Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Diamondback Energy Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,031 – 28.11% × 21,230 = -2,937
The financial analysis for the period from 2017 to 2021 reveals a consistent failure to generate positive economic profit, indicating that the company's operating returns did not exceed its cost of capital. While there was a notable recovery in performance toward the end of the period, the overall trend is characterized by significant volatility in profitability and capital allocation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme fluctuations, starting at 521 million USD in 2017 and peaking at 3,031 million USD in 2021. A critical downturn occurred in 2020, where NOPAT collapsed to -5,563 million USD, representing the lowest point of operating performance in the analyzed timeframe.
- Invested Capital Trends
- There was a substantial expansion of the capital base between 2017 and 2018, with invested capital increasing from 7,167 million USD to 20,304 million USD. Following a moderate decline to 16,329 million USD in 2020, the invested capital grew again to 21,230 million USD by the end of 2021.
- Cost of Capital
- The cost of capital remained high throughout the five-year span, beginning at 32.45% in 2017. A downward trend was observed through 2019, reaching a period low of 23.84%, before increasing again to 28.11% by 2021.
- Economic Profit Analysis
- Economic profit remained negative for every year in the sequence, confirming that the company destroyed shareholder value over this period. The deficit peaked in 2020 at -9,505 million USD, driven by the simultaneous occurrence of negative NOPAT and a high cost of capital. By 2021, although still negative, the economic profit improved significantly to -2,937 million USD, reflecting the recovery in operating profits.
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Net Operating Profit after Taxes (NOPAT)
Diamondback Energy Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Diamondback Energy, Inc..
3 2021 Calculation
Tax benefit of interest expense, less capitalized interest = Adjusted interest expense, less capitalized interest × Statutory income tax rate
= 189 × 21.00% = 40
4 Addition of after taxes interest expense to net income (loss) attributable to Diamondback Energy, Inc..
5 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 1 × 21.00% = 0
6 Elimination of after taxes investment income.
The financial performance from 2017 to 2021 is marked by extreme volatility in both operational and net profitability. A cyclical pattern is evident, characterized by an initial growth phase, a period of sharp decline culminating in a substantial loss, and a subsequent rapid recovery that exceeded previous peaks.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced an initial increase from 521 million US$ in 2017 to 1,175 million US$ in 2018. This was followed by a contraction to 495 million US$ in 2019 and a severe collapse in 2020, reaching a deficit of 5,563 million US$. By 2021, NOPAT rebounded strongly to 3,031 million US$, marking the highest operating profit within the observed timeframe.
- Correlation Between NOPAT and Net Income
- A strong positive correlation is observed between NOPAT and Net Income, as both metrics mirrored each other's trajectory across the five-year period. NOPAT consistently remained higher than Net Income during profitable years, suggesting that non-operating expenses, such as interest payments, exerted downward pressure on the final net earnings relative to the core operating performance.
- Operational Volatility Analysis
- The period between 2019 and 2021 highlights a significant variance in operating efficiency. The transition from a profit of 495 million US$ in 2019 to an operating loss of 5,563 million US$ in 2020 indicates a period of severe operational distress. However, the recovery to 3,031 million US$ in 2021 demonstrates a high degree of operational elasticity and a rapid return to profitability.
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Cash Operating Taxes
Diamondback Energy Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of tax-related financial metrics between 2017 and 2021 reveals a period of significant volatility, characterized by a sharp divergence in 2020 followed by a strong recovery in 2021. While cash operating taxes remained relatively stable in the early part of the period, the later years demonstrate substantial fluctuations that correlate with the overall tax provision.
- Cash Operating Tax Trends
- A gradual increase in cash operating taxes is observed from 2017 to 2019, rising from 14 million US dollars to 35 million US dollars. This upward trajectory was interrupted in 2020, when the figure shifted to a negative value of 22 million US dollars, suggesting a tax refund or a net cash inflow from tax authorities. By 2021, cash operating taxes rebounded sharply to a period high of 64 million US dollars.
- Comparative Analysis of Tax Provisions and Cash Outflows
- The provision for income taxes exhibited much higher volatility and magnitude than the actual cash operating taxes. In 2020, a substantial tax benefit of 1.104 billion US dollars was recorded in the provision, whereas the cash impact was limited to a 22 million US dollar inflow. This significant disparity indicates that the majority of the 2020 tax benefit was non-cash in nature, likely resulting from deferred tax adjustments or valuation allowance changes.
- Fiscal Year 2021 Recovery
- The year 2021 marked a reversal of the previous year's trends for both metrics. The tax provision shifted from a massive benefit to an expense of 631 million US dollars, while cash operating taxes increased to 64 million US dollars. This simultaneous shift suggests a return to normalized operations and an increase in the current tax burden following the anomalous results of the prior year.
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Invested Capital
Diamondback Energy Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred taxes from assets and liabilities. See details »
2 Addition of equity equivalents to total Diamondback Energy, Inc. stockholders’ equity.
3 Removal of accumulated other comprehensive income.
4 Subtraction of investment.
Invested capital exhibited significant volatility and overall growth between 2017 and 2021, characterized by a substantial expansion in the early period, a contraction in 2020, and a subsequent recovery by the end of 2021.
- Invested Capital Trends
- The total invested capital increased sharply from 7,167 million US$ in 2017 to 20,304 million US$ in 2018. This upward trajectory continued into 2019, reaching a peak of 22,002 million US$. A notable decline occurred in 2020, where invested capital dropped to 16,329 million US$, before rebounding to 21,230 million US$ in 2021.
- Debt and Lease Obligations
- Total reported debt and leases demonstrated a consistent and uninterrupted upward trend throughout the five-year period. Starting at 1,477 million US$ in 2017, the obligation increased more than threefold to 4,464 million US$ by 2018. This growth persisted steadily through 2021, ending at 6,687 million US$, indicating a continuous reliance on debt financing to support the capital structure.
- Stockholders' Equity Dynamics
- Stockholders' equity experienced significant fluctuations. A substantial increase was recorded between 2017 and 2018, rising from 5,255 million US$ to 13,699 million US$. Following a period of relative stability in 2019, equity declined sharply to 8,794 million US$ in 2020. However, a strong recovery was observed in 2021, with equity increasing to 12,088 million US$.
- Capital Composition Analysis
- The fluctuations in total invested capital were primarily driven by changes in stockholders' equity, as debt levels remained on a steady climb. The contraction of invested capital in 2020 was exclusively attributable to the decrease in equity, which offset the continued increase in reported debt and leases. By 2021, the simultaneous increase in both debt and equity restored the invested capital base to levels near the 2019 peak.
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Cost of Capital
Diamondback Energy Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,690) | 22,690) | ÷ | 29,838) | = | 0.76 | 0.76 | × | 36.03% | = | 27.40% | ||
| Debt3 | 7,148) | 7,148) | ÷ | 29,838) | = | 0.24 | 0.24 | × | 3.77% × (1 – 21.00%) | = | 0.71% | ||
| Total: | 29,838) | 1.00 | 28.11% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,913) | 10,913) | ÷ | 17,126) | = | 0.64 | 0.64 | × | 36.03% | = | 22.96% | ||
| Debt3 | 6,213) | 6,213) | ÷ | 17,126) | = | 0.36 | 0.36 | × | 4.13% × (1 – 21.00%) | = | 1.18% | ||
| Total: | 17,126) | 1.00 | 24.14% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,415) | 9,415) | ÷ | 14,960) | = | 0.63 | 0.63 | × | 36.03% | = | 22.67% | ||
| Debt3 | 5,545) | 5,545) | ÷ | 14,960) | = | 0.37 | 0.37 | × | 3.97% × (1 – 21.00%) | = | 1.16% | ||
| Total: | 14,960) | 1.00 | 23.84% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,308) | 17,308) | ÷ | 21,721) | = | 0.80 | 0.80 | × | 36.03% | = | 28.71% | ||
| Debt3 | 4,413) | 4,413) | ÷ | 21,721) | = | 0.20 | 0.20 | × | 4.55% × (1 – 21.00%) | = | 0.73% | ||
| Total: | 21,721) | 1.00 | 29.44% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,286) | 12,286) | ÷ | 13,793) | = | 0.89 | 0.89 | × | 36.03% | = | 32.09% | ||
| Debt3 | 1,507) | 1,507) | ÷ | 13,793) | = | 0.11 | 0.11 | × | 5.06% × (1 – 35.00%) | = | 0.36% | ||
| Total: | 13,793) | 1.00 | 32.45% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
Economic Spread Ratio
Diamondback Energy Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,937) | (9,505) | (4,749) | (4,802) | (1,804) | |
| Invested capital2 | 21,230) | 16,329) | 22,002) | 20,304) | 7,167) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -13.83% | -58.21% | -21.59% | -23.65% | -25.18% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -2.40% | — | — | — | — | |
| ConocoPhillips | 4.98% | — | — | — | — | |
| ExxonMobil Holdings Corp. | 3.21% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,937 ÷ 21,230 = -13.83%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a consistent failure to generate positive economic profit, indicating that the returns on invested capital did not meet the required cost of capital throughout the analyzed period.
- Economic Profit Trends
- Economic profit remained negative for the entire five-year duration. A notable deterioration occurred between 2017 and 2020, with the deficit widening from -1,804 million US$ to a peak loss of -9,505 million US$ in 2020. A partial recovery was observed in 2021, as the economic profit improved to -2,937 million US$, although it remained well below the threshold for value creation.
- Invested Capital Volatility
- Invested capital experienced significant fluctuations, beginning with a sharp increase from 7,167 million US$ in 2017 to 20,304 million US$ in 2018. After reaching a peak of 22,002 million US$ in 2019 and subsequently declining to 16,329 million US$ in 2020, the capital base expanded again to 21,230 million US$ by the end of 2021.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the period, signifying continuous value destruction. While a gradual improvement was noted from 2017 (-25.18%) to 2019 (-21.59%), a severe contraction occurred in 2020, where the ratio dropped to -58.21%. This represents a critical divergence between returns and the cost of capital. By 2021, the ratio improved significantly to -13.83%, marking the highest level achieved during the period, despite the continued failure to achieve a positive spread.
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Economic Profit Margin
Diamondback Energy Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,937) | (9,505) | (4,749) | (4,802) | (1,804) | |
| Revenue from contracts with customers | 6,747) | 2,756) | 3,887) | 2,130) | 1,186) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -43.53% | -344.88% | -122.19% | -225.46% | -152.11% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -2.98% | — | — | — | — | |
| ConocoPhillips | 8.30% | — | — | — | — | |
| ExxonMobil Holdings Corp. | 3.16% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue from contracts with customers
= 100 × -2,937 ÷ 6,747 = -43.53%
3 Click competitor name to see calculations.
An analysis of the economic value added indicates a period of sustained negative economic profit from 2017 through 2021, signifying that the entity's returns were insufficient to cover its cost of capital throughout this timeframe. While the absolute economic deficit peaked in 2020, the most recent period shows a marked reduction in losses alongside a significant expansion in revenue.
- Economic Profit Trends
- Economic profit remained consistently negative over the five-year period. A sharp deterioration was observed between 2017 and 2020, with the deficit widening from -1,804 million USD to a peak loss of -9,505 million USD. A substantial recovery occurred in 2021, as the economic profit improved to -2,937 million USD.
- Revenue Performance
- Revenue exhibited an overall upward trajectory, growing from 1,186 million USD in 2017 to 6,747 million USD in 2021. A notable contraction occurred in 2020, where revenue decreased to 2,756 million USD from the 3,887 million USD recorded in 2019, before surging to its period high in 2021.
- Economic Profit Margin Volatility
- The economic profit margin demonstrated extreme volatility, reflecting a high sensitivity to revenue fluctuations. The margin reached its lowest point in 2020 at -344.88%, coinciding with the highest economic loss and a dip in revenue. By 2021, the margin improved to -43.53%, representing the most favorable efficiency level in the analyzed period, driven by the rapid increase in total revenue.
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