corporate play afoot ?, page-14

Lots of metrics to use for oil companies.

Certainly I'm no expert but $100K per flowing barrel of oil seems to be "fair value". AOK MC seems to reflect this fairly well if you go by the published flow rates rather than estimates based on the most recent IP rates.

If you are valuing by the acre, then you must take into account the quality of the acres re: margins and recoverable hydrocarbons. This then gets into well costs, decline rates, oil:gas ratios, reproducibility, reserves, transport costs, well spacing etc.

As a simple example, if oil trades at $80/bbl and you have two companies:
- Company A: Can produce at $40/bbl and owns 5,500 acres
- Company B: Can produce at $60/bbl and owns 75,000 acres

The margins for company A are much higher. They make twice as much profit per barrel. A small amount of capital unlocks alot of cashflow so they become self sustaining much quicker and therefore grow much faster. They are also more protected from market down turns (what if oil droped to $60/bbl?), and other risks.

Personally I prefer to pay more money for the better acreage (Company A) but many would rather buy cheaper acres (Company B)