Industrywide drillbit finding and development (F&D) costs dropped 4% over the preceding year, while all-in F&D costs increased just under 2% year-over-year, according to an analysis conducted by Global Hunter Securities LLC. The anomaly makes sense to the researchers.

“Neither metric surprises us, as operators are getting more efficient as they move into manufacturing mode (pad drilling mixed with the simple benefit of experience is knocking well costs down), while at the same time, spending a record amount of money on acquisitions that have immaterial amounts of reserves associated with them (proved reserves are no longer a requirement in the resource paradigm we are now a part of),” according to the June 2 report, led by senior exploration and production (E&P) analyst Mike Kelly.

Average adjusted drillbit costs dropped from $27.50 per barrel of oil equivalent (boe) in 2012, the second year it declined, to $26.41/boe in 2013. Conversely, adjusted all-sources F&D costs increased to $29.07/boe from $28.67/boe in 2012.

Global Hunter’s annual Finding & Development Cost Study examines year-end reserve data from 100 of the largest domestic, public oil and gas companies. Unique to GHS’ analysis, its adjusted findings calculations add estimates of future development costs when considering proved undeveloped reserves (PUDs) booked during the year.

Using these metrics, all-sources adjusted F&D leaders for 2013 were: EV Energy Partners LP (NASDAQ: EVEP) with $4.15/boe, Cabot Oil & Gas Corp. (NYSE: COG) with $4.77, Antero Resources Corp. (NYSE: AR) with $5.25, Range Resources Corp. (NYSE: RRC) with $5.67, and EQT Corp. (NYSE: EQT) $5.93. Drillbit-only F&D leaders were EV Energy Partners with $3.48/boe, Ultra Petroleum Corp. (NYSE: UPL) with $3.64, Cabot with $4.52, Antero with $4.75 and Range with $5.19.

“E&Ps are ultimately price takers, so being a low-cost producer means better returns,” the report said.

The leader board looks significantly different when year-end reserve adds are incorporated into the mix.

“The companies that have performed the best in this category on year-end reserves were gas-weighted due to positive revisions,” according to the analysis. “During 2013, we witnessed unprecedented positive revisions due to gas prices that were approximately 22% above the price used to calculate reserves at year-end 2012.”

Using this lens, and without adjusting for estimated future costs to develop these reserves, the companies that rise to the top are Quicksilver Resources Inc. (NYSE: KWK) with $1.62/boe, Evolution Petroleum Corp. (NYSE MKT: EPM) with $1.66, Antero with $1.72, EV Energy with -$3.02 and Consol Energy Inc. (NYSE: CNX) with $3.09.

The analysts sliced and diced the data a number of ways. When evaluating efficiency and value creation, the self-stated favorite methods to determine value leaders are recycle ratios, “a solid proxy of return on capital for an E&P,” and production growth per debt-adjusted share, “a better assessment of growth vs. the top-line absolute figure,” according to the analysts.

Rising consistently to the top over the past three to five years are Continental Resources Inc. (NYSE: CLR), Cabot, EQT and Range, with returns exceeding 33% and 31%, respectively, vs. the typical E&P yielding 1% and 13% annually over three and five years.

The first factor, recycle ratio, measures cash earned per boe produced vs. the investment, including leasing, seismic, drilling and infrastructure costs.

“To us, it’s a quick and dirty way to gain a good sense of whether a company is making a solid return on investment,” Kelly said. “Our rule of thumb is that assets with high cash-operating margins and low F&D costs produce a superior recycle ratio, which leads to higher organic or debt-adjusted per-share growth rates—which in turn translates into share price outperformance.”

The 2013 top five recycle ratio leaders, according to the report, are Warren Resources Inc. (NASDAQ: WRES) with 4.18, Continental with 3.69, EV Energy with 3.62, Freeport-McMoRan with 3.36 and Cabot with -3.34.

The analysts’ second favorite measure of value creation—production growth per debt-adjusted share—reveals whether companies are growing production for the benefit of shareholders, or rather “to show tall bars” in presentation slides.

“Too often, companies highlight absolute production growth that was only accomplished by diluting shareholders through the issuance of debt or equity,” Kelly notes. “We like this metric because it isolates the growth in production that shareholders can truly stake claims to. If a company doesn’t have competitive margins and F&D costs, it is nearly impossible to outperform the industry average on this metric.”

Using this metric, GHS shows three-year top performers as Sanchez Oil & Gas with 96%, Kodiak Oil & Gas Corp. (NYSE: KOG) with 65%, Ring Energy Inc. (NYSE MKT: REI) 55%, SM Energy Co. (NYSE: SM) with 35% and Cabot with 33%. Five-year leaders are Kodiak with 52%, Miller Energy Resources Inc. (NYSE: MILL) with 51%, Northern Oil and Gas Inc. (NYSE MKT: NOG) with 38%, Cabot with 35% and EQT with 28%.

For 2013 acquirers, the top performers for acquisition F&D cost per boe were EQT with $2.36/boe, Ring Energy with $5.36, EV Energy with $5.59, Bonanza Creek Energy Inc. (NYSE: BCEI) with $7.31 and Noble Energy Inc. (NYSE: NBL) with $8.71.

“Buying PUDS benefits this calculation, while buying unproved acreage will negatively inflate this measure,” notes the report.