Breakeven Price
The oil or gas price at which a well or drilling program just covers its costs. It governs whether operators drill, complete, or shut in wells.
Breakeven price is the commodity price — dollars per barrel of oil or per Mcf of gas — at which a well or a drilling program exactly covers its costs and earns zero economic profit. Below that price the project loses money; above it, the operator makes a return. It is the single number that most cleanly answers whether drilling pencils out.
What goes into the calculation depends on the question. A drilling breakeven includes the upfront cost to drill and complete a well plus future operating expense, royalties, and taxes. A lower "shut-in" breakeven only needs to cover ongoing operating costs to keep an existing well producing. Top-tier acreage in the Permian's Delaware Basin breaks even at a far lower price than marginal fringe acreage.
For a mineral owner, breakeven explains operator behavior. When prices sit well above breakeven, rigs show up and your undeveloped locations get drilled; when prices dip below it, drilling stalls and checks shrink. See how this feeds value in our value guide.