Breakeven Costs: An Industry Review Since 2009

Abstract Our research compares corporate breakeven costs since the 2008 Securities and Exchange Commission (SEC) Modernized Rules, offering valuable insight into industry trends. Analysis reveals that corporate and basin-specific breakeven costs can be misleading without proper context. We found that from 2009 to 2022, the median and average breakeven price of all publicly traded companies in barrel of oil equivalent (BOE) were $47/BOE and $59/BOE, respectively. Unfortunately, the median and average realized revenue for these same companies was $45/BOE and $53/BOE. Market capitalization substantially impacts breakeven costs and realized revenue. Many perceive small companies to be much more efficient operators with lower breakeven prices, but the data provides a compelling argument to the contrary. The inclusion of capital costs, taxes, and debt as well as non-cash items like depreciation, depletion, and amortization (DD&A) also provide noteworthy observations when grouped by market capitalization. The results inform corporate profitability, operating efficiency, and the capital-intensive nature of the industry. Our research compiled more than a decade of corporate annual filings from over 130 publicly traded companies. We compared balance sheets, income, and cash-flow statements with reported reserves data. We used two distinct methods with variations of each to verify and validate calculations. Summing the total expenses and dividing by total production, normalized to BOE, provided the basis for determining breakeven operating costs. Expanding upon this to include capital costs, taxes, and total debt, all per BOE, begins to enlighten the industry on our true breakeven costs. This research offers valuable insight into key financial measures within our industry while also providing context for engineers, financial analysts, investors, and the public.