Oil Company Valuation

One method available to value oil company stocks is according to their proved reserves. One thing to keep in mind though when doing so is that those proved reserves are an estimate. What I thought would be interesting is to see what the value of the proved reserves are for a few oil companies. What I have done is to take their stated proved reserves as BOE equivalents and determined what they are currently being sold for based on the market price of the stock as of Feb 27, 2009.

So here we go.

Anadarko APC $7.17/barrel
Apache Oil APA $8.04/barrel
Chesapeake CKH $4.41/barrel
Chevron CVX $15.65/barrel
Conoco COP $8.40/barrel
Devon DVN $7.99/barrel
EOG EOG $8.63/barrel
Exxon Mobil XOM $26.40/barrel
Hess HES $12.40/barrel
Marathon MRO $13.81/barrel
Noble Energy NBL $9.11/barrel
Occidental OXY $14.66/barrel
Talisman TLM $5.71/barrel
XTO Energy XTO $7.94/barrel

Of course there is more to evaluating an oil company than the cost of their reserves. There is also the cost of delivering that oil to market. I have not addressed that cost here. There are some interesting things to note here. A couple of the integrated oil companies are considerably more expensive per barrel of reserves than are the production companies. Of course they have a much larger invested capital than the production companies. But one must wonder whether they are perhaps over valued currently. The other thing of note is that the cost per barrel currently is between $8.00 and $9.00 a barrel for the majority with two notable exceptions--TLM and CHK. TLM is a Canadian company which has recently become subject to increased taxation. CHK has had some interesting problems including a CEO who unwisely leveraged his company stock and got it yanked out from under him by margin calls. Perhaps that is not the only unwise move he has made.