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
EQT Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -1,348,798 – 12.53% × 16,527,021 = -3,419,078
The financial performance from 2017 to 2021 is characterized by a persistent failure to generate positive economic profit, indicating that the returns on invested capital were insufficient to cover the company's cost of capital throughout the entire period.
- Net Operating Profit After Taxes (NOPAT)
- A significant deterioration in operating profitability is observed following 2017. While the company reported a positive NOPAT of US$ 408.1 million in 2017, the subsequent four years were marked by consistent losses. The most severe contraction occurred in 2018, with a deficit of US$ 2.33 billion, before fluctuating between US$ 908.1 million and US$ 1.35 billion in losses through 2021.
- Invested Capital Trends
- There is a clear downward trend in invested capital from 2017 to 2020, decreasing from US$ 26.51 billion to US$ 15.62 billion. This reduction suggests significant asset write-downs or a strategic contraction of the capital base. A slight reversal occurred in 2021, with invested capital rising to US$ 16.53 billion, though this increase did not correlate with a return to operating profitability.
- Cost of Capital and Economic Profit
- The cost of capital exhibited volatility, peaking at 14.93% in 2017 and reaching a low of 6.43% in 2019. Despite this reduction in the cost of capital in 2019, economic profit remained negative. The economic profit reached its lowest point in 2018 at negative US$ 4.42 billion, coinciding with the deepest NOPAT loss. Although the economic loss narrowed to US$ 2.41 billion in 2019, it widened again to US$ 3.42 billion by 2021, reflecting a sustained destruction of shareholder value.
Overall, the analysis reveals a period of systemic economic value erosion. The combination of negative NOPAT and a substantial capital base ensured that economic profit remained deeply negative, regardless of the fluctuations in the cost of capital or the reduction in total invested capital.
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Net Operating Profit after Taxes (NOPAT)
EQT Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in provision for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to EQT Corporation.
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 52,712 × 2.90% = 1,529
5 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 310,432 × 21.00% = 65,191
6 Addition of after taxes interest expense to net income (loss) attributable to EQT Corporation.
7 Elimination of discontinued operations.
The financial performance from 2017 to 2021 is characterized by a significant transition from profitability to a period of sustained operating losses. A sharp decline in both net income and net operating profit after taxes occurred between 2017 and 2018, establishing a trend of negative returns that persisted through the end of the analyzed period.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced a precipitous drop from a positive US$ 408.1 million in 2017 to a loss of US$ 2.33 billion in 2018. While a partial recovery was observed in 2019 and 2020, with the loss narrowing to US$ 908.1 million in 2020, the metric deteriorated again in 2021 to a loss of US$ 1.35 billion. This volatility indicates instability in core operating profitability.
- Correlation Between NOPAT and Net Income
- A strong correlation is observed between NOPAT and net income, suggesting that operating performance is the primary driver of the overall bottom line. In the majority of the years following 2017, NOPAT was more negative than net income, most notably in 2018, 2019, and 2021. This divergence indicates that non-operating items provided a marginal offset to operating losses during those periods, though insufficient to restore net profitability.
- Economic Value Implications
- The consistent negative NOPAT from 2018 through 2021 indicates a failure to generate operating profits. From the perspective of economic value added, the inability to maintain a positive NOPAT suggests a sustained period of value destruction, as the company failed to cover its operating costs and tax obligations through its core business activities.
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Cash Operating Taxes
EQT Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of tax-related items from 2017 to 2021 reveals a transition from substantial tax benefits to a positive cash tax expenditure. This shift is a critical component for the determination of Economic Value Added (EVA), as it highlights the divergence between accounting tax provisions and actual cash outflows.
- Income Tax Benefit Trends
- A consistent income tax benefit was recorded throughout the five-year period. The most significant benefit occurred in 2017 at -1,188,416 thousand US$, followed by a general reduction in magnitude through 2020. A slight increase in the benefit is observed in 2021, where the figure rose to -434,175 thousand US$, indicating a continued reliance on accounting-based tax recoveries or deferred tax adjustments.
- Cash Operating Tax Volatility
- Cash operating taxes exhibited significant fluctuations and a notable directional shift. From 2017 through 2020, the values remained negative, representing net cash inflows or tax refunds, with a substantial peak in 2018 at -510,482 thousand US$. However, 2021 marks a pivot in the company's tax position, as the value shifted to a positive 64,624 thousand US$, signaling a move from cash tax benefits to actual cash tax payments.
- Relationship Between Accounting and Cash Taxes
- A divergence is evident between reported income tax benefits and cash operating taxes. While the income tax benefit remained negative across the entire period, the cash operating taxes were more volatile and eventually turned positive. This suggests that the accounting benefits were largely driven by non-cash items, whereas the cash operating taxes reflected the actual liquidity impact of tax obligations.
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Invested Capital
EQT Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
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 equity equivalents to common shareholders’ equity.
5 Removal of accumulated other comprehensive income.
Between 2017 and 2021, the capital structure exhibits a significant contraction phase followed by a moderate recovery. The most pronounced reduction occurred between 2017 and 2020, after which a reversal in the trend is observed across all measured capital components in 2021.
- Invested Capital Trend
- A substantial decrease in invested capital is evident, falling from 26,508,072 thousand US$ in 2017 to a low of 15,621,670 thousand US$ in 2020. This represents a total reduction of approximately 41% over the four-year period. The most aggressive decline took place between 2017 and 2018, where capital decreased by over 8 billion US$. A stabilization period followed, with a slight increase to 16,527,021 thousand US$ by the end of 2021.
- Common Shareholders' Equity Analysis
- Equity followed a downward trajectory similar to invested capital, decreasing from 13,319,618 thousand US$ in 2017 to 9,255,240 thousand US$ in 2020. This consistent decline suggests a reduction in the company's equity base during this period. However, a recovery is noted in 2021, with equity rising to 10,029,527 thousand US$, indicating an improvement in the net asset position.
- Total Reported Debt and Leases Evolution
- Debt and lease obligations showed a steady decline from 6,193,259 thousand US$ in 2017 to 4,975,379 thousand US$ in 2020. This downward trend indicates a period of deleveraging. In 2021, this trend reversed, with debt and leases increasing to 5,537,714 thousand US$, aligning with the overall increase in invested capital for that year.
The synchronization of the declines in debt, equity, and total invested capital through 2020 suggests a strategic downsizing or a systemic reduction in the asset base. The simultaneous upturn in 2021 across all three metrics indicates a transition toward renewed capital deployment or asset acquisition.
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Cost of Capital
EQT Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,148,424) | 8,148,424) | ÷ | 14,773,742) | = | 0.55 | 0.55 | × | 19.19% | = | 10.59% | ||
| Debt3 | 6,572,606) | 6,572,606) | ÷ | 14,773,742) | = | 0.44 | 0.44 | × | 5.50% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 52,712) | 52,712) | ÷ | 14,773,742) | = | 0.00 | 0.00 | × | 2.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 14,773,742) | 1.00 | 12.53% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,345,640) | 5,345,640) | ÷ | 10,983,612) | = | 0.49 | 0.49 | × | 19.19% | = | 9.34% | ||
| Debt3 | 5,588,059) | 5,588,059) | ÷ | 10,983,612) | = | 0.51 | 0.51 | × | 6.08% × (1 – 21.00%) | = | 2.44% | ||
| Operating lease liability4 | 49,913) | 49,913) | ÷ | 10,983,612) | = | 0.00 | 0.00 | × | 3.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 10,983,612) | 1.00 | 11.80% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,374,343) | 1,374,343) | ÷ | 6,418,757) | = | 0.21 | 0.21 | × | 19.19% | = | 4.11% | ||
| Debt3 | 4,985,429) | 4,985,429) | ÷ | 6,418,757) | = | 0.78 | 0.78 | × | 3.75% × (1 – 21.00%) | = | 2.30% | ||
| Operating lease liability4 | 58,985) | 58,985) | ÷ | 6,418,757) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 6,418,757) | 1.00 | 6.43% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,636,668) | 4,636,668) | ÷ | 9,290,850) | = | 0.50 | 0.50 | × | 19.19% | = | 9.58% | ||
| Debt3 | 4,553,427) | 4,553,427) | ÷ | 9,290,850) | = | 0.49 | 0.49 | × | 4.48% × (1 – 21.00%) | = | 1.73% | ||
| Operating lease liability4 | 100,755) | 100,755) | ÷ | 9,290,850) | = | 0.01 | 0.01 | × | 4.48% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 9,290,850) | 1.00 | 11.35% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 14,106,990) | 14,106,990) | ÷ | 19,175,750) | = | 0.74 | 0.74 | × | 19.19% | = | 14.12% | ||
| Debt3 | 4,872,831) | 4,872,831) | ÷ | 19,175,750) | = | 0.25 | 0.25 | × | 4.70% × (1 – 35.00%) | = | 0.78% | ||
| Operating lease liability4 | 195,930) | 195,930) | ÷ | 19,175,750) | = | 0.01 | 0.01 | × | 4.70% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 19,175,750) | 1.00 | 14.93% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
EQT Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (3,419,078) | (2,750,861) | (2,410,647) | (4,420,484) | (3,548,657) | |
| Invested capital2 | 16,527,021) | 15,621,670) | 16,653,426) | 18,393,800) | 26,508,072) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -20.69% | -17.61% | -14.48% | -24.03% | -13.39% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -2.40% | — | — | — | — | |
| ConocoPhillips | 4.98% | — | — | — | — | |
| ExxonMobil Holdings Corp. | 3.21% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,419,078 ÷ 16,527,021 = -20.69%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a consistent inability to generate positive economic value. Across the five-year period, the entity failed to achieve a positive economic profit, indicating that the returns generated on invested capital were consistently lower than the cost of that capital.
- Economic Profit Analysis
- Economic profit remained negative throughout the analyzed period, with significant volatility. The most substantial loss occurred in 2018 at -4.42 billion USD. Although a partial recovery was observed in 2019, with losses narrowing to -2.41 billion USD, the trend reversed in 2020 and 2021, ending the period with an economic loss of -3.42 billion USD.
- Invested Capital Trends
- A marked reduction in the capital base is observed between 2017 and 2020, as invested capital fell from 26.51 billion USD to 15.62 billion USD. This represents a significant contraction in the total assets employed to generate profit. However, this downward trend ceased in 2021, when invested capital increased slightly to 16.53 billion USD.
- Economic Spread Ratio Evaluation
- The economic spread ratio remained negative for the entire duration, confirming a sustained failure to create economic value. The ratio reached its lowest point in 2018 at -24.03%, coinciding with the peak economic loss. While the spread improved to -14.48% in 2019, it deteriorated steadily over the following two years, reaching -20.69% by December 31, 2021. This indicates that the gap between the return on invested capital and the cost of capital widened again toward the end of the period.
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Economic Profit Margin
EQT Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (3,419,078) | (2,750,861) | (2,410,647) | (4,420,484) | (3,548,657) | |
| Sales of natural gas, natural gas liquids and oil | 6,804,020) | 2,650,299) | 3,791,414) | 4,695,519) | 2,651,318) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -50.25% | -103.79% | -63.58% | -94.14% | -133.85% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -2.98% | — | — | — | — | |
| ConocoPhillips | 8.30% | — | — | — | — | |
| ExxonMobil Holdings Corp. | 3.16% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales of natural gas, natural gas liquids and oil
= 100 × -3,419,078 ÷ 6,804,020 = -50.25%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by persistent negative economic profit, indicating that the capital employed did not generate returns sufficient to cover its cost. Despite significant fluctuations in revenue, the organization consistently failed to achieve a positive economic value added during this five-year window.
- Economic Profit Trends
- A consistent pattern of value destruction is observed, with economic profit remaining in negative territory throughout the period. The deficit reached its maximum in 2018 at negative 4.42 billion US dollars and concluded the period at negative 3.42 billion US dollars in 2021.
- Revenue Volatility
- Sales of natural gas, natural gas liquids, and oil experienced substantial variance. A notable contraction occurred between 2018 and 2020, where sales fell from 4.70 billion US dollars to 2.65 billion US dollars, followed by a rapid expansion to 6.80 billion US dollars in 2021.
- Economic Profit Margin Analysis
- The economic profit margin showed an overall upward trajectory despite remaining negative. The margin improved from negative 133.85% in 2017 to negative 50.25% in 2021. This improvement was interrupted in 2020, when the margin deteriorated to negative 103.79% due to the combined effect of declining sales and sustained economic losses. The recovery in 2021 was primarily driven by the substantial increase in total sales relative to the economic loss.
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