Netback
Categories: Credit, Accounting
Most people might call it “gross profit.” But oil people are unique folk. Maybe it's all that time on offshore rigs, dreaming of mermaids, or the years spent in the desert sinking wells and dreaming...well, maybe of mermaids still.
Anyway, they have a different lingo. In the lexicon of oil terms, netback provides the bottom-line gross profit on a single unit of oil. But the figure doesn't just include the oil itself. It takes into account all the products that unit of oil got turned into (gasoline, heating oil, etc.).
Add up all costs related to bringing that one unit of oil to market, subtract that figure from the revenue generated from all the products that oil produced. The resulting figure provides the netback, with the number reported on a per barrel basis.
