Netback is an important tool that oil producers use to evaluate their production operations. Netback is a summary of all costs associated with bringing one unit of product to the marketplace. The netback is a way of measuring the profitability of production on a dollar or unit basis. It is calculated by taking the revenue obtained from the sale of the oil minus the cost of production and other associated expenses.

Netback pricing is used to compare different producers of the same commodity. It also allows producers to compare their own production from different fields or different locations. By looking at netbacks over time, producers can more easily measure the cost effectiveness of their operations.

Netbacks are used to compare producers with different production and export costs, for example those with different field locations or the shape of their yield curves. By comparing netbacks, producers can optimise their production strategies and production operations.

Netback prices can also be used to calculate transportation costs, royalty and other costs associated with production. This is done by taking (or subtracting) directly from the market prices, incoming charges and other costs. By calculating these costs, producers can ensure that they make the most efficient use of their production operations and optimise their cash flow.

In conclusion, netback pricing is an important tool that oil producers use to evaluate the profitability of their production operations. It helps them compare their cost effectiveness over time, compare the revenue between different producers, and calculate transportation and other associated costs. By understanding the netback, producers can make better decisions about their production operations, optimise their cash flow and ensure the best possible return on their investment.