Recycle Ratio

DEFINITION of 'Recycle Ratio'

An important measure of the profitability of an energy company. The higher the recycle ratio, the greater the profitability of the company.

The recycle ratio equals the profit per barrel divided by the total cost of discovering and extracting that barrel (more commonly known as the netback divided by the finding and development costs).

BREAKING DOWN 'Recycle Ratio'

The recycle ratio can often be found in the quarterly report of a company, and it can be used in advertising if the ratio is good enough. However, this ratio can be computed somewhat differently by different firms, depending on their accounting practices. Therefore it may not always provide an exact measure of profitability.