EOG Resources Inc. (NYSE:EOG)

Net Operating Profit After Taxes (NOPAT)

The company experienced significant volatility in its net operating profit after taxes over the analyzed period. Initially, there was a substantial loss in 2015, followed by a reduction in the loss in 2016. From 2017 onwards, the company turned profitable, reaching a peak in 2018, before experiencing a decline in 2019. This indicates a recovery phase with fluctuating profitability in the later years.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating marginally between approximately 16.7% and 17.7%. This suggests consistent market conditions or stable risk premiums associated with the company's investments during these years.

Invested Capital

Invested capital showed a steady upward trend, increasing from approximately 24.4 billion USD in 2015 to around 32.7 billion USD in 2019. This indicates ongoing investment and capital deployment by the company, possibly to support growth or expansion initiatives.

Economic Profit

Economic profit was persistently negative across all years, although the extent of the loss reduced significantly from 2015 to 2018. The smallest negative economic profit was recorded in 2018, coinciding with peak NOPAT, before worsening somewhat in 2019. This pattern suggests that while operational performance improved, the returns did not fully cover the cost of capital, highlighting challenges in value creation over the period.

The financial data reveals significant fluctuations in the company's profitability and operating performance over the five-year period.

Net Income (Loss)

There is a marked improvement from a substantial loss of approximately $4.52 billion in 2015 to a more moderate loss of about $1.10 billion in 2016. This negative trend reverses in 2017 when the company reports a net income of roughly $2.58 billion. The upward trajectory continues through 2018 and 2019, with net income increasing to approximately $3.42 billion and then slightly declining to about $2.73 billion, respectively. This pattern indicates a recovery and stabilization of net profitability after the initial losses in 2015 and 2016.

Net Operating Profit After Taxes (NOPAT)

The NOPAT data exhibits a similar trend to net income, with significant losses recorded in 2015 and 2016, amounting to approximately $6.84 billion and $1.42 billion, respectively. The company moves into positive territory in 2017 with a NOPAT of about $784 million, which then substantially increases to around $4.67 billion in 2018. There is a slight decrease in NOPAT to approximately $3.77 billion in 2019. These changes suggest improvements in core operational efficiency and profitability through the period, particularly from 2017 onwards.

Overall, the data indicates a transition from heavy losses to consistent profitability, reflecting either operational improvements, favorable market conditions, or other strategic adjustments that significantly enhanced financial performance starting in 2017. Both net income and NOPAT trends are aligned, reinforcing the conclusion of a robust turnaround in the company’s financial health over the observed years.

The financial data reveals several notable trends and changes over the examined periods.

Income Tax Provision (Benefit)

This item shows significant volatility throughout the years. In 2015 and 2016, the figures reflect substantial tax benefits, with values of approximately -2.4 billion and -460.8 million respectively, indicating periods of considerable tax relief or deferred tax benefits. The benefit peaked again in 2017 at nearly -1.9 billion, before reversing sharply in 2018 and 2019 to positive figures of 822 million and 810 million respectively. This shift from benefit to provision suggests a change in taxable income or tax obligations, possibly due to improved profitability or changes in tax regulations.

Cash Operating Taxes

Cash operating taxes presented a more stable but fluctuating pattern across the years. From 2015 to 2017, this expense remained positive, ranging between approximately 157.8 thousand and 173.4 thousand, indicating ongoing tax payments related to operations. Contrastingly, 2018 and 2019 show negative values of -165.6 thousand and -15.3 thousand, respectively, which could imply tax refunds, credits, or adjustments exceeding tax payments during these periods. The sharp decline and transition from positive to negative cash operating taxes in 2018 particularly highlight a notable operational or fiscal event impacting tax cash outflows.

The financial data reveals several notable trends in the company's capital structure over the five-year period ending December 31, 2019.

Total reported debt & leases

The total reported debt and leases show a consistent decline from 7,023,659 thousand US dollars in 2015 to 5,974,808 thousand US dollars in 2019. This represents a reduction of approximately 15% over the period, indicating a strategic effort to decrease debt obligations.

Stockholders’ equity

Stockholders’ equity demonstrates a steady and significant increase each year, rising from 12,943,035 thousand US dollars in 2015 to 21,640,716 thousand US dollars by the end of 2019. This growth, approximately 67% over five years, suggests retained earnings accumulation and possible additional equity issuances, strengthening the company's financial base.

Invested capital

Invested capital shows an upward trend throughout the period, increasing from 24,433,279 thousand US dollars in 2015 to 32,663,914 thousand US dollars at the end of 2019, marking a growth of about 34%. This trend indicates ongoing investments in assets, supporting the company's expansion or operational needs.

Overall, the combination of decreasing debt levels alongside increasing equity and invested capital suggests a strengthening of the capital structure with a shift towards greater equity financing. This could enhance the company's financial stability and capacity for future investment.

Economic Profit

The economic profit shows a consistent improvement over the five-year period. It starts at a significantly negative value in 2015 and steadily moves closer to zero by 2018, indicating a reduction in economic losses. However, in 2019, economic profit slightly deteriorates but remains considerably better than the initial years.

Invested Capital

Invested capital demonstrates a clear upward trend across the analysed years. The increase from 2015 to 2019 suggests ongoing investments and capital deployment, with the total amount growing steadily year-over-year.

Economic Spread Ratio

The economic spread ratio improves progressively, moving from highly negative figures in 2015 to much narrower negative percentages by 2018. This trend indicates a gradual improvement in the return on capital relative to its cost. Nonetheless, the ratio worsens slightly in 2019, though it remains markedly better than the early years.

Overall Assessment

The data reveals a positive trend towards reducing economic losses and enhancing capital efficiency. Despite the sustained negative economic profit and spread ratio, the narrowing deficits suggest progress in financial performance. Increasing invested capital points to continued resource allocation for growth or operational needs. The slight reversals in 2019 signal potential challenges that may warrant further investigation.

Operating Revenues and Other

Operating revenues demonstrated a marked upward trend over the observed period. Starting at approximately 8.76 billion US dollars in 2015, revenues declined slightly in 2016 to roughly 7.65 billion but then increased significantly in the subsequent years. By the end of 2017, revenues had risen to approximately 11.21 billion, followed by continued growth to nearly 17.28 billion in 2018 and stabilizing around 17.38 billion in 2019. This trajectory indicates robust revenue growth, particularly from 2016 onward.

Economic Profit

Economic profit, measured in thousands of US dollars, consistently remained negative throughout the five-year period. Although the losses reduced substantially from a peak of about -10.92 billion in 2015 to around -0.68 billion in 2018, there was a resurgence of losses in 2019, increasing to approximately -1.73 billion. This pattern suggests an overall improvement in profitability until 2018, followed by a setback in the final year.

Economic Profit Margin

The economic profit margin showed a consistent improvement trend from a strongly negative margin of -124.69% in 2015 to a less severe negative margin of -3.93% in 2018. However, similar to the economic profit figure, the margin deteriorated somewhat in 2019, rising to -9.95%. The trend implies increasing operational efficiency or profitability relative to revenues through 2018, with some decline thereafter.

Summary of Trends and Insights

Despite the substantial growth in operating revenues over the five-year span, economic profit remained negative, indicating challenges in generating value above the cost of capital. The steady reduction in losses and improvement in economic profit margin until 2018 reflects progress towards profitability and possibly improved cost management. However, the reversal observed in 2019 suggests that the company encountered factors negatively affecting profitability despite maintaining high revenue levels. This divergence between rising revenues and resurgence of economic losses warrants further investigation into cost structure, capital expenses, or other operational factors influencing economic profit.