Operators may largely have their hands tied when it comes to controlling the price of oil, but they can, and have, significantly pared the costs of producing a barrel (bbl). Cutting-edge technology and the pressures applied by the downturn in recent years compressed the global marginal cost (the cost to replace reserves) for non-OPEC producers to $63/bbl in 2016, a 12% decrease from the year previous. (All prices are in US dollars.)

This is according to a Bernstein Research survey of the 50 largest listed global oil and gas companies. This marginal cost now is equal to the breakeven point of 2006 and represents an impressive decline of almost 40% since the peak in 2013, according to the Bernstein analysts, led by Neil Beveridge.

The analysts determined that the global marginal cash cost of production—which represents the floor in oil prices below which it is uneconomic to produce a barrel—fell by 8% last year to $28/bbl.

The survey results of average unit production costs imply that producers can prosper at $45, not that they would not welcome a higher level and stability. The global average unit production cost fell by 8% to $30 per barrel of oil equivalent, “which implies the industry needs $45 to ‘break even’ in aggregate (hence the lack of positive earnings in 2016,” the analysts said. Leading the deflation were exploration costs (down 29% year-over-year), followed by production costs (down 11% over the same period) and SG&A (down 14%). DD&A held steady and net interest costs climbed slightly.

Shale-driven North American E&Ps—even those that have historically been highest on the curve—led cost reductions, not surprisingly. National oil companies (NOCs), however, moved in the opposite direction on the curve, “as resource complexity and depletion continues to push up production and development costs,” according to the report.

After the long period of cost declines, oil prices fell by a larger amount that producers could make up with smarter business strategies and technology. As a result, “the average industry profitability has turned negative for the first time in the past few decades.” In 2016, net income margins for the 50 largest companies in Bernstein’s survey were less than 3% or more versus a strong 30% in 2006. “Average organic free cash flow was just about $2.2/boe, despite the 18% capex cut highlighting the continued reliance of the sector on external funding,” the analysts said.

As commodity prices firm this year, as is widely expected, cost cutting will bottom out, the analysts said. In some places, they may increase, a trend many E&Ps have already experienced. “We suspect we’re getting close to the bottom of the range in what’s possible, although there is certainly no indication of a return to rampant inflation, either.”

The Bernstein analysts also noted that the marginal cost as well as the marginal cash cost are backward-looking metrics, and that as OPEC continues to support production cuts and market rebalancing, oil prices should “in theory revert to marginal cost. Last year this was just above $60/bbl, which is almost 20% above the current long-term oil price ($50/bbl).