economics · volumetric value
Netback
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Inputs
$/STB
fraction
$/STB
$/STB
$/STB
Description
Computes operating netback — realized price net of royalty burden, lease operating expense, and transportation/processing cost, on a per-unit basis — the standard field-level cash-margin metric used across upstream oil & gas, alongside its margin as a percentage of net revenue. Deliberately pre-tax; see limitations before treating this as a complete COGEH-style netback.
Variables
| Symbol | Unit | Description |
|---|---|---|
| NB | $/STB | Netback |
| NB/NRev | fraction | Netback Margin |
| P | $/STB | Gross realized (pre-deduction) oil price, before royalty, operating cost, and transportation/processing deductions — same convention as economic_limit_rate's oil_price. |
| NRI | fraction | Net revenue interest applied to the realized price — royalty burden is netted out via NRI here rather than as a separate line item, the same convention economic_limit_rate/breakeven_oil_price already use. LOE, transportation, and processing below are NOT reduced by NRI — they are borne in full, the same treatment economic_limit_rate gives LOE. |
| LOE | $/STB | Lease operating expense per barrel — see the LOE per Unit calculator to derive this from total annual LOE and production volume. |
| T | $/STB | Cost to move production from the wellhead to its sales point, per barrel. |
| Pr | $/STB | Gathering, treating, or processing cost incurred before sale, per barrel. |
Assumptions
- Royalty burden is netted out via NRI applied to the realized price, not as a separate cost line — the same convention every other calc in this discipline uses.
- LOE, transportation, and processing costs are borne in full by the working interest and are not reduced by NRI.
- All cost and price inputs are measured on the same per-unit (barrel) and period basis.
- Pre-tax: no severance or ad valorem/production tax deduction is applied — see limitations.
Limitations
- Pre-tax by design — a full COGEH-style netback (the convention SEC-reporting Canadian E&P issuers use, per the Canadian Oil and Gas Evaluation Handbook) also nets out severance/production/mineral tax as a line item, which this calculator excludes. Some issuers' own more recent reporting has also dropped this line, but treat this result as an upper bound relative to a fully tax-inclusive netback, not a substitute for one.
- Single-stream (oil) economics, denominated in $/STB — a well with material associated gas/NGL revenue needs a separate gas-stream netback or a blended-BOE calculation this tool does not perform.
- A single constant price and cost set is used; real netback shifts materially with commodity price and can turn negative in a downturn even for a historically profitable well.
Use Cases
- → Field-level profitability screening: Compare the cash margin different wells or fields are actually generating after royalty, operating, and midstream costs, independent of corporate overhead or financing.
- → Recycle ratio input: Feed this result into recycle_ratio alongside a realized F&D cost figure to assess capital efficiency.
Related Calculations
Region Notes
General
Netback is the standard field-level profitability metric in Canadian E&P reporting in particular (per the Canadian Oil and Gas Evaluation Handbook); U.S. issuers report similar per-unit cash-margin figures under varying names and conventions — always confirm which cost lines a reported netback figure does and does not include before comparing across companies.
References
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