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A Look at ConocoPhillips’s Realized Price Effectiveness

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What is realized price effectiveness?

Realized price effectiveness is defined as excess or shortfall of a realized price to a cost item, scaled by cost item. In other words, realized price effectiveness tells us how much higher or lower a company’s realized price is compared to its production costs.

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ConocoPhillips’s realized price effectiveness

As you can see in the above graph, realized price effectiveness tells us that for 3Q16, ConocoPhillips’s (COP) realized price, without hedging benefit, was ~77.0% above its production cash cost and ~16.0% below its total production cost for the same quarters.

Almost all other upstream companies, including Murphy Oil (MUR), Southwestern Energy (SWN), and Range Resources (RRC), have reported a negative 3Q16 realized price effectiveness in terms of total production costs.

Definitions

  • realized price: 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 administrative) cash expenses + interest cash expenses
  • total production cost: cash cost + DD&A (depletion, depreciation, and amortization)
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