrel of oil equivalent (BOE) is a term used to summarize the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. By encompassing different types of energy resources into one figure, analysts, investors and management can assess the total amount of energy the firm can access. This is also known as crude oil equivalent (COE).

BREAKING DOWN 'Barrel Of Oil Equivalent (BOE)'

The BOE is frequently used when exploration and production companies are reporting the total amount of reserves they have. Oil and natural gas are formed through the same geological processes; therefore, the two energy commodities are often found together. Many energy companies have a mixed reserve base, and they need a way to communicate the total energy content of their reserves in a manner that is easily understood. They can accomplish this by converting all of their reserves to BOE.

Significance

An energy company's primary asset is the amount of energy it owns, so an energy company bases its financial decisions and planning on its reserve base. For investors, a company's reserves are important in assessing the value of the company and determining whether or not the company is a good investment. Both investors and companies want to see a company's total energy resource increase over time. Representing reserves in BOE facilitates the comparison of total energy assets over time and against other similar energy companies. It would be more complicated to compare a company's energy assets over time and against other companies if natural gas and oil were presented separately.

Conversion

Converting assets to BOE is fairly simple. In terms of volume, oil is represented per barrel, and natural gas is represented per thousand cubic feet (mcf). There are 42 gallons (approximately 159 liters) in one barrel of oil. The energy contained in a barrel of oil is approximately 5.8 million British thermal units (MBtus) or 1,700 kilowatt-hours (kWh) of energy. This is an approximate measure, because different grades of oil have slightly different energy equivalents. One mcf of natural gas contains approximately one-sixth of the energy of a barrel of oil; therefore, 6,000 cubic feet of natural gas (6 mcf) have the energy equivalent of one barrel of oil. For large quantities of energy, BOE can be represented at kilo barrels of oil equivalent (kBOE), which is 1,000 BOE.

BOE also comes up when communicating daily energy production and consumption. This is expressed in barrels of oil equivalent per day (BOE/D).

RELATED TERMS
  1. Barrels Of Oil Equivalent Per Day ...

    A term that is used often in conjunction with the production ...
  2. Energy Sector

    The energy sector is a category of stocks that relate to producing ...
  3. Natural Gas Equivalent

    The amount of energy used by the burning of natural gas versus ...
  4. Billions Of Cubic Feet Equivalent ...

    Billions of cubic feet equivalent is a natural gas term used ...
  5. Oil Price to Natural Gas Ratio

    A mathematical ratio comparing the prices of crude oil and natural ...
  6. Wholesale Energy

    Wholesale energy is a term referring to the bulk purchase and ...
Related Articles
  1. Investing

    The US Is Becoming More Energy Independent

    Rising production and abundant shale oil and gas reserves are moving the US towards energy independence, which could happen by 2020
  2. Investing

    The 7 Biggest Canadian Energy Companies (IMO.TO, TRP)

    Read about the largest seven Canadian energy companies as measured by market capitalization, and learn more about their energy operations.
  3. Investing

    Oil, Gasoline Reserves Continue to Rise

    A surprising jump in gasoline inventories has caught energy markets by surprise, but BP and OPEC are still hoping higher demand for oil are on the horizon.
  4. Investing

    Energy Sector: Industries Snapshot (XLE, XOM)

    Discover the two industries that form the energy sector of the S&P 500 index, and learn which companies may be the right stock for your portfolio.
  5. Investing

    3 iShares Energy ETFs to Keep an Eye On (IYE, IXC)

    Three ETFs offered by BlackRock iShares that track the energy industry.
  6. Investing

    How To Capitalize On Rising Energy Prices

    The world's energy demands will keep rising as supplies become harder to find and exploit. These factors should propel a energy stock bull market for some time to come.
  7. Investing

    Peak Oil: What To Do When The Wells Run Dry

    Find out how to invest and protect your investments in this slippery sector.
  8. Investing

    The Strategic Oil Reserves Explained

    Strategic oil reserves are one of the least known and least understood national security measures in the United States.
  9. Financial Advisor

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  10. Investing

    How the Oil and Gas Industry Works

    The oil and gas industry has unique terminology that's crucial for investors to understand.
RELATED FAQS
  1. What factors are the primary drivers of share prices in the oil and gas sector?

    Learn the primary drivers behind changes in the share prices of the oil and gas sector. The oil and gas sector is a cyclical ... Read Answer >>
  2. How does an oil and gas company measure and state its production?

    Learn the ways in which oil and gas companies measure and state production, and how much oil and gas is produced worldwide ... Read Answer >>
  3. How is NAV used for oil, gas, and energy investments?

    Find out how net asset value, or NAV, can be useful for evaluating mutual funds with oil, gas and energy investments or valuing ... Read Answer >>
  4. How does analyzing an oil and gas's financial statements differ from companies in ...

    Learn how financial statements for oil and gas companies appear different from companies in other sectors, and discover how ... Read Answer >>
  5. Besides oil companies, what businesses are hurt by cheap oil prices?

    Falling oil prices do not only affect oil companies. Learn what other types of businesses are unintended victims of the drop ... Read Answer >>
  6. What is a heavy oil differential and how does it affect oil producers?

    Learn what the phrase "heavy oil differential" refers to and the significance of heavy oil differentials for oil production ... Read Answer >>
Hot Definitions
  1. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  2. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  3. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  4. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  5. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
  6. Sharpe Ratio

    The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.
Trading Center