Realized price effectiveness
Realized price effectiveness tells us that for 1Q16, Pioneer Natural Resources’ (PXD) realized price, without any hedging benefit, was ~39% above its production cash cost and ~39% below its total production cost for the same quarters.
Realized price effectiveness definition
Realized price effectiveness is defined as an excess or a shortfall of a realized price-to-cost item, scaled by cost item.
The following calculation breakdowns should help explain the above metrics:
- Realized price equals oil and gas revenues scaled by total production.
- Production cash cost equals LOE (lease operating expenses), plus production and ad valorem taxes, plus transportation expenses, plus G&A (general and administration), cash expenses, and interest cash expenses.
- Total production cost equals cash costs plus DD&A (depletion, depreciation, and amortization).
Now let’s discuss PXD’s lifting costs.