Marathon Oil Corp. (NYSE:MRO)

Net Operating Profit After Taxes (NOPAT)

The NOPAT values exhibit significant volatility over the analyzed periods. Initially, there is a notable negative value, followed by a sharp improvement to a positive figure in the subsequent year. This is succeeded by a decrease in profitability, returning to a negative figure in 2020, before rebounding again to a positive value in 2021. The fluctuations suggest variable operational performance impacted by external or internal factors.

Cost of Capital

The cost of capital remains relatively high throughout the period, ranging from approximately 21.55% to 28.27%. There is a slight downward trend observed until 2019, after which an increasing trend is seen, peaking in 2021. This upward trend towards the end could reflect increased risk perceived by investors or changes in the company’s capital structure or market conditions.

Invested Capital

Invested capital shows a gradual decline over the years, decreasing steadily from over 17 billion US dollars to just under 15 billion by the end of 2021. This decreasing trend could indicate divestitures, asset sales, or a deliberate strategy to reduce capital investment levels.

Economic Profit

The economic profit remains negative across all years, indicating the company has not generated returns above its cost of capital. While there is some improvement from the extreme negative in 2017 to lower negative values in later years, the figure still reflects a consistent value destruction. The least negative value occurred in 2018 and 2021, suggesting some temporary improvements in economic profitability.

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.

The analysis of the annual financial data reveals several key trends related to economic profit, invested capital, and the economic spread ratio over the five-year period ending December 31, 2021.

Economic Profit

Economic profit remained consistently negative throughout the period, indicating that the company did not generate returns above its cost of capital in any year. The largest negative economic profit was recorded in 2017 at -5,118 million US dollars. Following this, there was an improvement in 2018 and 2019, with economic losses reducing to approximately -3,260 and -3,214 million US dollars, respectively. However, 2020 saw a deterioration again to around -4,866 million US dollars before improving in 2021 to approximately -3,086 million US dollars.

Invested Capital

Invested capital showed a gradual decline over the five years, starting from 17,726 million US dollars in 2017 and decreasing to 14,862 million US dollars in 2021. This trend indicates a reduction in the company's deployed resources or assets over time, with the most notable drop occurring between 2019 and 2020.

Economic Spread Ratio

The economic spread ratio was negative for all years presented, reflecting that the returns on invested capital consistently fell short of the company’s cost of capital. The highest negative spread was in 2020 at -30.01%, which coincides with the year experiencing the largest increase in economic losses. The ratio demonstrated some recovery in 2021, improving to -20.77% from its 2020 low, but it remained significantly negative relative to the earlier years.

Overall, the data indicates sustained economic underperformance across the period, with persistent negative economic profit and economic spread ratio values. The downward trend in invested capital suggests a possible strategic reduction in asset base or capital employed, which may be a response to ongoing value destruction. The fluctuations in economic profit and spread ratio highlight challenges in profitability, particularly evident during the 2020 period, which may reflect broader economic or operational disruptions.

Economic Profit Trends

The economic profit remained negative during the entire five-year period, indicating consistent economic losses. While the loss narrowed from -5118 million USD in 2017 to -3086 million USD in 2021, fluctuations are apparent. The largest economic losses were recorded in 2017 and 2020, with a notable improvement observed in 2018, 2019, and 2021.

Revenues Trends

Revenues exhibited variability throughout the period. Starting at 4373 million USD in 2017, revenues increased significantly to 5902 million USD in 2018. Subsequently, revenues declined to 5063 million USD in 2019 and experienced a sharp decrease to 3097 million USD in 2020. A recovery took place in 2021, with revenues rising back to 5601 million USD. This pattern suggests sensitivity to external factors affecting sales or market conditions.

Economic Profit Margin Patterns

The economic profit margin, expressed as a percentage, remained negative and reflected the economic profit losses relative to revenues. The margin improved from -117.03% in 2017 to -55.24% in 2018, signaling better economic performance relative to revenue. Between 2018 and 2019, a slight decline occurred to -63.49%, and then a sharp worsening to -157.1% was recorded in 2020. The margin rebounded to -55.11% in 2021, indicating partial recovery but still negative profitability relative to revenues.

Overall Insights

The company demonstrated ongoing challenges in generating positive economic profit over the analyzed period despite fluctuating revenues and attempts at recovery. The marked volatility in both revenues and economic profit margin, especially the drastic downturn in 2020 coinciding with lower revenues, suggests vulnerability to adverse market or operational conditions. The improvements in 2021 hint at effective measures toward stabilization but highlight the need for continued focus on profitability enhancement.