Economic Value Added (EVA)
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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:
- Income Statement
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2012
- Operating Profit Margin since 2012
- Price to Earnings (P/E) since 2012
- Price to Operating Profit (P/OP) since 2012
- Price to Sales (P/S) since 2012
- Analysis of Revenues
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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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes experienced significant fluctuations during the period analyzed. An initial increase is observable from 521 million in 2017 to a peak of 1,175 million in 2018. This was followed by a sharp decline to 495 million in 2019. The year 2020 saw a considerable loss of 5,563 million, indicating major operational challenges or extraordinary expenses. However, there was a recovery in 2021 with a positive NOPAT of 3,031 million, though it had not reached the highs seen in 2018.
- Cost of Capital
- The cost of capital showed a general declining trend over the first three years, from 27% in 2017 to just under 20% in 2019, suggesting improvements in financing costs or risk profile. However, it increased again in 2020 to 20.24% and further to 23.45% in 2021, which could reflect heightened perceived risk or increased financing expenses during this period.
- Invested Capital
- Invested capital experienced growth from 7,167 million in 2017 to a peak of 22,002 million in 2019. This increase suggests significant capital deployment or acquisition activities. In 2020, the invested capital decreased sharply to 16,329 million, possibly indicating divestitures or asset impairments. It rose again in 2021 to 21,230 million, nearing previously high levels, which may represent renewed investment initiatives.
- Economic Profit
- The economic profit consistently remained negative throughout the five-year period, signifying that the company failed to generate returns above its cost of capital. The losses deepened from -1,414 million in 2017 to nearly -3,902 million in 2019, worsening further to -8,868 million in 2020, likely driven by the steep decline in operating profit and sustained capital costs. By 2021, economic loss lessened to -1,949 million, correlating with the rebound in operating profit but still reflecting ongoing value destruction relative to invested capital.
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 shows a negative trend throughout the observed periods, indicating persistent economic losses. Beginning at -1,414 million USD in 2017, the losses deepened significantly in 2018 and 2019, reaching approximately -3,811 million USD and -3,902 million USD, respectively. The year 2020 marked the most substantial decline with a loss of -8,868 million USD. However, there was an improvement in 2021, with economic profit rising to -1,949 million USD, although it remained negative.
- Invested Capital
- Invested capital exhibits considerable fluctuation across the periods. Starting at 7,167 million USD in 2017, it nearly tripled by 2018 to reach 20,304 million USD, and then increased slightly to 22,002 million USD in 2019. The value then decreased significantly in 2020 to 16,329 million USD before rising again in 2021 to 21,230 million USD. This pattern suggests active capital investment and withdrawal over the five-year span, reflecting adjustments in asset deployment or strategic investments.
- Economic Spread Ratio
- The economic spread ratio, which measures the difference between return on invested capital and cost of capital, is consistently negative, indicating returns below the cost of capital. This ratio begins at -19.72% in 2017 and slightly improves to -18.77% and -17.73% in 2018 and 2019, respectively. In 2020, the ratio sharply worsens to -54.31%, suggesting a significant decrease in efficiency or increased capital costs. By 2021, the ratio improves markedly to -9.18%, indicating a recovery in capital efficiency though still not reaching positive territory.
- Overall Analysis
- The data reveal that profitability challenges persist, with economic losses and negative economic spread ratios indicating returns below cost. The sizeable fluctuations in invested capital suggest dynamic shifts in investment levels, potentially driven by strategic decisions or external economic conditions. The sharp deterioration in 2020 across all key items signals a period of financial stress, likely influenced by external factors or operational difficulties, followed by a partial rebound in 2021. The recovery in 2021, while notable, has not yet restored positive economic profitability or spread ratios, implying ongoing focus is needed on improving capital efficiency and profitability.
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.
The annual financial data reveals several notable trends over the analyzed periods.
- Economic Profit
- The economic profit shows a consistently negative value throughout the years, indicating that the company experienced losses in economic terms over the entire period. However, the magnitude of the loss fluctuates. It peaked negatively in 2020 at -8,868 million US dollars, significantly larger than both the preceding and following years. The data suggests a partial recovery in 2021, where the loss reduced to -1,949 million US dollars, yet remained considerable.
- Revenue from Contracts with Customers
- Revenue demonstrates an overall upward trend during the period. Starting from 1,186 million US dollars in 2017, revenue almost doubled by 2018 to 2,130 million, then increased sharply to 3,887 million in 2019. There was a decline in 2020, with revenue falling to 2,756 million US dollars, possibly reflecting external challenges during that year. However, revenue rebounded strongly in 2021, more than doubling the previous year’s figure to 6,747 million US dollars, reaching the highest value in the series.
- Economic Profit Margin
- The economic profit margin mirrors the trend seen in economic profit, remaining negative throughout the reported timeframe. The margin worsened substantially in 2018 and 2020, reaching -178.95% and -321.77%, respectively, which marks unusually high levels of losses relative to revenue. The margin improved significantly by 2021 to -28.88%, indicating that while the company was still not generating a positive margin, the losses relative to revenue were less severe than in prior years.
Overall, despite a general increase in revenue, the company consistently experienced negative economic profit and profit margins, with the heaviest losses recorded in 2020. The subsequent improvement in 2021 suggests some recovery in economic efficiency, although profitability remains a challenge. These patterns may reflect operational or market challenges impacting profitability despite revenue growth.