Inflation in the oilpatch – A review of operating cost trends and a sneak peek at the upcoming launch of BOE Intel


With the Q4 reporting season coming up, we thought it would be a good time to take a look at the current state of inflation in the oilpatch. We’ve put together lots of data from the last 5 years, and have presented it in our various charts below, which will be part of our BOE Intel offering that is coming soon. We currently have over 30 public companies included in our dataset, from a company as big as Canadian Natural Resources, down to the 5,000 boe/d producers. What’s become apparent in looking at the data is that due to an uptick in industry activity levels, combined with tightness in labour and materials, inflation does appear to be sticking.

Tourmaline noted as much in the company’s recent operational update, noting that “inflation was on average 7% higher in the second half of 2022 than the 18% inflation contingency previously assumed in the mid-2022 outlook.” If a company such as Tourmaline, one of the best operators in the business and one of the lowest cost producers, is seeing this type of inflation, then it is certainly something for the rest of the industry to pay attention to.

Through the end of Q3, operating costs industry-wide were up ~13% YoY based on our cross section of producers, from Q3 2021 to Q3 2022. The median E&P company in our list reported operating expenses of $12.10/boe in Q3 2022, up from $10.70/boe in Q3 2021. This level of operating costs is holding at a 5-year high, so the Q4 numbers will be watched closely during reporting season.

With commodity prices pulling back during the quarter, combined with some higher costs showing through, the median operating netback after hedging fell ~13% in Q3, from $44.20/boe to $38.60/boe. These are still very healthy margins for E&P producers, with those netbacks being almost double the levels seen in the pre-COVID years 2018 and 2019.

The charts included here all come from our upcoming release of BOE Intel, which will include financial and production data, as well as public well data and maps. Click the link to find out more, and stay tuned for the official launch of BOE Intel.

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