Debt-Adjusted Cash Flow - DACF

Oil and gas companies rely on large industrial efforts. You can't start one in your kitchen and build it on the weekends, like your Aunt Sue does with the homemade jewelry she sells on Etsy.

To drill for oil and gas, you need big machines that require big supplies of cash to purchase. Therefore, oil and gas ventures often start in the hole, as it were, with large debt loads. This fact makes it difficult to judge the value of these operations, so a simple look at cash flow won't do the trick.

Other financial measures are necessary to get an idea of what's going on. Debt-adjusted cash flow is one of these more specialized measures. To figure out the measure, you add cash flows from the company's operations with its after-tax costs for finance.