What Are Billions of Cubic Feet Equivalent?
Billions of cubic feet equivalent (BCFE) is a natural gas industry term typically used to measure the amount of natural gas that is either untapped in reserves or that which is being pumped and delivered over extended periods of time (such as months or years).
The expression "equivalent" is used to describe the equivalent amount of energy liberated by the burning of this type of fuel versus crude oil, with every 6,000 cubic feet of natural gas being equal (or equivalent) to one barrel of oil.
Understanding Billions of Cubic Feet Equivalent
Billions of cubic feet equivalent (BCFE), most commonly found in the annual reports of natural gas and oil corporations, is used to quantify the energy produced (or potentially produced) by a company's reserves, as well as what is actually delivered to customers. Investors will look at this figure to understand how much earning potential a producer in the space may have.
One billion cubic feet of gas equivalent can produce roughly 1.028 trillion BTUs, which is enough to power all of Delaware's natural gas needs for slightly more than one week. Considering that the average natural gas well pumps roughly 250,000 - 350,000 cubic feet equivalent per day, it would take one well roughly 3,000 days to pump one billion cubic feet equivalent of natural gas.
- Billions of cubic feet equivalent (BCFE) is a term used to understand how much earnings potential a natural gas producer may have.
- BCFE is a measure of the amount of natural gas reserves and is made in terms equivalent to the energy in a standardized amount of crude oil.
- BCFE for a company is often listed in its annual report and may be a regulatory requirement by the SEC for publicly traded natural gas companies.
Reconciling Other Measures of Natural Gas Production
BCFE is a useful measure of natural gas production, but it is not the only one. Trillion cubic feet (Tcf) is a volume measurement of natural gas used by the U.S. oil and gas industry. A trillion (1,000,000,000,000) cubic feet is equivalent to approximately one Quad of Btu (British thermal unit).
A "quad" is an abbreviation for a quadrillion (1,000,000,000,000,000) Btu. A Btu is a unit of measurement for energy, representing the amount of heat that is needed to raise the temperature of one pound of water by one degree Fahrenheit at sea level. One Btu is roughly equal to the heat produced by a kitchen stick match.
Within the oil and gas industry, units of measurement are represented by the following letters:
- M = one thousand
- MM = one million
- B = one billion
- T = one trillion
Any of these can appear before certain terms, such as MMBOE (million barrel of oil equivalent) or Tcf (trillion cubic feet). Mcf is the conventional way to measure natural gas in the United States, which uses the imperial measuring system.
In Europe, where the metric system is used, the abbreviation most commonly used is thousand of cubic meters or Mcm. Oil and gas financial analysts need to be especially careful when analyzing companies' quarterly results to avoid mixing up various units. For example, it is quite easy to overlook the fact that U.S. companies will report in Mcf, while European companies often report in Mcm. This makes quite a difference because 1Mcm = 35.3Mcf.
Most of the major international oil and gas companies have standardized reports to help analysts and investors accurately assess these figures. This is partly a regulatory requirement with the U.S. Securities and Exchange Commission (SEC) requiring foreign companies with stock listed on U.S. exchanges to file standardized reports on an annual basis, called a 20-F. This is equivalent to the 10-K filing for U.S. companies and provides investors with oil and gas production and reserve statistics published using imperial measurements to allow direct comparison.
Investors in the emerging markets of Russia, Africa, or Latin America often receive reports with data reported with the metric system, which is a global measurement system. Analysts of these companies will need to use conversion tables to accurately quantify and compare them to more sophisticated international operators.