Marathon Oil’s realized price effectiveness
For 3Q16, realized price effectiveness tells us that Marathon Oil’s (MRO) realized price, without hedging benefit, was ~85% above its production cash cost and ~13% below its total production cost for the same quarter.
Sequentially, MRO’s 3Q16 realized price effectiveness in terms of cash cost increased from ~55% in 2Q16 to ~85% in 3Q16. This higher realized price effectiveness in terms of cash cost can be attributed to the ~18% sequential decrease in MRO’s cash cost.
Realized price effectiveness
Realized price effectiveness is defined as the excess or shortfall of realized price to cost item, scaled by cost item.
Realized price is defined as oil and gas revenue scaled by total production.
Production cash cost = LOE (lease operating expenses) + production and ad valorem taxes + transportation expenses + G&A (general and administration) cash expenses + interest cash expenses.
Total production cost = Cash cost + DD&A (depletion, depreciation and amortization).