Devon Energy Corp. (NYSE:DVN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes displayed considerable volatility across the examined periods. Starting with a strong positive value of 1250 million US dollars in 2018, it sharply decreased to 57 million in 2019, demonstrating a significant decline in profitability. The year 2020 marked a substantial loss, with NOPAT falling to -2522 million, indicating operational challenges or extraordinary expenses during this period. However, there was a notable recovery in 2021, with NOPAT increasing to 3160 million, which further strengthened in 2022, reaching 7447 million, the highest value recorded in the given timeframe.

Invested Capital

The invested capital also exhibited fluctuating trends. Initially valued at 15,392 million US dollars in 2018, it decreased significantly over the next two years to 10,964 million in 2019 and further to 7,866 million in 2020. This reduction could indicate asset divestitures or capital restructuring. Subsequently, invested capital rose markedly to 16,727 million in 2021 and continued to increase to 19,717 million in 2022, suggesting renewed investments or expansion activities during these years.

Return on Invested Capital (ROIC)

The return on invested capital mirrored the fluctuations observed in profitability and invested capital. It started at a healthy 8.12% in 2018 but dropped drastically to 0.52% in 2019, reflecting minimal returns relative to the capital employed. In 2020, ROIC fell deeply into negative territory at -32.06%, correlating with the significant NOPAT loss and reduced invested capital. The situation improved considerably in 2021, with ROIC rebounding to 18.89%, and further increased substantially to 37.77% in 2022, indicating enhanced efficiency in generating returns from the capital invested.

Overall Trends and Insights

The data reveals a period of operational and financial distress culminating in 2020, followed by a strong recovery in subsequent years. The decline in both profitability and invested capital through 2019 and 2020 suggests strategic adjustments or adverse external conditions impacting performance. The rapid recovery in NOPAT and corresponding increase in invested capital post-2020 indicate a successful turnaround and expansion phase, supported by an improving return on invested capital. The marked improvement in ROIC by 2022 highlights an effective utilization of the invested capital to generate higher profits, signaling robust operational efficiency and financial health recovery.

Operating Profit Margin (OPM)

The operating profit margin exhibited significant volatility over the observed period. It started at 11.61% in 2018, then sharply declined to 1.6% in 2019 and further deteriorated to -55.69% in 2020, indicating substantial operating losses during that year. Following this downturn, there was a strong recovery, with the margin increasing to 26.69% in 2021 and further improving to 42.13% by 2022, suggesting enhanced operational efficiency and profitability in the most recent years.

Turnover of Capital (TO)

This ratio showed a generally positive trend. It decreased from 0.7 in 2018 to 0.57 in 2019, indicating a reduction in the efficiency of capital usage. However, the turnover gradually improved to 0.61 in 2020, 0.73 in 2021, and reached 0.97 in 2022. This upward trajectory implies increasingly effective utilization of capital to generate revenue, approaching nearly one turnover per unit of capital by the end of the period.

1 – Effective Cash Tax Rate (CTR)

The metric remained consistently high across all years. Beginning at 100.29% in 2018, it dropped to 57% in 2019 but then stabilized near or above 90% subsequently: 100% in 2020, 97.02% in 2021, and 92.21% in 2022. This pattern indicates that the cash tax impacts relative to earnings or relevant tax measures remained substantial throughout the period, with some fluctuation but generally maintaining a high level.

Return on Invested Capital (ROIC)

ROIC reflected marked fluctuations and recovery trends over time. From a positive 8.12% in 2018, it plunged to a marginal 0.52% in 2019, and then sharply declined to a negative -32.06% in 2020, indicating significant value destruction. However, a notable recovery followed, with ROIC climbing to 18.89% in 2021 and further improving to 37.77% in 2022. This improvement signals enhanced profitability and efficient capital deployment in recent years.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes exhibits significant volatility over the analyzed period. Starting at $1,246 million in 2018, there is a substantial decline to $99 million in 2019, followed by a sharp negative value of -$2,689 million in 2020. This negative performance reverses markedly in 2021 with a rebound to $3,257 million, further increasing to $8,076 million in 2022. This trend indicates a recovery and strong improvement in profitability after a challenging 2020.

Revenues

Revenues show a downward trend from $10,734 million in 2018 to a low of $4,828 million in 2020. Subsequently, revenues increase markedly to $12,206 million in 2021 and continue rising to $19,169 million in 2022. This pattern suggests a significant contraction in the earlier years, followed by a strong recovery and growth in the subsequent years, surpassing the initial revenue levels by 2022.

Operating Profit Margin (OPM)

The operating profit margin mirrors the fluctuations observed in net operating profit and revenues. From 11.61% in 2018, the margin declines sharply to 1.6% in 2019, turns deeply negative to -55.69% in 2020, then shifts to a positive 26.69% in 2021, and improves further to 42.13% in 2022. This indicates that operational efficiency and profitability were severely impacted during 2020 but have considerably improved in recent periods, achieving a strong margin by 2022.

Summary of Trends

Overall, the financial data depicts a period of substantial challenge around 2019-2020, with both profitability and revenues declining significantly and the operating margin turning negative. From 2021 onwards, there is a clear turnaround with robust growth in revenues, a return to high profitability levels, and strong operating margins. This suggests effective management and operational strategies were likely implemented to restore financial health and drive growth.

The financial data reveals several key trends over the five-year period ending December 31, 2022. Revenues exhibit considerable fluctuation, declining sharply from 10,734 million US dollars in 2018 to 4,828 million in 2020, followed by a robust recovery to 19,169 million by 2022, which represents the highest recorded value in the dataset.

Invested capital shows a similar fluctuation pattern but with less volatility. Starting at 15,392 million US dollars in 2018, it decreases steadily to a low of 7,866 million in 2020, then increases gradually to 19,717 million in 2022. This suggests a retrenchment in capital deployment during the middle years followed by renewed investment activity.

The turnover of capital ratio, a measure of operational efficiency indicating how well the invested capital is generating revenues, follows the revenue and capital investment movements. The ratio dips from 0.7 in 2018 to 0.57 in 2019, then slightly recovers to 0.61 in 2020. In the following years, it improves steadily to reach 0.97 in 2022. This improvement reflects enhanced utilization of invested capital in generating revenues, particularly notable in 2022, nearing a full turnover, which indicates more efficient asset use.

In summary, the data depicts a period of contraction in both revenues and invested capital through 2020, followed by strong growth and improved capital efficiency by 2022. This trajectory indicates recovery and growth phases within the analyzed timeframe.

Cash Operating Taxes

The cash operating taxes exhibit significant volatility over the analyzed periods. Starting with a negative amount of -4 million USD in 2018, the value sharply increased to 43 million USD in 2019. In 2020, there was a notable decrease to -167 million USD, indicating a tax refund or credits. Subsequently, the figure rebounded to 97 million USD in 2021 and surged substantially to 629 million USD in 2022. This pattern reflects considerable fluctuations in tax payments, potentially influenced by varying profitability and tax regulations.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes showed considerable instability over the years. It was at a positive 1,246 million USD in 2018 but then dropped dramatically to 99 million USD in 2019. There was a sharp decline to -2,689 million USD in 2020, indicating a substantial operating loss before taxes in that year. Following this downturn, the company rebounded strongly with profits of 3,257 million USD in 2021 and further increased to 8,076 million USD in 2022. This trend suggests a volatile operating environment with a pronounced recovery phase after 2020.

Effective Cash Tax Rate (CTR)

The effective cash tax rate also displays irregular behavior. It was negative (-0.29%) in 2018, which aligns with the negative cash operating taxes recorded that year. In 2019, the tax rate jumped to 43%, indicating a high tax burden relative to pre-tax profits. There is no data recorded for 2020, which coincides with a significant loss in NOPBT. In 2021, the effective cash tax rate returned to a low positive rate of 2.98%, and in 2022, it increased slightly to 7.79%. This suggests a relatively low taxation proportion relative to earnings in recent profitable years, despite the high absolute tax payments reported in cash operating taxes.