Boa equivalent to MMcf/d.... but whats it all mean?

So we all know they relate wells by their "equivalent" but what are they really equaling it to?

As an example..

Well #1 puts out 40mmcf/d of methane

The equal is somewhere around 7500 barrels of oil a day

So, what does it really tell us though.... if well #1 was putting out 7500 barrels of oil a day is that the same royalties as 40mmcf/d of methane?

Is it the amount of space one takes up?

Whats it all mean?

Thanks!

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Permalink Reply by jason irvine on June 12, 2014 at 6:14am
I believe it is barrel of oil equivalent so instead of having three different measurement. Oil NGL and gas it makes it all one.
Permalink Reply by Dexter Green on June 12, 2014 at 6:35am

"So, what does it really tell us though.... if well #1 was putting out 7500 barrels of oil a day is that the same royalties as 40mmcf/d of methane?"

Not even close.  It is merely an energy equivalency. 

40,000 MCF= $180,400  vs. 7,500 bbl= $783,000 (all at current market price)

Permalink Reply by Bill Barnaby on June 12, 2014 at 6:36am

So it's merely a comparison of btu's basically? That's what I figured but was not 100% sure

Permalink Reply by Philip Thackray on June 12, 2014 at 9:37am

6000 (some use 5800) cubic feet of natural gas is energy equivalent to 1 barrel (42 gallons) of oil.  If a quantity of something contains the btu content of 1 barrel of oil then that quantity of whatever can be labeled 1 Boe (Barrel of Oil Equivalent).  So 6000 cubic feet of gas = 1 Boe.  However, as Dexter demonstrated above 6 mcf of natural gas is worth a LOT less than 1 barrel of oil (see prices at the top of the page).  So Boe cannot be used to determine the financial output of well unless the composition of the well output is known.  So royalties cannot be computed just from Boe.

Phil

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