Decision Economics · Module E4
Cost Structures and Break-Even Analysis
Building defensible CAPEX and OPEX assumptions and the break-even metrics that follow from them: lifting and finding costs, full-cycle economics, break-even oil price and break-even volume, cost overrun and OPEX escalation risk, and a volume–price viability matrix.
- Level
- Intermediate
- Position
- Module 4 of 8
- Video
- About 18 minutes, narrated
- Format
- Narrated video lesson and slide reading view; with the certified option, a quiz whose pass unlocks the next module.
What the module covers
- What CAPEX includes and how it is estimated
- OPEX and lifting cost per barrel
- Finding cost and full-cycle economics
- Break-even price and break-even volume
- CAPEX overrun and OPEX escalation risk
- The volume–price viability matrix
Learning outcomes
After the module you should be able to:
- Build defensible CAPEX/OPEX assumptions and break-even metrics.
- Document cost assumptions to a peer-review standard
- Compute break-even price and break-even volume
- Show how cost uncertainty moves the commercial boundary
A short preview
Break-even volume scales with capital. If a development needs 20 MMbbl to pay back its CAPEX at a given price and per-barrel margin, a 30 percent overrun raises that minimum to about 26 MMbbl, because each barrel still earns the same margin and there are 30 percent more dollars to recover. Overruns therefore move the commercial threshold directly, and a prospect that cleared its minimum field size by a small margin may not survive a realistic cost range.
Who it is for
Petrophysicists, geoscientists and reservoir engineers who need to connect technical work to investment decisions, and analysts new to upstream economics.
Prerequisites: None required; familiarity with volumetric estimates helps.
Take the module in the Learning Hub
Decision Economics: Eight economics modules from NPV framing through portfolio ranking and capstone. The lesson opens in the Learning Hub once the track is purchased; graded quizzes and the certificate come with the certified option.