Abstract: Aiming at the problems in the middle-late period of oilfield development, such as increased water cut, declined production and increased cost, the break-even analysis principle has been applied, and then the economic limit water cut model of oil wells has been established. Through reservoir engineering, the economically recoverable reserves have been calculated. The example calculation analysis indicates by using this method, the economic production and the economically recoverable reserves under different costs can be easily calculated.