ConocoPhillips (NYSE:COP)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited significant fluctuations over the five-year period. It started with a negative value of -2,991 million US dollars in 2020, indicating an operational loss during that year. Subsequently, there was a substantial recovery in 2021, with NOPAT rising sharply to 10,273 million US dollars. This upward trend continued into 2022, reaching a peak at 21,159 million US dollars. However, the profit declined thereafter, falling to 12,357 million US dollars in 2023 and further decreasing to 9,976 million US dollars in 2024, though remaining positive.

Invested Capital

Invested capital showed a general upward trend throughout the period with some fluctuations. It increased from 50,870 million US dollars in 2020 to 76,355 million US dollars in 2021, indicating an expansion in capital investment. A slight decrease was observed in 2022 to 75,520 million US dollars, followed by a renewed increase in 2023 to 81,278 million US dollars. The most notable rise occurred in 2024, when invested capital reached 106,371 million US dollars, representing the highest level in the five-year span.

Return on Invested Capital (ROIC)

ROIC demonstrated considerable volatility, correlating closely with changes in NOPAT and invested capital. In 2020, ROIC was negative at -5.88%, reflective of losses experienced that year. It improved significantly the following year, reaching 13.45% in 2021. The peak was observed in 2022 with ROIC at 28.02%, aligned with the highest NOPAT value. However, ROIC declined in subsequent years to 15.2% in 2023 and further down to 9.38% in 2024. Despite the decrease, ROIC remained positive above the initial negative value of 2020.

Overall Insights

The data indicate a recovery and growth phase in operations and capital investment from 2020 to 2022, followed by a period of moderation in profitability and returns in 2023 and 2024. Although net operating profit and ROIC declined after their 2022 peaks, they maintained positive levels, suggesting continued operational profitability. The steady increase in invested capital suggests ongoing commitment to long-term assets, even during periods of decreasing returns. This pattern may imply strategic investment decisions aimed at sustaining future growth despite short-term profitability challenges.

Operating Profit Margin (OPM)

The operating profit margin experienced a significant improvement from a negative margin of -13.25% in 2020 to a positive margin of 29.99% in 2021. This positive trend continued into 2022, peaking at 36.63%, followed by a gradual decline to 29.62% in 2023 and further to 25.8% in 2024. Despite the decline after 2022, the margin remains substantially positive compared to 2020, indicating improved operational efficiency over the period.

Turnover of Capital (TO)

The turnover of capital showed a marked increase from 0.37 in 2020 to 1.04 in 2022, indicating more effective utilization of capital during this timeframe. However, from 2022 onwards, the turnover ratio decreased to 0.69 in 2023 and further to 0.51 in 2024, suggesting a reduction in the efficiency of capital use following the peak year.

1 – Effective Cash Tax Rate (CTR)

This measure indicates the proportion of profit retained after tax. It decreased from 100% in 2020 to approximately 74.75% in 2021, stabilizing at around 73-74% in 2022 and 2023, and slightly reducing to 70.62% in 2024. This consistent rate suggests that while the company pays a significant portion in cash taxes, the proportion of net profit retained after taxes has remained relatively stable over the last four years.

Return on Invested Capital (ROIC)

The ROIC improved dramatically from a negative -5.88% in 2020 to 28.02% in 2022, indicating enhanced profitability and efficient use of invested capital during this period. After 2022, the ROIC declined to 15.2% in 2023 and further to 9.38% in 2024. Despite the decreases, the ROIC remained positive and significantly higher than the 2020 level, illustrating overall improvement but with some diminishing returns in the later years.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes displayed a significant turnaround from a negative value of -2,489 million US dollars in 2020 to a positive 13,743 million in 2021, indicating a substantial recovery. This upward trend continued with a peak at 28,752 million in 2022, followed by a decline in the subsequent years to 16,628 million in 2023 and further down to 14,126 million in 2024. Despite the drop after 2022, the values remained well above the 2020 level, signifying overall improved profitability compared to the initial period.

Sales and Other Operating Revenues

Sales and other operating revenues showed a consistent increase from 18,784 million US dollars in 2020 to a high of 78,494 million in 2022. After this peak, revenues experienced a decrease to 56,141 million in 2023 and a slight further decline to 54,745 million in 2024. While the market size appears to have contracted from the 2022 maximum, sales remain significantly higher than the 2020 baseline, suggesting sustained business expansion despite recent setbacks.

Operating Profit Margin (OPM)

The operating profit margin underwent a drastic improvement starting from a negative figure of -13.25% in 2020 to 29.99% in 2021. This positive momentum increased further to 36.63% in 2022, reflecting enhanced operational efficiency and profitability relative to revenues. However, margins declined to 29.62% in 2023 and then to 25.8% in 2024. Despite this reduction, the margin ratios remained substantially above the negative territory seen in 2020, indicating enduring improvements in cost management and pricing power.

Summary of Trends

Overall, the company’s financial performance demonstrated a marked recovery and growth from 2020 through 2022, characterized by rising profitability and revenue generation. The peak performance in 2022 was followed by a period of decline in both profits and revenues during 2023 and 2024, although these figures still surpass earlier levels. The operating profit margin trend corroborates this pattern, peaking in 2022 and moderating thereafter, yet maintaining a healthy positive margin compared to the initial negative margin. These patterns suggest a business environment or internal factors causing a contraction in the later years, though the fundamental profitability remains robust relative to the starting point.

The financial data reveals distinct trends in sales, invested capital, and capital turnover over the five-year period.

Sales and other operating revenues

Sales increased significantly from 18,784 million US dollars in 2020 to a peak of 78,494 million US dollars in 2022, indicating strong growth in that period. However, after 2022, sales declined to 56,141 million in 2023 and further slightly decreased to 54,745 million in 2024, suggesting a contraction or stabilization after the rapid growth phase.

Invested capital

Invested capital steadily increased each year, starting at 50,870 million US dollars in 2020 and rising to 106,371 million US dollars by 2024. This continuous growth in capital suggests ongoing investment and expansion efforts despite fluctuations in sales revenues.

Turnover of capital (TO)

The turnover ratio, which measures the efficiency of capital usage, improved markedly from 0.37 in 2020 to 1.04 in 2022, aligning with the sales peak. However, it declined in subsequent years to 0.69 in 2023 and further to 0.51 in 2024, reflecting reduced efficiency in utilizing invested capital relative to sales performance in these years.

In summary, the company experienced a strong sales growth phase culminating in 2022, which coincided with improved capital efficiency. Despite continued increases in invested capital through 2024, sales decreased after 2022, leading to a decline in capital turnover. This pattern may indicate challenges in converting investments into proportional revenue growth in the recent years.

Cash Operating Taxes

The cash operating taxes show a significant increase from US$502 million in 2020 to a peak of US$7,594 million in 2022. After reaching this high point, the cash taxes decrease notably to US$4,270 million in 2023 and slightly decline further to US$4,150 million in 2024. This pattern suggests a rapid increase in taxable income or changes in tax policy until 2022, followed by a normalization or reduction in taxable profit or tax liabilities in subsequent years.

Net Operating Profit Before Taxes (NOPBT)

NOPBT demonstrates a dramatic turnaround over the period. Starting with a negative figure of -US$2,489 million in 2020, the company experienced a substantial recovery, reaching a positive peak of US$28,752 million in 2022. Thereafter, NOPBT declines to US$16,628 million in 2023 and further to US$14,126 million in 2024. Despite the decrease after 2022, profitability remains strong compared to pre-2021 levels, indicating operational improvements and fluctuating market conditions impacting earnings.

Effective Cash Tax Rate (CTR)

The effective cash tax rate was not reported for 2020, but from 2021 onward, it remained relatively stable with minor fluctuations. It increased slightly from 25.25% in 2021 to 26.41% in 2022, then slightly decreased to 25.68% in 2023, before rising to 29.38% in 2024. This indicates a mostly consistent tax rate on operating profits with a gradual uptick in the latest year, which may reflect changes in tax legislation or a shift in the composition of taxable income.