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.
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Diamondback Energy Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2012
- Operating Profit Margin since 2012
- Total Asset Turnover since 2012
- Price to Sales (P/S) since 2012
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Economic Profit
Diamondback Energy Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial data exhibits several notable trends over the five-year period ending December 31, 2021.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed significant volatility across the years. It increased substantially from 521 million in 2017 to a peak of 1,175 million in 2018, followed by a sharp decline to 495 million in 2019. In 2020, the NOPAT turned negative, recording a substantial loss of 5,563 million, before recovering to a positive 3,031 million in 2021. This suggests the company experienced a major operational setback in 2020 but partially rebounded the following year.
- Cost of Capital
- The cost of capital exhibited a general downward trend from 26.91% in 2017 to 19.92% in 2019, indicating potentially lower capital costs or improved risk perceptions during this period. However, it increased to 20.18% in 2020 and further to 23.38% in 2021, signaling rising capital costs or increased risk profiles in the latter two years.
- Invested Capital
- Invested capital showed an overall increasing trend, starting from 7,167 million in 2017 and reaching a high of 22,002 million in 2019. It then declined to 16,329 million in 2020, before increasing again to 21,230 million in 2021. This pattern reflects fluctuations in the company’s deployment of capital, with a reduction in 2020 possibly linked to the operational difficulties indicated by the NOPAT loss.
- Economic Profit
- Economic profit was consistently negative throughout the period, indicating that the company did not generate returns exceeding its cost of capital. The deficit worsened from -1,407 million in 2017 to -3,795 million in 2018 and remained at similarly high negative levels in 2019 (-3,888 million). The situation deteriorated further in 2020, with economic profit falling to -8,858 million, coinciding with the negative NOPAT. A partial recovery was observed in 2021, with economic profit improving to -1,933 million but still negative.
In summary, the data reflects a period of financial instability marked by a sharp operational loss in 2020 and increased capital costs thereafter. Although there was a rebound in profitability and invested capital in 2021, economic profit remained negative, underscoring challenges in generating value beyond the cost of capital throughout the entire period.
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
= × 21.00% =
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
= × 21.00% =
6 Elimination of after taxes investment income.
- Net Income (Loss) Attributable to Diamondback Energy, Inc.
- The net income experienced significant fluctuations over the five-year period. Starting at $482 million in 2017, it increased substantially to $846 million in 2018, indicating strong profitability growth. However, a sharp decline occurred in 2019, with net income dropping to $240 million. The year 2020 saw a drastic reversal, as the company reported a substantial net loss of $4,517 million, reflecting considerable financial distress or extraordinary losses. In 2021, the company recovered strongly, posting a net income of $2,182 million, the highest figure in the period under review, signaling a robust turnaround.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also displayed significant variability, mirroring the trends seen in net income. The value rose from $521 million in 2017 to $1,175 million in 2018, more than doubling, which suggests improved operational efficiency and profitability. In 2019, NOPAT decreased substantially to $495 million, indicating a drop in operating profitability. The year 2020 showed a severe negative NOPAT of $5,563 million, consistent with the net loss trend, indicating a substantial operational and tax burden. By 2021, NOPAT recovered to $3,031 million, reflecting a strong improvement in operational performance and effective tax management.
Cash Operating Taxes
Diamondback Energy Inc., cash operating taxes calculation
US$ 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 financial data indicates significant volatility in the provision for income taxes over the five-year period. In 2017, the provision showed a tax benefit of $20 million, which shifted dramatically to a tax expense of $168 million in 2018. This was followed by a moderate tax expense of $47 million in 2019. The year 2020 saw a substantial reversal with a large tax benefit of $1,104 million, marking the most pronounced change within the timeframe. In 2021, the provision returned to a notable tax expense of $631 million.
Cash operating taxes also exhibited variability but on a relatively smaller scale compared to the provision for income taxes. From $14 million in 2017, cash operating taxes increased slightly to $15 million in 2018 and then rose more substantially to $35 million by 2019. In 2020, cash operating taxes decreased to a negative $22 million, implying a cash inflow or tax refund situation. By 2021, cash operating taxes had increased sharply to $64 million, the highest in the observed period.
- Provision for Income Taxes:
- Highly volatile with alternating tax expenses and benefits.
- Significant tax benefit in 2020 contrasts with consistent tax expenses in most other years.
- The peak tax expense occurred in 2021 at $631 million.
- Cash Operating Taxes:
- Gradual increase from 2017 through 2019.
- Negative value in 2020 suggests tax refunds or credits received.
- Sharp increase in 2021, reaching the highest cash tax outlay in the period.
Overall, the trends reveal considerable fluctuations in tax-related financial items, with 2020 standing out due to exceptional tax benefits and cash tax refunds. The years following show a return to positive tax expenses and increased cash tax payments, signaling potential changes in tax obligations and operational profitability.
Invested Capital
Diamondback Energy Inc., invested capital calculation (financing approach)
US$ 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.
- Total reported debt & leases
- The total debt and leases showed a significant increase from 2017 to 2018, rising from $1,477 million to $4,464 million. This upward trend continued in the following years, reaching $6,687 million by the end of 2021. The consistent rise indicates increasing leverage and possibly greater investments or acquisitions financed through debt.
- Total stockholders’ equity
- Stockholders’ equity increased markedly from $5,255 million in 2017 to a peak of $13,699 million in 2018. After a slight decline to $13,249 million in 2019, equity decreased further to $8,794 million in 2020, before recovering to $12,088 million in 2021. This pattern suggests volatility in retained earnings or equity capital transactions over the period, with a notable dip during 2020, possibly reflecting challenging market conditions or one-time charges.
- Invested capital
- Invested capital followed a similar upward trajectory from $7,167 million in 2017 to $22,002 million in 2019, indicating substantial growth in the company’s asset base. However, this figure declined sharply to $16,329 million in 2020, before increasing again to $21,230 million in 2021. The fluctuation mirrors the trends seen in equity and debt, implying adjustments in asset investment and financing approaches possibly influenced by external economic factors.
Cost of Capital
Diamondback Energy Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
Economic Spread Ratio
Diamondback Energy Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit has demonstrated significant fluctuations throughout the observed periods. Starting with a negative value of -$1,407 million in 2017, it deteriorated further to -$3,795 million in 2018 and then slightly declined to -$3,888 million in 2019. The year 2020 marked the most substantial negative economic profit of -$8,858 million. However, in 2021, there was a notable improvement, with economic profit recovering to -$1,933 million, albeit still negative.
- Invested Capital
- The level of invested capital showed variability during the period. It increased considerably from $7,167 million in 2017 to $20,304 million in 2018, and then continued to rise to $22,002 million in 2019. In 2020, invested capital decreased to $16,329 million but rose again in 2021 to $21,230 million. This pattern indicates periods of substantial capital deployment, followed by a reduction and another increase towards the end of the period.
- Economic Spread Ratio
- The economic spread ratio consistently remained negative throughout all periods, indicating that returns on invested capital were below the cost of capital. The ratio was -19.64% in 2017 and slightly improved to -18.69% in 2018 and -17.67% in 2019. However, in 2020, there was a sharp deterioration to -54.24%, reflecting a severe decline in economic performance relative to capital costs. By 2021, the ratio improved substantially to -9.1%, signaling a recovery phase but still reflecting a shortfall relative to the benchmark cost of capital.
- Summary Insight
- The data reveals that the company experienced significant financial challenges from 2017 through 2020, as evidenced by persistent negative economic profit and deteriorating economic spread ratios, with a peak deterioration in 2020. Invested capital fluctuated but remained elevated, suggesting ongoing investments despite underperformance. The improvement in both economic profit and economic spread ratio in 2021 could indicate initial signs of financial recovery or operational improvements, yet profitability remains below desired thresholds.
Economic Profit Margin
Diamondback Energy Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue from contracts with customers | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
- Revenue Trends
- The revenue from contracts with customers experienced an overall upward trend from 2017 to 2021. It increased from $1,186 million in 2017 to $6,747 million in 2021, with a notable peak in 2019 at $3,887 million, followed by a slight decline in 2020 to $2,756 million before the considerable rise in 2021.
- Economic Profit Analysis
- The economic profit consistently showed negative values throughout the five-year period, indicating ongoing economic losses. The losses intensified significantly from -$1,407 million in 2017 to a peak loss of -$8,858 million in 2020, followed by a reduction to -$1,933 million in 2021. This suggests that despite revenue growth, profitability challenges persisted, particularly in 2020.
- Economic Profit Margin Dynamics
- The economic profit margin remained negative across all periods, reflecting unprofitable operations relative to economic profit. It deteriorated sharply from -118.63% in 2017 to -321.39% in 2020, indicating worsening returns relative to revenue. However, in 2021, there was a significant improvement to -28.64%, aligning with the reduction in economic losses and the increased revenue figure.
- Insights and Implications
- The data reveals that while revenue growth was strong, especially in 2021, it did not translate proportionally into economic profitability until the last year analyzed. The volatile and negative economic profit margins imply that operational or cost efficiency issues may have contributed to sustained economic losses despite higher revenues. The improvements in 2021 could suggest the beginning of a turnaround, possibly driven by better cost management or changes in market conditions.