Exploration Drilling Break-Even Analysis: $147K To Cover Overhead

Fixed costs $90.2K/mo Monthly fixed base

Contribution margin 70% After variable costs

Break-even revenue $128.9K/mo Cover fixed load

Break-even timing Month 4 Model breakeven point

Break-even calculator

Test monthly revenue against variable expenses and fixed costs to see where break-even lands.

Lean Base Full

Monthly revenue Revenue sets the pool that can cover direct costs and fixed overhead. $ Low sales High sales Variable expenses These are the direct costs that rise with drilling revenue, like consumables, fuel, logistics, and outside support. $ Low direct cost High direct cost

Money available to cover fixed costs $76,005 $102,020 revenue - $26,015 variable expenses

Margin ratio

75%

Covers fixed costs

$14,212 short

Fixed monthly costs This is the monthly cost base contribution margin has to cover. $ Lean overhead Heavy overhead

Break-even chart Revenue Total costs

Which exploration drilling expenses are fixed, and which move with sales?

Cost classification

Break-even is only useful if fixed salaries and rent are separated from job-linked field costs. The $3.785M early equipment spend affects cash runway, not operating break-even revenue.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent & Facilities	Fixed	Use $5,000 per month in fixed overhead from Month 1 through Month 60.	Scaling rent as a percent of revenue.
Business Insurance & Permits	Fixed	Use $2,500 per month as a standing operating commitment.	Treating permits as job-variable without contract recovery.
CEO / Lead Geologist payroll	Fixed	Use 1.0 FTE at $180,000 per year in monthly fixed payroll.	Leaving technical leadership out of break-even overhead.
Drill Crew Member payroll	Semi-fixed	Model capacity steps: 2.0 FTEs in the first year, rising to 8.0 FTEs by year five.	Treating crew payroll as fully variable per drilling hour.
Drilling Consumables & Minor Repairs	Variable	Reduce field margin by 12% of revenue in the first year, falling to 8% by year five.	Burying repairs inside overhead instead of field margin.
Fuel & Lubricants	Variable	Reduce revenue by 8% in the first year, falling to 6% by year five.	Holding fuel flat while billable hours grow.
Project Mobilization & Logistics	Variable	Charge 6% of revenue in the first year, falling to 4% by year five.	Treating mobilization as fixed when it moves by project.
Third-Party Geological Support	Variable	Apply 4% of revenue in the first year, falling to 3% by year five.	Treating standby as free when contracts may cap recovery.

How does break-even change across lean, base, and full drilling scenarios?

Scenario table

Lean volume sits at the edge of break-even, while the base plan gives a cushion and the fuller case shows how extra payroll and marketing can eat into it. The break-even line moves with utilization and cost mix.

Planning assumptions only; actual contract volume and cost mix can shift break-even.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean drilling ramp	$1,467K	$440K	$1,027K	70%	$0	Near break-even; small volume swings matter.
Base first-year plan	$2,260K	$678K	$1,027K	70%	$555K	Healthy cushion, but fixed overhead still sets the pace.
Full utilization run-rate	$3,545K	$744K	$2,319K	79%	$482K	More revenue helps, but added payroll and marketing absorb much of the gain.

How much downtime or cost pressure can this drilling plan take before break-even slips?

Stress test

Base revenue is $2.26M, and the cushion is real but not wide. Weather delays, fuel spikes, repair overruns, standby time, and underuse are the fastest ways to push this plan back toward break-even.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$1.705M	$555K cushion	The plan clears break-even, but the buffer can shrink fast.
Revenue shortfall	Billings fall 20%.	$1.569M	$239K cushion	A small volume miss cuts most of the safety margin.
Fixed-cost pressure	Overhead rises 15%.	$1.688M	$401K cushion	Higher overhead eats cushion even if work stays steady.
Margin pressure	Field expenses rise to 40%.	$1.712M	$329K cushion	Fuel and repair pressure push the floor up fast.
Combined pressure	Revenue falls 20%, field spend rises to 40%, and overhead rises 15%.	$1.969M	$161K gap	This mix creates a $96K operating loss and leaves little room for delay.

What should you verify before you commit to the first exploration drilling rig?

Founder checklist

Do not commit to the first rig until signed or near-signed work can clear the $1.467M monthly break-even and cash can survive the Month 6 trough. The model shows minimum cash at negative $2.563M, so runway is the real gate.

1Demand proof$1.467M/mo

Verify signed or near-signed drilling billings can hit break-even before you lock the rig, because backlog has to exist before steel does.

2Fixed burn$19.8K/mo

Here’s the quick math: office, utilities, insurance, software, legal, R&D lease, and vehicles total $19.8K a month before wages.

3Contribution70% CM

Here’s the quick math: Year 1 variable costs add to 30%, so contribution margin is 70% before fixed burn.

4Service mix40/35/20/10

Check that Year 1 work lands near 40% mineral, 35% oil and gas, 20% geotechnical, and 10% data analysis, because pricing and crew time depend on that split.

5Crew ramp2 crew + 1 sup.

Confirm two drill crew FTEs plus one supervisor can cover Year 1 starts, and the full wage plan still totals $845K a year.

6Cash runway-$2.563M

Protect cash through Month 6, when minimum cash turns negative, and only move ahead after the $3.785M early capex is funded and mobilization billing is set.