How NOT to compare the efficiency of the various companies- deceptive charts in E&P companies’ investor presentations

This is a good follow-up from the previous post.  Shown above is a highly deceptive chart found on a presentation slide from Ultra Petroleum.  The suggestion is that UPL is the most efficient E&P company.  In fact, this chart is basically just displaying the oil weighting of the various companies.  Unconventional oil is more expensive to produce than unconventional gas on a BOE basis.  Wet gas falls in the middle.  So you have the companies on the right side, Oasis, Kodiak, Marathon, Whiting, which are basically oil companies that produce only small amounts of gas.  Then you have the companies on the left side that are more or less gas producers.  The ones in the middle tend to have more of a mix of oil and gas or are more NGL heavy gas producers.  But because oil sells for more money than gas on a BOE basis, from a financial standpoint, many of the companies on the right side have returns on capital that are as good or  better than UPL.  Also, if you take a company like RRC’s dry gas production and compare it to UPL’s dry gas, UPL will no longer look so attractive.

Many E&P company presentations are riddled with slides like these.  Other common practices that are highly vulnerable to manipulation include comparing initial production rates from wells, comparing cash margin per BOE, comparing F&D costs.  Whenever there is a huge line of companies being compared on some oil and gas metric in a company presentation, it is typically a cherry-picked statistic totally removed from context and intended to deceive people into thinking that this particular company is a superior operator.  They are often are pulled from Wall Street sell-side research so that they seem more impartial, but then are removed from all context.