Netback

AAA

DEFINITION of 'Netback'

A summary of all the costs associated with bringing one unit of oil to the marketplace, and all of the revenues from the sale of all the products generated from that same unit. The netback is calculated by taking all of the revenues from the oil, less all costs associated with getting the oil to a market. These costs can include, but are not limited to, importing, transportation, production and refining costs, and royalty fees.

INVESTOPEDIA EXPLAINS 'Netback'

For example, let's say it costs a total of US$125 to convert one barrel of light crude oil into heating oil, gasoline, diesel and petrochemical byproducts. Next, assume that all of those products could sell for a total of US$200. The netback in this example would be $75 ($200 - $125). Keep in mind that the costs associated with converting one barrel include all of the costs the company incurred to get that barrel to the marketplace.

This figure allows exploration and production firms to compare their costs with those of their competitors; it also allows for more efficient planning regarding which products a company should focus on producing.

RELATED TERMS
  1. Balance Of Payments (BOP)

    A record of all transactions made between one particular country ...
  2. Recycle Ratio

    An important measure of the profitability of an energy company. ...
  3. Import

    A good or service brought into one country from another. Along ...
  4. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  5. Dollar Drain

    When a country imports more goods and services from another country ...
  6. Land Rehabilitation

    A re-engineering process that attempts to restore an area of ...
Related Articles
  1. Getting A Grip On The Cost Of Gas
    Home & Auto

    Getting A Grip On The Cost Of Gas

  2. Commodity Prices And Currency Movements
    Forex Education

    Commodity Prices And Currency Movements

  3. 6 Factors That Influence Exchange Rates
    Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

  4. How can I hedge against rising diesel ...
    Trading Strategies

    How can I hedge against rising diesel ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center