Cobalt International Energy’s production costs and margins
In 2Q16, Cobalt International Energy (CIE) reported a negative cash margin and negative total margin. The company’s high total production cost can be attributed to its significant G&A (general and administrative) expense of ~$210 per boe (barrel of oil equivalent), a result of it still being in the appraisal and drilling phase, or discovery phase. CIE achieved its initial production of crude oil (USO) and natural gas (UNG) in 1Q16 and expects production volumes to grow in 2H16. This will bring down the total production cost per boe for subsequent quarters.
Other upstream players
Production cash cost is a sum of LOE (lease operating expenses), production and ad valorem taxes, transportation expenses, and G&A (general and administration) cash expenses. Total production cost is a sum of cash cost + DD&A (depletion, depreciation, and amortization).