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 = -3,420,383
The analysis of the economic value added reveals a consistent trend of shareholder value destruction between 2017 and 2021. Despite fluctuations in operational performance and capital structure, the entity failed to generate a positive economic profit in any of the observed years, indicating that the returns generated were insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- A significant deterioration in operating profitability is observed starting in 2018. While 2017 yielded a positive NOPAT of $408.1 million, the subsequent four years were characterized by substantial losses. The most severe decline occurred in 2018 with a loss of $2.33 billion, followed by a period of volatility where losses narrowed to $908.1 million in 2020 before widening again to $1.35 billion by 2021.
- Invested Capital Dynamics
- There was a pronounced reduction in the capital base during the early part of the period. Invested capital decreased from $26.51 billion in 2017 to a low of $15.62 billion in 2020, representing a contraction of approximately 41%. This suggests a strategic reduction in assets or a deleveraging process. However, this trend reversed slightly in 2021, with invested capital increasing to $16.53 billion.
- Cost of Capital Fluctuations
- The cost of capital exhibited significant volatility, peaking at 14.94% in 2017 and reaching a period low of 6.44% in 2019. The subsequent rise back to 12.53% by 2021 indicates an increasing burden of capital charges, which compounded the negative impact of operating losses on the overall economic profit.
- Economic Profit Synthesis
- Economic profit remained negative throughout the five-year duration, ranging from a high of negative $2.41 billion in 2019 to a low of negative $4.42 billion in 2018. The negative trajectory is driven by the combination of sustained NOPAT losses and a substantial capital charge. Even in 2019, when the cost of capital was at its lowest and NOPAT losses were moderate, the company could not achieve a positive economic profit, confirming that the operational returns were fundamentally decoupled from the cost of investment.
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Net Operating Profit after Taxes (NOPAT)
EQT Corp., NOPAT calculation
US$ 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.
- Net Income (Loss) Attributable to EQT Corporation
- Over the five-year period from 2017 to 2021, net income exhibited a significant downward trend. In 2017, net income was positive, amounting to approximately $1.51 billion. However, from 2018 onwards, the company incurred losses each year, with the loss magnitude increasing initially in 2018 (around $2.24 billion), followed by a somewhat reduced loss of roughly $1.22 billion in 2019. The losses remained substantial in 2020 and 2021, with figures close to $967 million and $1.16 billion respectively. This pattern suggests persistent financial challenges beginning in 2018 and continuing through 2021, without a return to profitability within this timeframe.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT data reveals a similar trajectory to net income, indicating consistent operating losses from 2018 forward. Starting with a positive NOPAT of about $408 million in 2017, the company faced a steep decline to a negative $2.33 billion in 2018. Subsequent years show ongoing negative NOPAT values, though somewhat less severe than 2018, with losses of approximately $1.34 billion, $908 million, and $1.35 billion in 2019, 2020, and 2021 respectively. The continuous negative NOPAT reflects challenges in the core operations, implying difficulties in generating operating profitability post-2017.
- Overall Trend Analysis
- The data indicates a critical inflection point between 2017 and 2018, with both net income and operating profit shifting sharply from profitability to significant losses. This negative trend persists without material improvement through to 2021. Despite some fluctuations in the magnitude of losses, the absence of recovery highlights ongoing adverse conditions impacting the company's earnings and operational efficiency over this interval.
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Cash Operating Taxes
EQT Corp., cash operating taxes calculation
US$ 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 financial data reflects fluctuations and notable trends in the tax-related components over the five-year period ending December 31, 2021.
- Income Tax Benefit
- This item shows a consistent decrease in the magnitude of the tax benefit from 2017 through 2020, moving from approximately -1,188,416 thousand US dollars in 2017 to -298,858 thousand US dollars in 2020. The decreasing absolute value suggests a diminishing tax benefit over time. However, in 2021, there is a slight reversal with the income tax benefit increasing in magnitude to -434,175 thousand US dollars, indicating a partial rebound in the tax benefits recognized.
- Cash Operating Taxes
- Cash operating taxes exhibit significant volatility during the period. Notably, there is a sharp increase in the cash operating tax outflow in 2018, with a value of -510,482 thousand US dollars, which markedly exceeds the amounts of the surrounding years. In 2019 and 2020, these operating taxes decreased substantially to -58,336 and -85,720 thousand US dollars respectively. Contrasting with previous years, a positive figure of 64,624 thousand US dollars is observed in 2021, indicating a cash inflow or a tax refund rather than an outflow, which marks a substantial positive shift in this cash flow item.
Overall, the data reveals a general trend of decreasing income tax benefits until 2020 followed by a slight increase in 2021, alongside a volatile pattern in cash operating taxes which includes a significant outflow anomaly in 2018 and a notable positive inflow in 2021. These trends suggest shifts in the tax strategy, tax payments, or recognition of tax benefits, as well as possible changes in underlying tax positions or operational tax circumstances during the analyzed period.
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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.
- Total reported debt & leases
- Over the five-year period, total reported debt and leases exhibited a general downward trend from 6,193,259 thousand USD at the end of 2017 to a low of 4,975,379 thousand USD at the end of 2020. However, this was followed by an increase to 5,537,714 thousand USD at the end of 2021, indicating a partial reversal of the previous declining trend.
- Common shareholders’ equity
- The common shareholders' equity showed a consistent decline from 13,319,618 thousand USD in 2017 to a low of 9,255,240 thousand USD in 2020. Notably, in 2021 there was a recovery to 10,029,527 thousand USD, suggesting improvement in equity position after several years of decrease.
- Invested capital
- Invested capital experienced a sharp decline from 26,508,072 thousand USD in 2017 to 15,621,670 thousand USD in 2020. This represents a significant reduction in invested capital over these years. In 2021, there was a modest increase to 16,527,021 thousand USD, signaling a stabilization or slight growth after the downward trajectory.
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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 | × | 19.21% | = | 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 | × | 19.21% | = | 9.35% | ||
| 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 | × | 19.21% | = | 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 | 6.44% | ||||||||||
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 | × | 19.21% | = | 9.59% | ||
| 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 | 11.36% | ||||||||||
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 | × | 19.21% | = | 14.13% | ||
| 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 | 14.94% | ||||||||||
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 | (3,420,383) | (2,751,950) | (2,411,157) | (4,421,799) | (3,551,449) | |
| Invested capital2 | 16,527,021) | 15,621,670) | 16,653,426) | 18,393,800) | 26,508,072) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -20.70% | -17.62% | -14.48% | -24.04% | -13.40% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -2.37% | — | — | — | — | |
| ConocoPhillips | 5.03% | — | — | — | — | |
| Exxon Mobil Corp. | 3.26% | — | — | — | — | |
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 × -3,420,383 ÷ 16,527,021 = -20.70%
4 Click competitor name to see calculations.
Analysis of the period between 2017 and 2021 reveals a persistent inability to generate positive economic value, as indicated by consistently negative economic profit and a negative economic spread ratio throughout the five-year duration.
- Economic Profit Trends
- Economic profit remained negative for the entire duration, signifying that the returns generated were insufficient to cover the cost of capital. The most significant deficit occurred in 2018 at approximately -4.42 billion USD. While there was a notable recovery in 2019, where the deficit narrowed to -2.41 billion USD, this improvement was not sustained, with the deficit widening again to -3.42 billion USD by the end of 2021.
- Invested Capital Dynamics
- A significant contraction in the invested capital base was observed from 2017 to 2020. The invested capital decreased from 26.51 billion USD in 2017 to a low of 15.62 billion USD in 2020. This downward trajectory suggests a strategic reduction in assets or a deleveraging process. However, this trend reversed slightly in 2021, with invested capital increasing to 16.53 billion USD.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative across all reporting years, reflecting a continuous destruction of shareholder value. The ratio reached its lowest point in 2018 at -24.04%. Although the ratio improved to -14.48% in 2019, a subsequent deterioration is observed in 2020 and 2021, ending the period at -20.70%. The volatility of this ratio, coupled with the shrinking capital base, indicates that the reduction in invested capital was not sufficient to offset the negative economic profit.
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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 | (3,420,383) | (2,751,950) | (2,411,157) | (4,421,799) | (3,551,449) | |
| 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 | -50.27% | -103.84% | -63.60% | -94.17% | -133.95% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -2.95% | — | — | — | — | |
| ConocoPhillips | 8.39% | — | — | — | — | |
| Exxon Mobil 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 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales of natural gas, natural gas liquids and oil
= 100 × -3,420,383 ÷ 6,804,020 = -50.27%
3 Click competitor name to see calculations.
Analysis of the financial performance from 2017 to 2021 reveals a consistent inability to generate positive economic value, with economic profit remaining negative throughout the entire period. This indicates that the returns generated by the company were insufficient to cover its cost of capital over these five years.
- Economic Profit Trends
- Economic profit exhibited significant volatility, reaching its lowest point in 2018 at negative 4.42 billion US dollars. While there was a notable recovery in 2019, where the deficit narrowed to negative 2.41 billion US dollars, the trend reversed in subsequent years. By 2021, the economic profit had declined again to negative 3.42 billion US dollars, demonstrating a recurring struggle to achieve economic value added.
- Revenue Fluctuations
- Sales of natural gas, natural gas liquids, and oil showed substantial variance. A significant increase was observed in 2018, followed by a contraction in 2019 and 2020. A sharp recovery occurred in 2021, with sales reaching a period high of 6.80 billion US dollars. This volatility in top-line revenue suggests a high sensitivity to market price fluctuations or production volume changes.
- Economic Profit Margin Performance
- The economic profit margin remained negative throughout the analyzed timeframe, though it showed an overall improving trend in terms of relative efficiency. The margin peaked at negative 133.95% in 2017 and reached its most favorable level of negative 50.27% in 2021. The improvement in the margin during 2021 coincides with the surge in sales, suggesting that increased revenue scales helped reduce the proportional gap between operating returns and the cost of capital, despite the absolute economic profit remaining negative.
The correlation between the surge in sales in 2021 and the improvement in the economic profit margin indicates that revenue growth is a primary driver of efficiency improvements. However, the persistent negative values across all metrics suggest a systemic challenge in achieving a return on invested capital that exceeds the required threshold.
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