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. Natural Gas Equivalent

    Natural gas equivalent refers to the amount of natural gas needed ...
  2. Energy ETFs

    Energy ETFs are a broad class of ETFs that includes funds focused ...
  3. Energy Sector

    The energy sector is a category of stocks that relate to producing ...
  4. Billions Of Cubic Feet Equivalent ...

    Billions of cubic feet equivalent is a natural gas term used ...
  5. Barrels Per Day - B/D

    Barrels per day (B/D) is a measure of oil output, represented ...
  6. Oil Reserves

    Oil reserves are an estimate of the amount of crude oil located ...
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

    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.
  3. 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.
  4. Investing

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

    Three ETFs offered by BlackRock iShares that track the energy industry.
  5. 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.
  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

    Projected Gas Prices for 2016

    Learn what major authorities on gas prices are predicting for 2016, and about the different factors that can impact the price of gas.
  8. Investing

    How Oil ETFs React To Falling Energy Prices

    Not all ETFs react the same to falling energy prices. Here's a look at a few examples.
  9. Investing

    Alaska Oil Find Small by Historical Standards

    Spain's Repsol and Armstrong Energy have announced the largest onshore oil discovery in 30 years, but the field is small by historical standards.
  10. Investing

    Top 5 Oil-Producing Countries In 2011

    The recent spike in the price of oil has once again drawn our attention to the importance of a ready supply of oil to our modern economy.
RELATED FAQS
  1. What causes oil prices to fluctuate?

    Discover how OPEC, demand and supply, natural disasters, production costs and political instability are some of the major ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. How Oil Cos. Treat Reserves on a Balance Sheet

    Oil reserves are estimated quantities of crude oil that have a high degree of certainty. Read Answer >>
  5. What are average operating expenses for the oil and gas sector?

    Learn about the average operating expenses and average operating expenses margin for the oil and gas sector and how they ... Read Answer >>
Trading Center