As commodity prices stabilize and operators transition from resource capture to development and consolidation, corporate planners and investors are turning their attention to full-cycle economics in their decision making. Full-cycle economics include land acquisition costs and corporate-level expenses, while half-cycle economics account for just the drilling, completing and tie-in costs and represent a binary “drill/no-drill” decision,Figures 1 and 2.

Full-cycle economics bring important yet often excluded costs back into the picture and answer a critical question: 

If an operator started from scratch and entered a basin at a given acreage value, what breakeven price does it need going forward for the investment to remain economic? Basins priced on a full-cycle basis are unlikely to receive attention, and operators will likely avoid deploying new capital, or consolidating, into these basins.

FIGURE 1 | Terminology of Economics

HALF-CYCLE: Drilling, Completion and Tie-In Costs No Corporate Overheard Costs (G&A)

3/4-CYCLE: Includes Facilities Capital Tied to Corporate-Level Capital Efficiency Includes G&A

FULL-CYCLE: Includes Land Acquisition Costs Does not Include Financing Costs

FIGURE 2 | Half-Cycle Breakevens for Major North American Plays

RS Energy Group
RS Energy Group
RS Energy Group's (RSEG) practical intelligence at the asset level and long-standing participation in capital markets bridges the gap between technical and operational information and the macro conclusions that impact your strategic decisions. RSEG has a dedicated team of geologists, data scientists, geological and petroleum engineers and financial analysts covering more than 150 companies operating in every key North American and many international energy plays.
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