One BOE is officially equivalent to 42 US gal (159L) of crude oil or its equivalent energy content in other products such as natural gas or liquefied petroleum products. It is used by investors and energy companies as a way of comparing different energy sources, based on their common energy content per unit of volume. This simplifies the comparison of production and reserves across different types of energy resources.

In the energy sector, most investment decisions are based on the economic costs, revenues and/or profitability of producing energy units. One BOE is a useful tool to compare energy from different sources in a common unit based on energy content. This helps to eliminate the variety of units used to report energy production, such as barrels of oil, cubic feet of natural gas, kilowatts of electricity and therms.

For the measurement of reserves and production, BOEs are typically averaged over a daily, monthly or annual output. BOEs are also used to standardize production and reserves data reported by oil and gas companies in their financial statements. This allows simpler comparison between companies and across time periods.

For example, a company may have 200 BOE/D of production that includes 100 barrels of oil, 2 million cubic feet of natural gas and 2 barrels of liquefied petroleum products. Converting the production in this example to the equivalent barrels of oil, we get: 100 + (2 million ÷ 6,000) + (2 ÷ 42) = 100 + 333.3 + 0.47 = 433.77 BOE/D.

BOEs are a useful mechanism for comparing energy companies, since they allow investors to compare oil and gas production on an equal basis. The measure will vary depending on the mix of products produced, and production levels may be volatile. However, the reporting of production in BOE/D provides investors with a snapshot of the company’s performance and provides a basis for more detailed analysis.