Production cost and breakeven cost are two separate costs , but production cost is part of the breakeven cost calculation.
1) Production cost is the cost it takes to get the BOE out of the ground and onto market, is $ per barrel or cents per MCF or $ per BOE.
2) Breakeven cost is the $ number per barrel, per MCF or per BOE that needs to be achieved for the company to get all it's money back spent on a particular project. That is a total cost number and includes , land acquisition costs, drilling costs, legal etc. Additionally, the costs to keep the well/ wells operating such as production costs, taxes, royalties, and gathering and compression costs, toilet paper etc, EVERYTHING are included . That number is derived by adding all expenses incurred , expected costs over the well lifetime and dividing that by the EUR or initial reserve that is expected to be produced over it's lifetime.
BRK have guided production costs at ~US$5-8 per BOE, where it will be a lower number in early production when the wells produce at greater flows and increases as production rates drop over time.
BRK have guided it's break even cost at ~US$ 25 -US$30 per BOE.... So if , just for example, the company spends US$ 9 million to drill, lease costs of US$ 1.5 million, legal , royalty at 20%, taxes, GG&A estimates etc for a total spend of US$ 50 million for a well, including the production cost and the well has 2.0 MMBOE reserves, it's break even cost will be estimated to be US$50/ 2 million BOE or US$ 25 per BOE.
Hope that makes some sense.
Cheers
Dan
BRK Price at posting:
2.6¢ Sentiment: Buy Disclosure: Held
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