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 – 28.34% × 21,230 = -2,986
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic profit, indicating that the returns on invested capital failed to exceed the cost of capital throughout the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme volatility over the five-year period. After an initial increase from 521 million USD in 2017 to 1,175 million USD in 2018, a downward trend occurred, culminating in a substantial loss of 5,563 million USD in 2020. A strong recovery was observed in 2021, with NOPAT rising to 3,031 million USD.
- Invested Capital
- A rapid expansion of the asset base is observed between 2017 and 2019, with invested capital increasing from 7,167 million USD to 22,002 million USD. This was followed by a contraction to 16,329 million USD in 2020 and a subsequent increase to 21,230 million USD in 2021, suggesting significant fluctuations in capital expenditure or asset valuations.
- Cost of Capital
- The cost of capital remained consistently high, ranging from a peak of 32.72% in 2017 to a minimum of 24.02% in 2019. The sustained high cost of capital established a significant threshold that the company's operating returns were unable to surpass, directly contributing to the negative economic profit.
- Economic Profit
- Economic profit remained negative for all five years, demonstrating continuous value destruction. The deficit widened from 1,824 million USD in 2017 to a peak loss of 9,536 million USD in 2020, coinciding with the sharp decline in NOPAT. While the economic loss narrowed to 2,986 million USD in 2021, the overall trend underscores a failure to achieve economic value added despite the recovery in operating profits.
AI Ask an analyst for more
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.
- 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 $3,031 million, reflecting a strong improvement in operational performance and effective tax management.
AI Ask an analyst for more
Cash Operating Taxes
Diamondback Energy Inc., cash operating taxes calculation
US$ 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 $631 million.
- Cash Operating Taxes:
- Gradual increase from 2017 through 2019.
- Negative value in 2020 suggests tax refunds or credits received.
- Sharp increase in 2021, reaching the highest cash tax outlay in the period.
Overall, the trends reveal considerable fluctuations in tax-related financial items, with 2020 standing out due to exceptional tax benefits and cash tax refunds. The years following show a return to positive tax expenses and increased cash tax payments, signaling potential changes in tax obligations and operational profitability.
AI Ask an analyst for more
Invested Capital
Diamondback Energy Inc., invested capital calculation (financing approach)
US$ 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.
AI Ask an analyst for more
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 | × | 36.33% | = | 27.62% | ||
| Debt3 | 7,148) | 7,148) | ÷ | 29,838) | = | 0.24 | 0.24 | × | 3.77% × (1 – 21.00%) | = | 0.71% | ||
| Total: | 29,838) | 1.00 | 28.34% | ||||||||||
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 | × | 36.33% | = | 23.15% | ||
| Debt3 | 6,213) | 6,213) | ÷ | 17,126) | = | 0.36 | 0.36 | × | 4.13% × (1 – 21.00%) | = | 1.18% | ||
| Total: | 17,126) | 1.00 | 24.33% | ||||||||||
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 | × | 36.33% | = | 22.86% | ||
| Debt3 | 5,545) | 5,545) | ÷ | 14,960) | = | 0.37 | 0.37 | × | 3.97% × (1 – 21.00%) | = | 1.16% | ||
| Total: | 14,960) | 1.00 | 24.02% | ||||||||||
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 | × | 36.33% | = | 28.95% | ||
| Debt3 | 4,413) | 4,413) | ÷ | 21,721) | = | 0.20 | 0.20 | × | 4.55% × (1 – 21.00%) | = | 0.73% | ||
| Total: | 21,721) | 1.00 | 29.68% | ||||||||||
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 | × | 36.33% | = | 32.36% | ||
| Debt3 | 1,507) | 1,507) | ÷ | 13,793) | = | 0.11 | 0.11 | × | 5.06% × (1 – 35.00%) | = | 0.36% | ||
| Total: | 13,793) | 1.00 | 32.72% | ||||||||||
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 | (2,986) | (9,536) | (4,791) | (4,851) | (1,824) | |
| Invested capital2 | 21,230) | 16,329) | 22,002) | 20,304) | 7,167) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -14.06% | -58.40% | -21.78% | -23.89% | -25.45% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -2.25% | — | — | — | — | |
| ConocoPhillips | 5.20% | — | — | — | — | |
| Exxon Mobil Corp. | 3.42% | — | — | — | — | |
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 × -2,986 ÷ 21,230 = -14.06%
4 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by a consistent failure to generate positive economic value, as economic profit remained negative across all reported years. This indicates that the returns generated from invested capital were insufficient to cover the cost of that capital throughout the observed period.
- Economic Profit Trends
- Economic profit exhibited significant volatility and a persistent deficit. Starting at -1,824 million US$ in 2017, the deficit widened considerably, reaching a peak loss of -9,536 million US$ in 2020. A recovery trend emerged in 2021, with the economic profit improving to -2,986 million US$, although it did not return to positive territory.
- Invested Capital Dynamics
- A period of aggressive capital expansion was observed from 2017 to 2019, with invested capital increasing from 7,167 million US$ to 22,002 million US$. This growth was followed by a contraction in 2020 to 16,329 million US$, before rebounding to 21,230 million US$ by the end of 2021, suggesting a cycle of expansion, correction, and subsequent reinvestment.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the five-year window, mirroring the trends in economic profit. The ratio showed relative stability between 2017 and 2019, fluctuating between -25.45% and -21.78%. A severe deterioration occurred in 2020, where the ratio dropped to -58.40%, marking the period of lowest capital efficiency. By 2021, the ratio improved significantly to -14.06%, representing the strongest relative performance in the period and indicating a narrowing of the gap between the return on invested capital and the cost of capital.
AI Ask an analyst for more
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 | (2,986) | (9,536) | (4,791) | (4,851) | (1,824) | |
| Revenue from contracts with customers | 6,747) | 2,756) | 3,887) | 2,130) | 1,186) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -44.25% | -346.02% | -123.26% | -227.75% | -153.73% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -2.80% | — | — | — | — | |
| ConocoPhillips | 8.66% | — | — | — | — | |
| Exxon Mobil Corp. | 3.37% | — | — | — | — | |
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 × -2,986 ÷ 6,747 = -44.25%
3 Click competitor name to see calculations.
Between 2017 and 2021, the entity consistently operated with a negative economic profit, indicating that generated returns were insufficient to cover the total cost of capital employed throughout the period. While the company experienced significant volatility in both its operational scale and value creation, a notable trend of recovery emerged in the final year of the analysis.
- Economic Profit Trends
- Economic profit remained negative for all five years analyzed. Initial losses of -1,824 million USD in 2017 expanded to -4,851 million USD in 2018 and remained relatively stagnant in 2019. A sharp deterioration was observed in 2020, with losses peaking at -9,536 million USD. This was followed by a significant recovery in 2021, as losses narrowed to -2,986 million USD.
- Revenue Trajectory
- Revenue exhibited substantial growth over the period, increasing from 1,186 million USD in 2017 to 6,747 million USD by 2021. A temporary contraction occurred in 2020, where revenue declined to 2,756 million USD from a 2019 high of 3,887 million USD. The subsequent surge in 2021 indicates a rapid expansion in top-line capacity.
- Economic Profit Margin Analysis
- The economic profit margin remained negative, reflecting a persistent failure to achieve economic value added. The margin reached its most critical level in 2020 at -346.02%, correlating with the period of maximum economic loss and reduced revenue. However, 2021 marked a substantial improvement, with the margin rising to -44.25%. This improvement suggests that the aggressive revenue growth in 2021 significantly mitigated the relative impact of the economic loss, bringing the entity closer to a break-even point regarding its cost of capital.
AI Ask an analyst for more