Q4 results: What to focus on

[dan_s]

Read this: https://finance.yahoo.com/news/3-excell ... 00483.html

Most investors focus on earnings per share, which is not the best way to value an upstream company. SEC / GAAP rules are so screwed up for upstream companies that IMO the last thing you want to focus on is "Reported Earnings". "Adjusted Earnings" are what you should compare to my forecasts and First Call forecasts.
1. Cash flow from operations should be at the top of your list. Wall Street is very focuses on "Free Cash Flow" now.
2. Production and proven reserve growth are also very important. Remember the year-end reserves are extremely conservative because of SEC regulations. They must be reviewed and signed off on by 3rd engineering firms. All of the companies use the "Units of Production Method" to calculate DD&A expense, so proven reserves at year-end have a big impact on future net income.
3. It is very important that upstream companies have "running room", lots of high quality drilling inventory.
4. Liquidity. This is an extremely capital intensive business.