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. Natural Gas Equivalent

    Natural gas equivalent refers to the amount of natural gas needed ...
  6. Operating Income

    Operating income is the amount of money a company generates from ...
Related Articles
  1. Investing

    Key Financial Ratios to Analyze Oil Companies

    Learn about key financial ratios investors will want to use when analyzing oil companies, and what these ratios say about the future prospects for companies.
  2. Investing

    Key Ratios For Analyzing Oil And Gas Stocks

    Oil and gas investors need to focus on a different subset of ratios to analyze the growth and profitability of these companies.
  3. Investing

    Oil Prices' Impact On Oil Transport Sector

    Short-term changes in oil prices and in the volume of oil produced have a marginal impact on the oil transportation industry in Canada.
  4. Investing

    What a $20 USD Barrel Means For the US Oil Industry

    Read about Goldman Sachs' prediction that oil prices could go as low as $20 a barrel. Understand how low prices impact companies in the U.S. oil sector.
  5. Investing

    Should U.S. Producers Shut Down While Oil Is out of the Money?

    Should oil producers simply stop producing and wait for oil prices to recover? It may make sense for some producers to shut down in a $40 per barrel oil price environment.
  6. Investing

    Falling Oil Prices Could Bankrupt These Countries

    The price of crude oil has fallen sharply as of late, trading around $45 per barrel down from a high of over $100 just six months ago. Many oil-producing countries are feeling the pinch as oil ...
  7. Investing

    Guide To Measuring Oil And Gas Companies

    Here are some important stats to look for when measuring oil and gas companies.
  8. Investing

    The Strategic Oil Reserves Explained

    Strategic oil reserves are one of the least known and least understood national security measures in the United States.
  9. Investing

    5 biggest risks faced by oil and gas companies

    Learn about factors to consider, such as political and geological risks, before investing in gas and oil stocks.
RELATED FAQS
  1. What are average operating expenses for the oil and gas sector?

    Learn about the average operating expenses and average operating expenses margin for the oil and gas sector and how they ... Read Answer >>
  2. How does an oil and gas company measure and state its production?

    Learn the ways in which oil and gas companies measure and state production, and how much oil and gas is produced worldwide ... Read Answer >>
  3. What causes oil prices to fluctuate?

    Discover how OPEC, demand and supply, natural disasters, production costs and political instability are some of the major ... Read Answer >>
  4. 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 >>
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center