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
ConocoPhillips, economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,950 – 8.55% × 105,245 = -45
The financial trajectory from 2021 to 2025 is characterized by a significant peak in profitability in 2022, followed by a sustained contraction in economic value creation. While the organization achieved substantial economic profit during the early part of the period, a combination of declining operating profits and an expanding capital base has led to a transition toward negative economic profit by the end of 2025.
- Net Operating Profit After Taxes (NOPAT)
- A substantial increase in NOPAT is observed between 2021 and 2022, with values rising from 10,273 million USD to a peak of 21,159 million USD. This growth was not sustained, as NOPAT entered a consistent downward trend from 2023 through 2025, eventually falling to 8,950 million USD. This represents a significant reduction in operational earning power relative to the 2022 high.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable between 2021 and 2022 but exhibited an upward trend thereafter, with a notable increase to 106,371 million USD in 2024. Simultaneously, the cost of capital remained remarkably stable, fluctuating within a narrow range between 8.48% and 8.73%. The expansion of the capital base without a corresponding increase in NOPAT suggests a decrease in capital efficiency over the analyzed period.
- Economic Profit Analysis
- Economic profit mirrors the volatility of NOPAT, peaking at 14,565 million USD in 2022. However, a sharp decline followed, with economic profit dropping to 5,323 million USD in 2023 and further eroding to 961 million USD in 2024. By December 31, 2025, the economic profit turned negative at -45 million USD, indicating that the net operating profit was no longer sufficient to cover the cost of the capital employed.
The overall trend indicates a shift from significant value creation to marginal value destruction. The divergence between the increasing invested capital and the decreasing NOPAT served as the primary driver for the collapse in economic profit, culminating in the negative result observed in 2025.
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Net Operating Profit after Taxes (NOPAT)
ConocoPhillips, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 950 × 4.58% = 44
6 2025 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= 899 × 21.00% = 189
7 Addition of after taxes interest expense to net income.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 311 × 21.00% = 65
9 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited significant fluctuation over the five-year period. While net income experienced volatility, NOPAT demonstrated a more pronounced pattern of increase followed by decline. A clear trend of increasing profitability was observed between 2021 and 2022, followed by a subsequent decrease through 2025.
- Overall Trend
- NOPAT increased substantially from US$10,273 million in 2021 to US$21,159 million in 2022, representing a growth of approximately 106%. This was followed by a consistent decline over the subsequent three years, decreasing to US$8,950 million by 2025. This represents an overall decrease of approximately 58% from the 2022 peak.
- Year-over-Year Changes
- The largest year-over-year increase occurred between 2021 and 2022, with NOPAT growing by US$10,886 million. The most significant decrease was observed between 2022 and 2023, with a reduction of US$8,802 million. Subsequent declines were more moderate, with decreases of US$369 million between 2023 and 2024, and US$1,026 million between 2024 and 2025.
- Relationship to Net Income
- While both NOPAT and net income fluctuated, NOPAT consistently exceeded net income throughout the period. The difference between NOPAT and net income suggests the presence of significant non-operating items or differences in accounting treatment impacting reported net income. The gap between NOPAT and net income also varied year to year, indicating changes in these non-operating factors.
The observed decline in NOPAT from 2022 to 2025 warrants further investigation to determine the underlying drivers. Potential factors could include changes in operating expenses, revenue fluctuations, or shifts in the effective tax rate. The consistent difference between NOPAT and net income also suggests a need for detailed analysis of non-operating items to fully understand the company’s profitability.
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Cash Operating Taxes
ConocoPhillips, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The income tax provision and cash operating taxes exhibited fluctuating behavior over the five-year period. A significant increase in both metrics occurred between 2021 and 2022, followed by subsequent adjustments in the following years.
- Income Tax Provision
- The income tax provision increased substantially from US$4,633 million in 2021 to US$9,548 million in 2022. This represents a more than 100% increase. Following this peak, the provision decreased to US$5,331 million in 2023 and further to US$4,427 million in 2024. A slight increase to US$4,668 million was observed in 2025, remaining relatively close to the 2021 level.
- Cash Operating Taxes
- Cash operating taxes mirrored the trend observed in the income tax provision, increasing from US$3,469 million in 2021 to US$7,594 million in 2022. This also represents an increase exceeding 100%. Subsequent years saw a decline to US$4,270 million in 2023, followed by US$4,150 million in 2024. The value increased slightly in 2025, reaching US$4,242 million.
The close correlation between the income tax provision and cash operating taxes suggests a strong link between reported accounting income and actual cash outflows for tax purposes. The substantial increase in 2022, followed by declines in 2023 and 2024, could be attributable to changes in taxable income, tax rates, or the timing of tax payments. The stabilization in 2025 indicates a potential leveling off of these factors.
- Relationship between Metrics
- Cash operating taxes consistently remained below the income tax provision throughout the period. This difference could be due to various factors, including deferred tax assets or liabilities, tax credits, or differences in the timing of recognition for accounting and tax purposes. The magnitude of this difference remained relatively stable across the observed years.
Further investigation into the underlying drivers of these fluctuations, such as changes in revenue, expenses, and applicable tax laws, would be necessary to provide a more comprehensive understanding of these trends.
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Invested Capital
ConocoPhillips, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of LIFO reserve. See details »
5 Addition of equity equivalents to equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of marketable securities.
The reported invested capital exhibited a fluctuating pattern over the five-year period. Initially, a slight decrease is observed between 2021 and 2022, followed by a period of growth and then a minor contraction. Concurrent changes are noted in the components contributing to invested capital – total reported debt & leases and equity.
- Invested Capital Trend
- Invested capital decreased marginally from US$76,355 million in 2021 to US$75,520 million in 2022, representing a decline of approximately 1.1%. A subsequent increase occurred, with invested capital reaching US$81,278 million in 2023. This growth accelerated in 2024, with invested capital rising to US$106,371 million. A slight decrease was then recorded in 2025, with invested capital settling at US$105,245 million.
- Debt & Leases
- Total reported debt & leases decreased significantly from US$20,601 million in 2021 to US$17,188 million in 2022. An increase followed in 2023, reaching US$19,634 million, and continued into 2024, with debt & leases rising to US$25,348 million. A modest decrease was observed in 2025, with the value reported as US$24,394 million.
- Equity
- Equity demonstrated a consistent upward trend from 2021 to 2024. It increased from US$45,406 million in 2021 to US$48,003 million in 2022, then to US$49,279 million in 2023, and reached US$64,796 million in 2024. A slight decrease was recorded in 2025, with equity reported at US$64,487 million.
The substantial increase in invested capital between 2023 and 2024 appears to be driven by a combination of increased debt & leases and a significant rise in equity. The minor decrease in invested capital in 2025 is attributable to a slight reduction in both debt & leases and equity. The growth in equity is more pronounced than the fluctuations in debt & leases, suggesting equity is becoming a more dominant component of the invested capital base.
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Cost of Capital
ConocoPhillips, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 132,966) | 132,966) | ÷ | 157,415) | = | 0.84 | 0.84 | × | 9.38% | = | 7.92% | ||
| Debt, including finance leases3 | 23,499) | 23,499) | ÷ | 157,415) | = | 0.15 | 0.15 | × | 5.13% × (1 – 21.00%) | = | 0.60% | ||
| Operating lease liability4 | 950) | 950) | ÷ | 157,415) | = | 0.01 | 0.01 | × | 4.58% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 157,415) | 1.00 | 8.55% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 123,993) | 123,993) | ÷ | 148,954) | = | 0.83 | 0.83 | × | 9.38% | = | 7.81% | ||
| Debt, including finance leases3 | 23,937) | 23,937) | ÷ | 148,954) | = | 0.16 | 0.16 | × | 5.08% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 1,024) | 1,024) | ÷ | 148,954) | = | 0.01 | 0.01 | × | 4.62% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 148,954) | 1.00 | 8.48% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 130,581) | 130,581) | ÷ | 151,028) | = | 0.86 | 0.86 | × | 9.38% | = | 8.11% | ||
| Debt, including finance leases3 | 19,750) | 19,750) | ÷ | 151,028) | = | 0.13 | 0.13 | × | 5.16% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 697) | 697) | ÷ | 151,028) | = | 0.00 | 0.00 | × | 4.13% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 151,028) | 1.00 | 8.66% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 132,067) | 132,067) | ÷ | 149,477) | = | 0.88 | 0.88 | × | 9.38% | = | 8.28% | ||
| Debt, including finance leases3 | 16,865) | 16,865) | ÷ | 149,477) | = | 0.11 | 0.11 | × | 4.91% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 545) | 545) | ÷ | 149,477) | = | 0.00 | 0.00 | × | 2.99% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 149,477) | 1.00 | 8.73% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 118,465) | 118,465) | ÷ | 142,844) | = | 0.83 | 0.83 | × | 9.38% | = | 7.78% | ||
| Debt, including finance leases3 | 23,712) | 23,712) | ÷ | 142,844) | = | 0.17 | 0.17 | × | 5.26% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 667) | 667) | ÷ | 142,844) | = | 0.00 | 0.00 | × | 2.66% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 142,844) | 1.00 | 8.48% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ConocoPhillips, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (45) | 961) | 5,323) | 14,565) | 3,802) | |
| Invested capital2 | 105,245) | 106,371) | 81,278) | 75,520) | 76,355) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -0.04% | 0.90% | 6.55% | 19.29% | 4.98% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -7.95% | -3.16% | -3.78% | 6.72% | -2.40% | |
| ExxonMobil Holdings Corp. | -1.81% | -1.04% | 3.07% | 11.83% | 3.21% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -45 ÷ 105,245 = -0.04%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits significant volatility, characterized by a sharp peak in 2022 followed by a consistent decline through 2025. This trajectory indicates a transition from substantial value generation to a state of economic value destruction by the end of the analyzed period.
- Economic Profit Trends
- Economic profit experienced a dramatic surge in 2022, reaching a peak of US$ 14,565 million, a substantial increase from the US$ 3,802 million reported in 2021. However, this peak was not sustained, as profit levels fell sharply to US$ 5,323 million in 2023 and continued to diminish to US$ 961 million in 2024. By December 31, 2025, the economic profit turned negative, recording a loss of US$ 45 million, signaling that the company failed to generate returns in excess of its cost of capital.
- Invested Capital Evolution
- Invested capital remained relatively stable between 2021 and 2022, fluctuating around US$ 76 billion. A notable upward trend began in 2023, with capital increasing to US$ 81,278 million, and accelerating significantly in 2024 to reach US$ 106,371 million. A marginal contraction occurred in 2025, with the balance settling at US$ 105,245 million. The significant expansion of the capital base in 2024 occurred concurrently with a decline in economic profit, suggesting that the additional capital deployed did not yield proportional economic returns.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of the economic profit, peaking at 19.29% in 2022. This high ratio indicates a period of exceptional efficiency in generating returns above the cost of capital. Subsequent years show a precipitous decline: the ratio dropped to 6.55% in 2023 and further collapsed to 0.90% in 2024. The trend concluded with a negative spread of -0.04% in 2025, confirming that the return on invested capital fell slightly below the required cost of capital, resulting in the destruction of shareholder wealth during that fiscal year.
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Economic Profit Margin
ConocoPhillips, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (45) | 961) | 5,323) | 14,565) | 3,802) | |
| Sales and other operating revenues | 58,944) | 54,745) | 56,141) | 78,494) | 45,828) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -0.08% | 1.76% | 9.48% | 18.56% | 8.30% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -11.82% | -3.41% | -4.08% | 6.05% | -2.98% | |
| ExxonMobil Holdings Corp. | -2.08% | -1.16% | 2.82% | 8.82% | 3.16% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × -45 ÷ 58,944 = -0.08%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility followed by a sustained decline in profitability relative to the cost of capital. A peak in economic performance occurred in 2022, after which a consistent downward trajectory is observed, culminating in a transition to negative economic profit by the end of 2025.
- Economic Profit Trajectory
- Economic profit experienced a sharp increase from 3,802 million USD in 2021 to a peak of 14,565 million USD in 2022. However, this gain was not sustained, as values fell precipitously to 5,323 million USD in 2023 and 961 million USD in 2024. By December 31, 2025, economic profit shifted to a negative value of 45 million USD, indicating that the company ceased to generate returns in excess of its required cost of capital.
- Revenue Performance and Correlation
- Sales and other operating revenues mirrored the initial upward trend, rising from 45,828 million USD in 2021 to a high of 78,494 million USD in 2022. While revenues contracted in 2023 and 2024, a slight recovery to 58,944 million USD is noted in 2025. Despite this recovery in top-line revenue, economic profit continued to decline, suggesting a decoupling between revenue growth and value creation.
- Economic Profit Margin Erosion
- The economic profit margin provides a clear illustration of diminishing efficiency in value generation. After expanding from 8.30% in 2021 to 18.56% in 2022, the margin underwent a steady contraction. It decreased to 9.48% in 2023 and further collapsed to 1.76% in 2024. The period concludes with a negative margin of -0.08% in 2025, signaling that the operations are no longer yielding an economic surplus.
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