What is 'Barrels Of Oil Equivalent Per Day - BOE/D'

Barrels of oil equivalent per day (BOE/D) is a term that is used often in conjunction with the production or distribution of crude oil and natural gas. Many oil companies produce both of these commodities, but the unit of measure for each is different. Oil is measured in barrels and natural gas is measured in cubic feet. To help facilitate like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil. One barrel of oil is generally deemed to have the same amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.

When measuring a company's natural gas production output, management often wants to know how many equivalent barrels of oil they are producing. This makes it easier to compare themselves to other industry participants. The Society of Petroleum Engineers provides conversion tables that help illustrate unit equivalencies and some of the factors that affect comparison and conversion.

BREAKING DOWN 'Barrels Of Oil Equivalent Per Day - BOE/D'

Large oil producers are evaluated and refer to their production by the number of cubic feet of natural gas, and/or by the barrels of oil equivalent, they produce per day. This is an industry standard and a way that investors can compare the production and/or the reserves of two oil/gas companies.

​BOE/D is important to the financial community because it is used as a way to help determine the value of a company. There are several different metrics equity and bond analysts use to evaluate the performance of an oil company. First is a company's total production, which is calculated on a total equivalent barrel basis. This helps to determine the scale of the business. Companies that produce little oil and a lot of natural gas could be unfairly evaluated if equivalent barrels were not counted.

​Another important measure of a company is the size of its reserves. Equivalent barrels plays an important role here too because excluding natural gas reserves can unfairly impact the size of a company. When banks are determining the size of a loan to extend, it is important to consider the total size of the company's reserve base. Converting natural gas reserves to equivalent barrels is an easy to understand like-for-like metric that helps to determine the amount of debt a company has relative to its reserve base. If this isn't evaluated correctly, a company can be unfairly impacted with higher borrowing costs.

RELATED TERMS
  1. Natural Gas Equivalent

    Natural gas equivalent refers to the amount of natural gas needed ...
  2. Billions Of Cubic Feet Equivalent ...

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

    The oil price to natural gas ratio compares prices of crude oil ...
  4. MCF - Thousand Cubic Feet

    MCF is an abbreviation derived from the Roman numeral 'M' for ...
  5. Trillion Cubic Feet - Tcf

    Trillion cubic feet is a volume measurement of natural gas used ...
  6. Integrated Oil & Gas Company

    An integrated oil and gas company is a business entity that engages ...
Related Articles
  1. Investing

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  2. Investing

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  3. Investing

    Do Oil and Natural Gas Prices Rise And Fall Together?

    Do the prices of crude oil and natural gas affect each other? Investopedia explores price patterns and provides analysis.
  4. Investing

    Weekly Update on Commodity ETFs

    A continued decline in natural gas is driving UNG lower, but oil is ending the week on a high note.
  5. Investing

    Winners and Losers of Low Natural Gas Prices

    Chemical and fertilizer manufacturers benefit from a low price for natural gas, while utilities and natural gas producers are adversely affected by it.
  6. Investing

    Top 5 Oil and Gas Bond ETFs for 2016 (USO, OIL)

    Discover the top five oil and natural gas bond ETFs with the potential to come out on top in 2016 as the industry looks toward a future rebound.
  7. 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.
  8. Investing

    Should U.S. Producers Shut Down While Oil Is out of the Money?

    Should oil producers simply stop producing and wait for oil prices to recover? It may make sense for some producers to shut down in a $40 per barrel oil price environment.
  9. Investing

    Oil & Gas Sector: How to Find Hidden Gems

    The issue of depleting resources means that finding winners among oil companies is a new game. Analysis differs from traditional industrial companies.
  10. Investing

    Low Natural Gas Supply Boosts Energy (UWTI, XLE)

    The amount of natural gas on tap is barely rising, which is giving commodity prices a boost.
RELATED FAQS
  1. 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 >>
  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. How did the financial crisis affect the oil and gas sector?

    Learn how the financial crisis affected the oil and gas sector. The financial crisis led to a contraction in economic activity ... Read Answer >>
Trading Center