Comparing ConocoPhillips’s Realized Price Effectiveness

Realized price effectiveness compares a company’s realized price with its production costs.

As shown in the above chart, in 1Q17, ConocoPhillips’s (COP) realized price, without hedging benefits, was ~159% above its production cash costs, and ~30% above its total production costs. These figures are much higher than those seen 4Q16, which can be attributed mainly to higher realized crude oil (USO) and natural gas (UNG) prices. Upstream companies Denbury Resources (DNR) and Devon Energy (DVN) have realized price effectiveness in terms of total production costs of ~39% and ~68%, respectively.

Realized price = oil and gas revenue scaled by total production

Production cash costs = production and ad valorem taxes + LOE (lease operating expenses) + transportation expenses + interest cash expenses + G&A (general and administration) cash expenses

Total production costs = DD&A (depletion, depreciation, and amortization) + cash costs