ConocoPhillips (NYSE:COP)

The analysis of the annual financial figures reveals significant fluctuations in key profitability metrics over the examined period.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a marked recovery from a negative figure in 2020 to strong positive values in 2021 and 2022. Specifically, the measure improved from a loss of approximately $2.99 billion in 2020 to a peak profit of approximately $21.16 billion in 2022. However, after this peak, NOPAT decreased notably in 2023 and further in 2024, remaining positive but at lower levels of approximately $12.36 billion and $9.98 billion, respectively. This pattern indicates a substantial turnaround followed by moderating profitability.

Cost of Capital

The cost of capital showed a gradually increasing trend from 13.93% in 2020 to a peak of 15.39% in 2022, before slightly decreasing to 14.75% in 2024. This implies a rising hurdle rate over the initial years, which may have exerted pressure on performance metrics tied to capital efficiency.

Invested Capital

Invested capital expanded significantly from approximately $50.87 billion in 2020 to over $106.37 billion by 2024. This near doubling demonstrates notable capital commitment or asset accumulation, with incremental rises each year except for a slight dip between 2021 and 2022. The growth in invested capital alongside fluctuating profitability suggests careful scrutiny regarding capital allocation efficiency.

Economic Profit

The economic profit, representing value creation after accounting for cost of capital, was negative in 2020 and 2021, continuing a significant loss of about $10.08 billion in 2020, narrowing to a loss of nearly $0.97 billion in 2021. In 2022, a substantial positive economic profit of approximately $9.54 billion indicates value generation during that year. However, thereafter, economic profit declined sharply to near breakeven in 2023 and reverted to a negative figure of about $5.71 billion in 2024. This volatility reflects challenges in sustaining economic value despite fluctuations in operating profits and invested capital.

Overall, the financial data depicts a recovery from poor profitability in 2020 to a peak in 2022, followed by a decline in both operating and economic profit margins in the subsequent years. The increase in cost of capital and significant growth in invested capital appear to have influenced the variability in value creation over the period. These patterns emphasize the importance of managing capital efficiency and sustaining operating performance to enhance long-term value.

Net Income (Loss) Attributable to ConocoPhillips

The net income attributable to the company demonstrated significant volatility over the analyzed period. In 2020, the figure was a substantial loss of 2,701 million US dollars, indicating a challenging financial year. However, a dramatic recovery occurred in 2021, with net income rising to 8,079 million US dollars, reflecting a strong turnaround.

The upward trend continued in 2022, with net income reaching a peak of 18,680 million US dollars, more than doubling the previous year's performance. Despite a notable decline in 2023 to 10,957 million US dollars, net income remained robust and significantly positive. In 2024, the figure further declined to 9,245 million US dollars, representing a tapering off of profitability but maintaining a solid profit level relative to earlier years.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes followed a pattern similar to net income, though with some differences in magnitude. The company recorded a negative NOPAT of 2,991 million US dollars in 2020, aligning with the overall loss experienced that year.

A sharp improvement occurred in 2021, with NOPAT rising to 10,273 million US dollars. This growth trend accelerated in 2022, reaching a peak at 21,159 million US dollars, which was the highest point in the observed period. Subsequently, NOPAT decreased to 12,357 million US dollars in 2023 and then to 9,976 million US dollars in 2024.

Despite these declines in the last two years, NOPAT remained significantly positive, indicating continued operational profitability post-tax, though at a lower level than the peak in 2022.

Overall Trend Summary

The financial results demonstrate a recovery from significant losses in 2020 to strong profitability in subsequent years. Both net income and NOPAT peaked in 2022, followed by decreases in the later years of 2023 and 2024, suggesting a potential moderation in earnings after a period of exceptional growth.

The alignment in trends between net income and NOPAT suggests consistent operational performance after tax impacts are considered. The decline after the peak year may indicate changing market conditions, operational challenges, or strategic shifts impacting profitability, but the company remains financially robust relative to 2020 lows.

Income Tax Provision (Benefit)

The income tax provision exhibited significant volatility over the five-year period. In 2020, the provision was a benefit amounting to -485 million USD, indicating a tax credit or refund. This trend reversed dramatically in 2021 with a substantial increase to 4633 million USD, followed by further escalation in 2022 reaching 9548 million USD. Thereafter, the provision declined notably in 2023 to 5331 million USD and continued to decrease in 2024 to 4427 million USD. This pattern suggests a shift from a net tax benefit to considerable tax expenses, peaking in 2022 before trending downward in subsequent years.

Cash Operating Taxes

Cash operating taxes demonstrated an overall upward trajectory from 2020 through 2022, increasing from 502 million USD in 2020 to 7594 million USD in 2022. However, after this peak, the amount decreased significantly to 4270 million USD in 2023 and saw a slight further reduction to 4150 million USD in 2024. This indicates that while the company’s cash tax payments rose sharply in the initial years, they moderated in the most recent periods.

Comparative Insights

Both the income tax provision and cash operating taxes followed similar trends with increases up to 2022 and subsequent declines. The notable spike in 2022 for both metrics may reflect higher taxable income or changes in tax rates or structures influencing the tax liabilities. The subsequent decline may indicate improved tax planning, tax rate reductions, or decreased taxable income in the latter years.

Total Reported Debt & Leases

The total reported debt and leases exhibit a fluctuating yet overall increasing trend from 2020 through 2024. The debt rose significantly from 16,154 million in 2020 to a peak of 20,601 million in 2021, followed by a decline to 17,188 million in 2022. Subsequently, the debt increased again, reaching 19,634 million in 2023 and further escalating to 25,348 million by the end of 2024. This pattern indicates periods of both deleveraging and increased borrowing or lease obligations, with a notable surge in the final reported year.

Common Stockholders’ Equity

Common stockholders’ equity demonstrates a consistent upward trajectory across all years presented. Starting at 29,849 million in 2020, equity grew substantially each year, reaching 45,406 million in 2021, 48,003 million in 2022, and 49,279 million in 2023. The growth accelerates notably in 2024 with equity rising to 64,796 million. This steady increase reflects a strengthening equity base, likely supported by retained earnings growth and possibly additional equity issuance or valuation gains.

Invested Capital

Invested capital shows an overall growth trend with slight volatility. Beginning at 50,870 million in 2020, it increased sharply to 76,355 million in 2021 but then edged down marginally to 75,520 million in 2022. Afterwards, invested capital resumed growth, climbing to 81,278 million in 2023 and making a more pronounced leap to 106,371 million in 2024. The upward movement in invested capital corresponds with the increases in both equity and debt, indicating expanding asset bases or capital expenditures that may be financed through both debt and equity.

Economic Profit

The economic profit displayed significant fluctuations over the analyzed periods. Starting from a substantial negative value in 2020, there was a marked improvement in 2021, moving closer to break-even territory. In 2022, economic profit turned positive, reaching a peak of 9,536 million US dollars, which indicates a strong operational performance during that year. However, this positive trend did not continue; it sharply declined to near zero in 2023 and then reverted to a large negative value by 2024. This series of changes suggests volatility in profitability and varying efficiency in capital utilization over the years.

Invested Capital

The invested capital consistently increased throughout the period, starting at 50,870 million US dollars in 2020 and rising to 106,371 million US dollars by 2024. This steady growth reflects ongoing investment or capital expansion efforts. The rate of increase appears particularly strong between 2023 and 2024, indicating accelerated capital deployment in the most recent year.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and its cost, shows a trend closely mirroring the economic profit behavior. Initially, it was significantly negative in 2020, indicating returns below the cost of capital. The ratio improved markedly in 2021 and turned positive in 2022, reaching the highest value of 12.63%. In 2023, the spread almost negligible at 0.03%, suggests near breakeven returns relative to the cost of capital. By 2024, the economic spread ratio fell back into negative territory at -5.37%, indicating a deterioration in the value generated from invested capital.

Overall Analysis

Over the five-year period, the data reveals a pattern of initial struggle and recovery, peaking in 2022 before declining again. The increase in invested capital suggests substantial reinvestment or growth efforts despite volatile profitability and value creation metrics. The drop in economic profit and economic spread ratio in the latest year points to challenges in sustaining returns relative to capital costs, raising concerns about operational efficiency or market conditions affecting profitability. Monitoring the factors behind these fluctuations may be crucial for strategic planning going forward.

Economic Profit

There was a significant improvement in economic profit from a negative value of -10077 million USD at the end of 2020 to a near breakeven of -971 million USD in 2021. This trend continued positively into 2022, reaching a peak economic profit of 9536 million USD. However, this improvement was not sustained in later years, with economic profit sharply declining to 26 million USD in 2023, followed by a return to negative territory at -5713 million USD by the end of 2024.

Sales and Other Operating Revenues

Sales and operating revenues showed strong growth from 18784 million USD in 2020 to a peak of 78494 million USD in 2022, reflecting a robust increase in business activity or pricing. However, a marked decline followed, with revenues decreasing to 56141 million USD in 2023 and further to 54745 million USD in 2024, indicating a contraction compared to the peak year. Despite this decline, revenue levels in 2023 and 2024 remained substantially higher than those in 2020 and 2021.

Economic Profit Margin

The economic profit margin displayed a parallel pattern to economic profit values, starting at a low of -53.65% in 2020 and improving dramatically to nearly break even at -2.12% in 2021. A strong positive margin of 12.15% in 2022 coincided with peak profitability. However, the margin dropped sharply to 0.05% in 2023 and then deteriorated again to -10.43% by 2024, suggesting worsening operational efficiency or increased costs relative to revenues during these years.