DEFINITION of 'Operating Netback'

Operating netback is a measure of oil and gas sales revenue net of royalties, production and transportation expenses. This is a non-GAAP measure used specifically in the oil and gas industry as a benchmark to compare performance between time periods, operations and competitors.

BREAKING DOWN 'Operating Netback'

The operating netback measure is generally calculated based on the oil or gas selling metric, such as per barrel in the case of oil. It is the amount of money the company gets to keep per barrel after royalties, production costs and costs of transport are deducted. It is an industry specific benchmark.

Example of an Operating Netback

For example, suppose an oil company's Canadian operations sell oil at an average $50 per barrel if royalties, production and transport equal $5, $15 and $8 respectively. The operating netback for the Canadian operations equals $22 a barrel. The calculated operating netback can be compared to the specific operations' past performance or a rival company's performance in the same region.

RELATED TERMS
  1. Royalty Interest

    A Royalty Interest in the oil and gas industry refers to ownership ...
  2. Royalty

    A royalty is a payment to an owner for the ongoing use of their ...
  3. Royalty Units

    Ownership shares in a royalty trust, which usually own the income ...
  4. Royalty Income Trust

    A royalty income trust is a type of special-purpose financing ...
  5. Operating Earnings

    Operating earnings are profit earned after subtracting from revenues ...
  6. Working Interests

    Working interests is a term for a form of investment in oil and ...
Related Articles
  1. Investing

    3 Stocks to Invest in the Oil Transportation Industry

    Learn about the oil and gas transportation industry, and discover some of the best oil transportation stocks for investors to consider.
  2. Financial Advisor

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  3. Financial Advisor

    Is Now the Right Time to Buy Oil Stocks?

    Learn about the oil industry and how crude oil effects the prices of oil stock. Understand if now is a good time to purchase oil stock.
  4. Investing

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  5. Investing

    Who is Most Affected by Lower Oil Prices?

    With low oil prices affecting just about everyone, from citizens to corporations to entire nations, we look at who wins and who loses with the price drop.
  6. Investing

    Guide To Measuring Oil And Gas Companies

    Here are some important stats to look for when measuring oil and gas companies.
  7. Tech

    Tech Startups Eye the Oil Industry

    Although the oil and gas industries have plummeted, high tech companies and investors see promise.
  8. Financial Advisor

    The Biggest Oil Producers in Africa

    Discover which African countries produce the most oil, and learn more about which domestic and international oil companies operate in each country.
  9. Investing

    Long on Oil? Buy Canadian Dollars

    Discover why investing in the Canadian dollar can give investors exposure to the crude oil market without the risks of futures investing.
  10. Investing

    These 5 Countries Move the Supply of Oil

    Learn which countries are the largest source of change in the global supply of oil. Oil prices crashed in 2014 as supply increased and demand dropped.
RELATED FAQS
  1. Why are stocks and oil so correlated right now?

    Learn whether the stock market and oil prices will continue their highly correlated price relationship or decouple again ... Read Answer >>
  2. What economic indicators do oil and gas investors need to watch?

    Leading indicators for oil and gas investments are centered on the levels of production, consumer demand and inventory levels ... Read Answer >>
  3. What is a heavy oil differential and how does it affect oil producers?

    Learn what the phrase "heavy oil differential" refers to and the significance of heavy oil differentials for oil production ... Read Answer >>
Trading Center