Hess Corp. (NYSE:HES)

The financial data reveals several key trends in the company's operational and investment performance over the five-year period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates significant volatility across the years. It started at a positive value of $159 million in 2018, then declined sharply to $77 million in 2019, followed by a substantial negative value of -$2,506 million in 2020. A strong recovery is observed in 2021 with NOPAT rising to $1,404 million, and this upward trend continues into 2022 with an even higher NOPAT of $3,165 million. This pattern indicates a major operational setback in 2020 with a rebound and growth in subsequent years.

Cost of Capital

The cost of capital exhibits a gradual increasing trend from 16.05% in 2018 to 17.92% in 2022 with minor fluctuations. This suggests an overall rise in the weighted average cost of capital over the period, which may reflect increasing risk perceptions or changes in the company’s capital structure or market conditions.

Invested Capital

Invested capital decreases from $19,028 million in 2018 to a low of $16,448 million in 2020, indicating divestitures or asset reductions during this time. It then stabilizes and begins to increase in 2021 and 2022, reaching $18,062 million. This recovery suggests a strategic reinvestment or growth in asset base following the contraction.

Economic Profit

Economic profit remains negative throughout the entire period, indicating that the company has consistently failed to generate returns above its cost of capital. The economic loss is most severe in 2020 with -$5,015 million, paralleling the sharp decline in NOPAT. Subsequent years show a reduction in economic loss, with a significant improvement by 2022 when the economic profit is almost neutral at -$72 million. This improvement aligns with the recovery in operating profit and invested capital.

Overall, the data highlights a major operational and economic challenge during 2020, followed by a strong recovery phase. Despite the improvement in profit and invested capital levels, the company has yet to consistently generate economic profits above its cost of capital by 2022.

The financial data over the five-year period exhibits significant volatility in key profitability measures for the company.

Net income (loss) attributable to Hess Corporation

The net income shows a negative trend from 2018 through 2020, with losses deepening each year and peaking at a substantial loss in 2020. Specifically, the company recorded losses of $282 million, $408 million, and $3,093 million respectively in those years. However, a marked recovery occurred in 2021, with net income turning positive to $559 million, followed by a further substantial increase to $2,096 million in 2022. This indicates a strong rebound in profitability after a difficult period culminating in 2020.

Net operating profit after taxes (NOPAT)

Similar to net income, NOPAT declined sharply from 2018 to 2020, moving from a profit of $159 million in 2018 to a significant loss of $2,506 million in 2020. Notably, the decline in NOPAT was steeper than for net income, which may suggest operational challenges or non-operating factors affecting net income differently. From 2021 onwards, NOPAT exhibits a strong recovery, reaching $1,404 million in 2021 and rising to $3,165 million in 2022, surpassing pre-2018 levels. This recovery highlights a substantial improvement in operational profitability and tax efficiency.

Overall, the data demonstrates the company's transition from significant losses during the 2018-2020 period to robust profitability in 2021 and 2022. The peak losses in 2020 may reflect extraordinary circumstances or operational setbacks, followed by a significant turnaround. Both net income and NOPAT reflect this trend, with NOPAT showing a more pronounced recovery in 2022, indicating enhanced core operating performance relative to net income gains.

Provision (benefit) for income taxes

The provision for income taxes exhibits significant volatility over the five-year period. Starting at 335 million USD in 2018, it rose substantially to 461 million USD in 2019. In 2020, the figure turned negative to -11 million USD, indicating a tax benefit rather than a provision. The trend reversed sharply in 2021, with the provision increasing dramatically to 600 million USD, followed by a further increase to 1,099 million USD in 2022. This suggests an increasing tax expense or liability in the most recent years, possibly due to higher pre-tax earnings or changes in tax regulations.

Cash operating taxes

Cash operating taxes showed a relatively stable but fluctuating pattern. The amount increased slightly from 504 million USD in 2018 to 547 million USD in 2019, then dropped substantially to 146 million USD in 2020. This decrease corresponds with the sharp drop in the provision for income taxes in 2020, reflecting lower tax payments during that year. In 2021, cash operating taxes rebounded to 586 million USD and further increased significantly to 904 million USD in 2022. This rise mirrors the increased tax provision, indicating higher cash outflows related to tax payments in the latter years.

Analysis of the financial data reveals several key trends in the debt, equity, and invested capital of the company over the five-year period ending December 31, 2022.

Total reported debt & leases

The total reported debt and leases increased steadily from $7,434 million in 2018 to $9,150 million in 2022. This represents a gradual accumulation of liabilities over the five years, indicating a strategic move towards higher leverage or increased financing requirements. The rate of increase slowed notably between 2020 and 2022, suggesting a stabilization in borrowing or lease commitments.

Total stockholders’ equity

Stockholders’ equity showed a different pattern, starting at $9,629 million in 2018 then declining sharply through 2020 to a low of $5,366 million. This substantial reduction, nearly halving equity value, may reflect net losses, dividends, share buybacks, or other equity-reducing activities during this period. However, from 2020 onwards, equity rebounded progressively, reaching $7,855 million by the end of 2022, indicating a recovery phase, possibly driven by improved profitability or equity financing events.

Invested capital

Invested capital decreased from $19,028 million in 2018 to $16,448 million in 2020, aligning with the decline in equity and increase in debt. From 2021 onwards, invested capital increased moderately each year, reaching $18,062 million in 2022. This suggests selective reinvestment or asset expansion after a period of contraction, reflecting a potentially cautious but constructive growth strategy.

Overall, the data illustrates a period of financial strain or restructuring between 2018 and 2020, marked by decreased equity and fluctuating capital levels alongside rising debt. Subsequent years show signs of recovery and cautious growth with equity rebuilding and stabilization in debt levels, complementing an increase in invested capital. This pattern suggests a phase of adaptation followed by strategic stabilization improving the company’s capital structure.

Economic Profit

The economic profit maintained a significant negative trend throughout the period, indicating losses in value creation. Starting at -2895 million US dollars in 2018, the loss marginally decreased to -2855 million in 2019, before deteriorating sharply to -5015 million in 2020. Subsequently, the losses improved notably, reducing to -1412 million in 2021 and further declining substantially to -72 million by 2022, signaling a movement towards breakeven or slight profitability.

Invested Capital

Invested capital showed a downward trend from 2018 to 2020, contracting from 19028 million US dollars to 16448 million US dollars. However, it increased steadily afterward, reaching 16885 million in 2021 and continuing the upward trajectory to 18062 million in 2022. This suggests a recovery or expansion phase in capital investment following the decline experienced during the earlier years.

Economic Spread Ratio

The economic spread ratio was consistently negative over the five-year period, reflecting economic losses relative to invested capital. The ratio started at -15.21% in 2018, slightly worsening to -15.29% in 2019 and sharply declining to -30.49% in 2020. After this low point, there was a marked improvement, with the spread rising to -8.36% in 2021 and approaching near zero at -0.4% in 2022. This trend indicates a gradual reduction in the economic loss margin and an improving efficiency of capital utilization.

Summary

Overall, the data reveals a period marked by significant economic losses and diminishing return on invested capital through the 2018-2020 interval, peaking negatively in 2020. Following this, the company appears to have embarked on a recovery path characterized by a reduction in losses, gradual increase in invested capital, and improvement in the economic spread ratio. By the end of 2022, these trends suggest a considerable narrowing of economic losses and progress toward financial stabilization.

Economic Profit

Economic profit was negative throughout the period, indicating losses. The value notably worsened in 2020, reaching its lowest point at -5,015 million US dollars. However, there was a substantial recovery in 2021 and 2022, with losses significantly reduced to -1,412 million and further to -72 million US dollars respectively, signaling progress toward breakeven or profitability.

Sales and Other Operating Revenues

Sales and operating revenues demonstrated variability with an initial increase from 6,323 million US dollars in 2018 to 6,495 million in 2019, followed by a sharp decline to 4,667 million in 2020. Revenues recovered strongly after 2020, rising to 7,473 million in 2021 and reaching a peak of 11,324 million US dollars in 2022, representing a robust growth trend in the latter years.

Economic Profit Margin

The economic profit margin remained negative throughout all years, consistent with the negative economic profits. The margin deteriorated significantly in 2020, dropping below -100%, which corresponds with the deepest economic loss and lowest revenue level. Following 2020, the margin improved significantly in 2021 and 2022, reaching -18.9% and -0.64% respectively, reflecting the reduction of losses in relation to growing revenues.

Summary of Trends

Overall, the company experienced challenging financial conditions in 2020, characterized by a steep decline in revenues and a substantial increase in losses, both in absolute terms and margin percentage. The subsequent years saw a notable recovery with significant revenue growth and a near elimination of economic losses by 2022. The trends suggest an improving operational performance and a move towards economic profitability despite the persistent slight negative margin at the end of the period.