Cubic feet is the primary unit of measurement used in natural gas production. It is somehow identical to the ones used in oils. The following are the most common terms used in measuring gas.
- Mmcf = 1 million cubic feet
- Bcf = 1 billion cubic feet
- Tcf = 1 trillion cubic feet
However, if it is all about natural gas futures trade, MMBtu or 1 million British thermal units are used. This is approximately 970 cubic feet of gas.
On the other hand, E&P companies use BOE or Barrels of Oil Equivalent. Calculating BOE is pretty tricky. You need to know the right energy conversion for BOE which is 6,040 cubic feet.
The good thing is oil quantity can be transformed into gas quantity. This is very identical to how gas producers utilize Mcfe to denote gas equivalency.
Why terms are important?
The natural gas reserves must be taken into account at all times. Oil and natural gas reserves are the ones included in the report. Remember that oil and natural gas reserves quantity are the ones that still lingering beneath the ground just like the bbl and mcf terms.
It is the determining factor to help in knowing the value of E&P companies and knowing their net worth. This is because they need to have oil and gas reserves company disclosure as part of their supplementary info.
The acquisition of new reserves is important for more revenue. This is why many E&P companies take time and spend their resources to search for virgin reservoirs. It is essential to search because reserves will surely decrease over time. It only entails that their net worth is reliant on their reserves.
Why do E&P companies outsource?
Believe it or not, E&P companies do not possess their own drilling equipment. This why they just outsource it to drilling companies to save costs in buying new equipment and hiring more workers.
The costs that they need to pay for drilling companies depend on the services that they will provide. The work does not stop after well drilling. The well will be maintained to ensure that production targets will be met. Take note that oil servicing and drilling are two different entities in this industry.