Chapter 2: What Is It About Cash Flow?

So far, I’ve talked about cash flow in the very general sense of what it is and why it matters. Now I’m going to talk more specifically about the cash flows oil companies experience, which will occupy this chapter and the next two.

Some of the cash flows oil companies expect to receive and some of them they expect to incur are cash flows they ought to “know,” although by “know” I don’t mean know for certain. Rather, they’re cash flows that people in the company with particular knowledge and expertise can estimate—for example, how much oil the oil field will produce and what price it will sell for (and so, between them, how much revenue the oil will generate for the company), as well as what it will cost to build everything to do with accessing it (platforms and pipelines perhaps). The next chapter is about that sort of cash flow.