Marathon Oil Corp. (NYSE:MRO)

The financial data reveals fluctuating performance in key profit metrics over the five-year period, alongside evolving capital deployment and cost structures.

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited considerable volatility. Starting with a negative value of -659 million US dollars in 2017, it improved markedly to a positive 1,350 million US dollars in 2018. This was followed by a decline to 654 million in 2019. A significant downturn occurred in 2020, with NOPAT dropping to -1,242 million, before rebounding to a positive 1,116 million US dollars in 2021. This pattern suggests fluctuations in operational efficiency and profitability, with challenges notably peaking in 2020.

Cost of Capital

The cost of capital remained relatively high and volatile, ranging from 21.63% to 28.39% over the observed period. Starting at 25.26% in 2017, it peaked at 28.39% in 2021 after a low of 21.63% in 2019. The elevated and increasing cost of capital may imply higher risk perceptions or financing costs, adversely impacting the company’s economic profitability.

Invested Capital

Invested capital displayed a declining trend from 2017 to 2021. The company’s capital base decreased from 17,726 million US dollars in 2017 to 14,862 million US dollars in 2021. This reduction suggests asset divestitures, efficiency improvements, or other strategic decisions aimed at capital optimization.

Economic Profit

Economic profit remained negative throughout the entire period, indicating that the company did not generate returns exceeding its cost of capital. While there was some improvement from -5,136 million in 2017 to -3,104 million in 2021, the persistent negative values and considerable magnitude reflect ongoing challenges in creating shareholder value. The highest negative economic profit was recorded in 2017, with a partial recovery evident by 2021.

Overall, the financial data points to a company experiencing significant fluctuations in profitability, facing high and variable capital costs, while gradually decreasing its invested capital base. Despite some recovery in operating profits and a reduction in economic losses by 2021, the ongoing negative economic profit highlights challenges in delivering returns above the cost of capital.

Net income (loss)

The net income demonstrated significant volatility over the five-year period. In 2017, the company experienced a substantial loss of $5,723 million. This negative outcome was followed by a strong recovery in 2018, with net income rising to a positive $1,096 million. However, the subsequent years showed fluctuating performance, with a decline to $480 million in 2019, then a return to a loss of $1,451 million in 2020. The year 2021 saw another recovery, bringing net income back to a positive $946 million. The trend indicates cyclical financial performance with significant swings between profit and loss.

Net operating profit after taxes (NOPAT)

The NOPAT followed a broadly similar pattern to net income, reflecting operational profitability after tax considerations. In 2017, NOPAT was negative at $659 million, switching to a positive $1,350 million in 2018, which aligns with the recovery in net income that year. The profit reduced to $654 million in 2019 and fell again to a loss of $1,242 million in 2020, paralleling the downturn in net income. In 2021, NOPAT increased to $1,116 million, indicating improved operational efficiency or market conditions. This pattern suggests that operational profitability was a significant factor in the company's overall net income variability.

Income Tax Provisions (Benefits)

The income tax provisions experienced a notable fluctuation over the analyzed period. Starting at a relatively high positive figure in 2017 with 376 million US dollars, the value decreased to 331 million in 2018. In 2019 and 2020, the provisions turned negative, reflecting benefits rather than expenses, with -88 million and -14 million US dollars respectively. This shift indicates a period of tax benefits or credits. In 2021, the figure returned to a positive value of 58 million US dollars, though this amount remains significantly lower than the earlier years, suggesting a partial return to tax liabilities but not to previous levels.

Cash Operating Taxes

Cash operating taxes displayed a steep decline from 2017 to 2019, falling from 559 million US dollars down to a minimal 1 million. This sharp reduction suggests substantial changes in taxable operating activities or enhanced tax strategies during these years. A gradual increase followed in 2020 and 2021, reaching 66 million and 139 million US dollars, respectively. Despite this recovery, the 2021 value remains well below the levels observed in 2017 and 2018, indicating that the company's cash tax payments have not reverted to prior higher levels.

Total Reported Debt & Leases

The total reported debt and leases demonstrated a relatively stable trend from 2017 to 2020 with slight fluctuations, starting at $5,600 million in 2017 and peaking modestly at $5,709 million in 2019. However, there was a significant reduction in 2021, where the figure dropped sharply to $4,107 million, indicating a considerable deleveraging effort or repayment of debt and leases during that year.

Stockholders’ Equity

Stockholders’ equity showed moderate growth between 2017 and 2019, increasing from $11,708 million in 2017 to $12,153 million in 2019. This was followed by a decline in 2020 down to $10,561 million, likely reflecting the impact of market or operational challenges during that period. In 2021, equity stabilized somewhat with a slight increase to $10,686 million, suggesting a period of recovery or improved financial performance.

Invested Capital

Invested capital exhibited an overall downward trend over the five-year period. Beginning at $17,726 million in 2017, it remained relatively steady through 2018 and 2019 but declined sharply in 2020 to $16,214 million and further decreased in 2021 to $14,862 million. This decrease may indicate asset disposals, decreased capital expenditures, or a strategic shift in the company’s investment approach.

Summary Insights

Over the five-year span, the company appeared to strategically reduce its financial leverage, as evidenced by the significant decline in total reported debt and leases in 2021. This deleveraging was concurrent with a reduction in invested capital, possibly reflecting a realignment of capital allocation or divestitures. Stockholders’ equity experienced volatility, with a peak around 2019 followed by a contraction and slight rebound, which may be connected to broader market conditions or company-specific operational factors. Overall, the financial data indicates a trend toward lower debt levels and reduced invested capital, alongside a cautious stabilization of equity in the latest period.

Economic Profit

The economic profit remained consistently negative over the period from 2017 to 2021, indicating that the company did not generate returns exceeding its cost of capital in any of these years. While there was an initial improvement from -5136 million USD in 2017 to -3279 million USD in 2018, economic profit slightly worsened in 2019 and deteriorated further in 2020, reaching -4880 million USD. In 2021, there was a recovery to -3104 million USD, although the figure remained substantially negative.

Invested Capital

The invested capital showed a gradual decline over the five-year period. Starting at 17726 million USD in 2017, the capital slightly decreased to 17565 million USD in 2018 and increased marginally to 17954 million USD in 2019. However, the subsequent years reflected a notable reduction, with invested capital falling to 16214 million USD in 2020 and further declining to 14862 million USD in 2021. This trend suggests a contraction or divestment in the company's investment base during the latter years.

Economic Spread Ratio

The economic spread ratio, indicative of the profitability relative to the cost of capital, remained negative throughout the period, signaling persistent value destruction. The ratio improved from -28.98% in 2017 to -18.67% in 2018 and then slightly declined to -17.99% in 2019. A sharp deterioration occurred in 2020, with the ratio falling to -30.1%, reflecting decreased operational efficiency or higher costs relative to returns. There was some recovery in 2021, with the ratio improving to -20.88%, yet still reflecting negative economic value added.

Overall Trends and Insights

The analysis reveals that the company consistently struggled to generate positive economic profit across the period, with significant losses especially pronounced in 2017 and 2020. The reduction in invested capital after 2019 could reflect strategic asset rationalization or responses to market conditions. The economic spread ratio's negative values across all five years underline ongoing challenges in achieving returns above the cost of capital, despite intermittent improvements. The company's financial position might benefit from measures aimed at enhancing operational efficiency, reducing costs, or repositioning capital investments to generate positive economic value.

The financial performance over the five-year period shows notable fluctuations in several key metrics. The economic profit, denominated in millions of US dollars, remained negative throughout the period, indicating consistent losses. The most significant loss was recorded in 2017 at -5,136 million, followed by a gradual improvement reaching its lowest deficit in 2021 at -3,104 million, despite a temporary reversal in 2020.

Revenues experienced volatility with an overall upward trend. Beginning at 4,373 million in 2017, revenues increased to 5,902 million in 2018 but then declined to 5,063 million in 2019. A sharp drop was observed in 2020, where revenues fell to 3,097 million, likely reflecting external market pressures or operational challenges. However, the revenue rebounded strongly in 2021, reaching 5,601 million, nearing previous peak levels.

The economic profit margin, expressed as a percentage, underscores the company's continued struggle to convert revenue into economic profit. The margin was worst in 2020 at -157.57%, indicating losses exceeding revenue by a substantial margin. In other years, the margin ranged between approximately -55% and -117%, showing that despite improvements after 2017, the company remained unprofitable on an economic profit basis. The margin in 2021 improved to -55.41%, close to the level in 2018, suggesting some recovery in operational efficiency or cost control.

Economic Profit Trend

Consistent negative values with the largest loss in 2017 and some improvement by 2021, though still significantly negative.

Revenue Trend

Fluctuating revenues with a peak in 2018, a sharp dip in 2020, and recovery in 2021 to near previous highs.

Economic Profit Margin

Consistent negative margins indicating economic losses, with the worst performance in 2020 and partial recovery in 2021.

Overall Insights

The company shows persistent economic losses despite variable revenue, with some signs of operational recovery after a challenging 2020.