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
Hess Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,165 – 20.71% × 18,062 = -575
The analysis of economic value added over the five-year period reveals a persistent failure to generate positive economic profit, although a strong recovery trend emerged following a significant downturn in 2020.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme volatility, characterized by a severe contraction in 2020 when figures fell to -2,506 million US$. A sharp reversal followed, with profits ascending to 1,404 million US$ in 2021 and reaching 3,165 million US$ by 2022, indicating a robust recovery in operational earning capacity.
- Cost of Capital and Invested Capital
- Invested capital decreased from 19,028 million US$ in 2018 to a period low of 16,448 million US$ in 2020, before gradually increasing to 18,062 million US$ in 2022. During this same period, the cost of capital remained elevated, showing a slight dip to 17.48% in 2020 before trending upward to 20.71% by the end of 2022.
- Economic Profit Trends
- Economic profit remained negative throughout the entire observation period, signifying that the returns on invested capital were insufficient to cover the cost of capital. The deficit peaked in 2020 at -5,381 million US$. However, a consistent improvement is observed from 2021 onward, with the economic loss narrowing significantly to -575 million US$ in 2022, driven primarily by the substantial increase in NOPAT.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Hess Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Hess Corporation.
3 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 669 × 4.50% = 30
4 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 523 × 21.00% = 110
5 Addition of after taxes interest expense to net income (loss) attributable to Hess Corporation.
The financial performance from 2018 through 2022 is characterized by significant volatility, marked by a severe downturn in 2020 followed by a robust recovery phase. A trend of operational instability transitioned into a period of substantial growth, with both net income and net operating profit after taxes (NOPAT) exhibiting a strong upward trajectory in the final two years of the period.
- NOPAT Performance and Trend
- NOPAT exhibited extreme fluctuations, starting at 159 million US dollars in 2018 and declining to 77 million US dollars in 2019. A precipitous drop occurred in 2020, where NOPAT fell to negative 2,506 million US dollars. This was followed by a rapid reversal, with values climbing to 1,404 million US dollars in 2021 and reaching a peak of 3,165 million US dollars by 2022.
- Comparative Analysis of Operating and Net Profitability
- A divergence is observed between 2018 and 2019, where NOPAT remained positive while net income attributable to the corporation remained negative. This suggests that core operations were profitable during those years, but net results were suppressed by non-operating expenses or financial costs. In the recovery years of 2021 and 2022, NOPAT consistently exceeded net income, indicating that the improvement in operating profitability outpaced the growth in the bottom line.
- Impact of the 2020 Contraction
- The year 2020 serves as a critical anomaly in the trend, with net income reaching negative 3,093 million US dollars and NOPAT reaching negative 2,506 million US dollars. The scale of the recovery following this trough is significant, as NOPAT increased by approximately 5,671 million US dollars between 2020 and 2022, signaling a comprehensive restoration of operational value generation.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cash Operating Taxes
Hess Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
An analysis of tax-related financial obligations from 2018 through 2022 reveals a period of significant volatility, characterized by a sharp contraction in 2020 followed by a rapid escalation in both accrued provisions and cash outflows by 2022.
- Cash Operating Taxes Trend
- Cash operating taxes remained relatively stable between 2018 and 2019, moving from US$ 504 million to US$ 547 million. A substantial decline occurred in 2020, with payments falling to US$ 146 million. This was followed by a strong recovery to US$ 586 million in 2021 and a peak of US$ 904 million in 2022, reflecting a significant increase in cash tax burdens toward the end of the period.
- Provision for Income Taxes Analysis
- The provision for income taxes exhibited more extreme fluctuations than cash payments. Following an increase from US$ 335 million in 2018 to US$ 461 million in 2019, the company recorded a tax benefit of US$ 11 million in 2020. The recovery phase was aggressive, with provisions rising to US$ 600 million in 2021 and surging to US$ 1,099 million in 2022.
- Correlation and Divergence
- A consistent correlation is observed between cash operating taxes and income tax provisions, both reaching their lowest points in 2020. However, a notable divergence emerged in 2022; while cash operating taxes reached a five-year high of US$ 904 million, the provision for income taxes climbed even further to US$ 1,099 million. This indicates that by the end of the analyzed period, the accounting tax expense significantly exceeded the actual cash tax disbursements.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Invested Capital
Hess Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to total Hess Corporation stockholders’ equity.
4 Removal of accumulated other comprehensive income.
The financial trajectory of the company's capital structure between 2018 and 2022 is characterized by an initial contraction followed by a recovery phase. While total invested capital declined during the first three years of the period, a consistent upward trend emerged starting in 2021, bringing the capital base closer to its 2018 levels.
- Total Reported Debt and Leases
- A consistent increase in total reported debt and leases is observed, rising from 7,434 million US$ in 2018 to 9,150 million US$ in 2022. The most pronounced growth occurred between 2019 and 2020, with the figures stabilizing thereafter.
- Stockholders’ Equity
- Equity levels experienced significant volatility, marked by a sharp decline from 9,629 million US$ in 2018 to a low of 5,366 million US$ in 2020. A recovery phase followed, with equity increasing to 6,300 million US$ in 2021 and further to 7,855 million US$ in 2022, though it remained below the 2018 starting point.
- Invested Capital Trends
- Invested capital decreased from 19,028 million US$ in 2018 to a trough of 16,448 million US$ in 2020. This contraction was primarily driven by the substantial reduction in stockholders' equity, which offset the simultaneous increase in debt. Since 2020, invested capital has trended upward, reaching 18,062 million US$ by the end of 2022.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
Hess Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,544) | 42,544) | ÷ | 51,605) | = | 0.82 | 0.82 | × | 24.18% | = | 19.93% | ||
| Debt and finance lease obligations3 | 8,392) | 8,392) | ÷ | 51,605) | = | 0.16 | 0.16 | × | 5.67% × (1 – 21.00%) | = | 0.73% | ||
| Operating lease liability4 | 669) | 669) | ÷ | 51,605) | = | 0.01 | 0.01 | × | 4.50% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 51,605) | 1.00 | 20.71% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,408) | 31,408) | ÷ | 41,988) | = | 0.75 | 0.75 | × | 24.18% | = | 18.09% | ||
| Debt and finance lease obligations3 | 10,116) | 10,116) | ÷ | 41,988) | = | 0.24 | 0.24 | × | 5.69% × (1 – 21.00%) | = | 1.08% | ||
| Operating lease liability4 | 464) | 464) | ÷ | 41,988) | = | 0.01 | 0.01 | × | 4.10% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 41,988) | 1.00 | 19.21% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 20,117) | 20,117) | ÷ | 30,543) | = | 0.66 | 0.66 | × | 24.18% | = | 15.93% | ||
| Debt and finance lease obligations3 | 9,885) | 9,885) | ÷ | 30,543) | = | 0.32 | 0.32 | × | 5.85% × (1 – 21.00%) | = | 1.50% | ||
| Operating lease liability4 | 541) | 541) | ÷ | 30,543) | = | 0.02 | 0.02 | × | 4.00% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 30,543) | 1.00 | 17.48% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,753) | 19,753) | ÷ | 28,785) | = | 0.69 | 0.69 | × | 24.18% | = | 16.59% | ||
| Debt and finance lease obligations3 | 8,497) | 8,497) | ÷ | 28,785) | = | 0.30 | 0.30 | × | 5.85% × (1 – 21.00%) | = | 1.36% | ||
| Operating lease liability4 | 535) | 535) | ÷ | 28,785) | = | 0.02 | 0.02 | × | 4.30% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 28,785) | 1.00 | 18.02% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,479) | 17,479) | ÷ | 24,735) | = | 0.71 | 0.71 | × | 24.18% | = | 17.09% | ||
| Debt and finance lease obligations3 | 6,494) | 6,494) | ÷ | 24,735) | = | 0.26 | 0.26 | × | 5.83% × (1 – 21.00%) | = | 1.21% | ||
| Operating lease liability4 | 762) | 762) | ÷ | 24,735) | = | 0.03 | 0.03 | × | 5.83% × (1 – 21.00%) | = | 0.14% | ||
| Total: | 24,735) | 1.00 | 18.44% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Hess Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (575) | (1,839) | (5,381) | (3,287) | (3,349) | |
| Invested capital2 | 18,062) | 16,885) | 16,448) | 18,672) | 19,028) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -3.18% | -10.89% | -32.71% | -17.61% | -17.60% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | 6.63% | -2.48% | — | — | — | |
| ConocoPhillips | 19.09% | 4.79% | — | — | — | |
| Exxon Mobil Corp. | 11.64% | 3.03% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -575 ÷ 18,062 = -3.18%
4 Click competitor name to see calculations.
The analysis of economic value creation reveals a consistent pattern of negative economic profit over the five-year period, although a significant recovery trend is evident in the final two years. The most acute deterioration occurred in 2020, followed by a substantial narrowing of losses through 2022.
- Economic Profit Trajectory
- Economic profit remained negative throughout the observed period. After relative stability between 2018 and 2019, a sharp decline was recorded in 2020, with losses expanding to 5,381 million US$. However, a strong corrective trend followed, with economic profit improving to negative 1,839 million US$ in 2021 and further recovering to negative 575 million US$ by December 31, 2022.
- Invested Capital Fluctuations
- Invested capital exhibited a U-shaped trend. Capital levels decreased from 19,028 million US$ in 2018 to a minimum of 16,448 million US$ in 2020. Subsequently, a period of reinvestment or capital growth occurred, bringing the total invested capital back up to 18,062 million US$ by the end of 2022.
- Economic Spread Ratio Performance
- The economic spread ratio reflects the efficiency of capital utilization relative to the cost of capital. The ratio reached its lowest point in 2020 at negative 32.71%, coinciding with the peak in economic losses. A significant recovery is observed thereafter, with the ratio improving to negative 10.89% in 2021 and reaching negative 3.18% in 2022. This movement indicates that the company is steadily approaching a break-even point where the return on invested capital aligns with its cost of capital.
Overall, the correlation between the economic spread ratio and economic profit suggests that the improvement in value creation is driven by operational recovery rather than a reduction in the capital base, as invested capital increased during the period of the most rapid ratio improvement.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Economic Profit Margin
Hess Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (575) | (1,839) | (5,381) | (3,287) | (3,349) | |
| Sales and other operating revenues | 11,324) | 7,473) | 4,667) | 6,495) | 6,323) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -5.08% | -24.61% | -115.30% | -50.61% | -52.97% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | 5.97% | -3.09% | — | — | — | |
| ConocoPhillips | 18.36% | 7.98% | — | — | — | |
| Exxon Mobil Corp. | 8.67% | 2.98% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × -575 ÷ 11,324 = -5.08%
3 Click competitor name to see calculations.
Between 2018 and 2022, a consistent trend of negative economic profit was observed, indicating that the entity did not generate returns exceeding its cost of capital during this five-year period. However, a significant recovery trajectory emerged following a trough in 2020, characterized by a substantial reduction in economic losses and a corresponding expansion in operating revenues.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed duration, with losses initially measured at -3,349 million USD in 2018. A significant deterioration occurred in 2020, where losses widened to -5,381 million USD. Following this period, a consistent recovery was recorded, with losses narrowing to -1,839 million USD in 2021 and further improving to -575 million USD by the end of 2022.
- Revenue Correlation and Scale
- Sales and other operating revenues exhibited a sharp contraction in 2020, falling to 4,667 million USD from 6,495 million USD in 2019. This decline in top-line performance directly coincided with the peak in economic losses. Subsequently, revenues grew aggressively, reaching 11,324 million USD in 2022, suggesting that the improvement in economic profit was closely tied to the substantial increase in operating scale.
- Economic Profit Margin Volatility
- The economic profit margin experienced extreme fluctuations, reaching a critical low of -115.30% in 2020, signifying that economic losses exceeded total revenues for that year. From this point, a sharp reversal was observed, with the margin improving to -24.61% in 2021 and reaching -5.08% in 2022. This trend indicates a narrowing gap between the generated returns and the cost of capital, moving the organization closer to a positive value-creation threshold.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?