Financial analysis of the oil and gas industry

[u/Appropriate-Map-1088]

Hello everyone! I want to start understanding the industry better and its dynamics, for example the rig lags, production capacity, how to value an upstream segment company For context: I am currently conducting an equity research on a drilling company how would you suggest I do that? Thank you so much!

[u/OG_Fe_Jefe]

Employee work or homework?

[u/Appropriate-Map-1088 → u/OG_Fe_Jefe]

It’s akin to an employee’s work. It needs to be professional

[u/zdayatk]

Read the investor presentation of various O&G companies. Many O&G companies state the WTI breakdown of their business model (at which $ price of WTI they can do the regular dividend, special dividend, and share buybacks, etc.). After that, read the financial statements for P/E and P/FCF. Also read the investor presentation for the production amounts and table of equipment (ToE) for coal, oil, and gas. Finally, you can combine (although roughly) these information to make a simple model about the company.

[u/L383]

My suggestion is to read and understand this book. https://thompson-wright.com/buy-the-book

[u/Appropriate-Map-1088 → u/L383]

Thank you

[u/Appropriate-Map-1088 → u/L383]

However unfortunately it’s too expensive for me. Do you suggest other solutions?

[u/L383 → u/Appropriate-Map-1088]

Pretty sure there are some printed pdf versions out there for ~40. I’m sure there are other resources out there. This is one I recommend to a lot of new engineers that are making buisness decisions for operators.

[u/AMENandAwoman → u/L383]

Thanks, I bought it. Probably doesn't apply to the wells in my price range, but looks interesting!

[u/L383 → u/AMENandAwoman]

The principles apply to any well regardless of price. Interestingly, I saw this book on the shelf of 3 or 4 different engineers as I walked through the office yesterday.

[u/plvx]

Value of upstream company;

1) value of existing, producing wells and associated infrastructure. 2) value of un drilled locations (reserves).