Production Per Share

Production per share is an indirect profitability measure used in the oil and gas industry. The ratio is the number of barrels of oil per day or cubic feet of gas per day divided by the total number of shares of the producing company. The production per share ratio is one of several measures of financial health of an energy-producing company.

Obviously, the higher the production per share, the more potential for profitability for an exploration and production (E&P) company. It is normally the case that a greater ratio leads to greater profits, but if the development, extraction and other operating costs are also elevated, the energy firm may have lower profitability margins. Additionally, the amount of capital expenditure required to boost production must be kept in mind. Management and stock analysts track production per share over time frames that are long enough to smooth out short-term peaks and valleys that could be caused by a number of factors such as adverse weather (e.g., hurricanes), unusually favorable weather (e.g., extremely cold winter), pipeline capacity availability, conflict in the Middle East, etc. These production per share figures will also be compared to those of peers to discern differences in operational efficiencies. An underperforming ratio can be addressed by management through additional investments, abandoning unproductive wells, adjusting extraction techniques, and even lowering outstanding shares, if feasible, through share repurchases.

Suncor, a Canadian firm, reported a production compound average growth rate (CAGR) of 6% per share for 2012-2016. During that period, the shareholder dividend grew from C$0.50 per share to C$1.16 per share, indicating that increases in production per share were linked to higher shareholder returns. The company's planned production CAGR per share for 2016-2019 is 10%, suggesting that more rewards could be on the way to shareholders as long as operating costs are controlled.