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.
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Marathon Oil Corp. pages available for free this week:
- Common-Size Income Statement
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Marathon Oil Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a volatile trend over the analyzed period. It started with a significant loss of 659 million USD in 2017, followed by a substantial increase to 1,350 million USD in 2018. In 2019, the profit decreased to 654 million USD, then sharply declined to a loss of 1,242 million USD in 2020, before recovering to a profit of 1,116 million USD in 2021. This indicates considerable fluctuations in operating profitability across the years.
- Cost of Capital
- The cost of capital exhibits a generally upward trend from 2017 to 2021. Beginning at 25.19% in 2017, it increased slightly to 26.28% in 2018, then declined to 21.58% in 2019, rose again to 22.38% in 2020, and finally reached a peak of 28.32% in 2021. The increased cost of capital in 2021 suggests higher required returns by investors or increased risk perceptions.
- Invested Capital
- Invested capital shows a declining trend over the period analyzed. Starting from 17,726 million USD in 2017, it marginally decreased to 17,565 million USD in 2018 and slightly increased to 17,954 million USD in 2019. Subsequently, a more noticeable decline occurred, with the invested capital falling to 16,214 million USD in 2020 and further down to 14,862 million USD in 2021. This reduction may indicate asset divestitures or decreased capital investment.
- Economic Profit
- The economic profit remained negative throughout the entire period, indicating returns below the cost of capital consistently. The losses decreased from -5,124 million USD in 2017 to -3,267 million USD in 2018 and remained at a similar level in 2019 with -3,220 million USD. However, economic profit deteriorated significantly again in 2020 to -4,871 million USD before partly improving to -3,093 million USD in 2021. Despite fluctuations, the persistent negative economic profit reflects challenges in value creation over these years.
Net Operating Profit after Taxes (NOPAT)
Marathon Oil Corp., NOPAT calculation
US$ in millions
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 reserve for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income (loss).
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income (loss).
7 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
- 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 $1,116 million, indicating improved operational efficiency or market conditions. This pattern suggests that operational profitability was a significant factor in the company's overall net income variability.
Cash Operating Taxes
Marathon Oil Corp., cash operating taxes calculation
US$ in millions
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).
- 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.
Invested Capital
Marathon Oil Corp., invested capital calculation (financing approach)
US$ in millions
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 stockholders’ equity.
5 Removal of accumulated other comprehensive income.
- 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 $14,862 million. This decrease may indicate asset disposals, decreased capital expenditures, or a strategic shift in the company’s investment approach.
- Summary Insights
- Over the five-year span, the company appeared to strategically reduce its financial leverage, as evidenced by the significant decline in total reported debt and leases in 2021. This deleveraging was concurrent with a reduction in invested capital, possibly reflecting a realignment of capital allocation or divestitures. Stockholders’ equity experienced volatility, with a peak around 2019 followed by a contraction and slight rebound, which may be connected to broader market conditions or company-specific operational factors. Overall, the financial data indicates a trend toward lower debt levels and reduced invested capital, alongside a cautious stabilization of equity in the latest period.
Cost of Capital
Marathon Oil Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Marathon Oil 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit, measured in millions of US dollars, shows a consistent negative value throughout the period from 2017 to 2021, indicating that the company did not generate positive economic value over these years. The magnitude of the negative economic profit decreased significantly from -5124 million in 2017 to -3267 million in 2018 and remained relatively stable around -3200 million in 2019. However, there was a notable deterioration in 2020, with economic profit declining sharply to -4871 million, before improving again in 2021 to -3093 million. This suggests some volatility in the company's ability to create economic value, with a particularly challenging year in 2020 followed by partial recovery.
- Invested Capital
- The invested capital, also in millions of US dollars, showed a gradual downward trend over the five-year period, decreasing from 17726 million in 2017 to 14862 million in 2021. The decline was steady, with a slight increase in 2019 compared to 2018, but overall there was a reduction of nearly 19% by 2021 compared to 2017. This contraction in invested capital could indicate asset disposals, capital efficiency improvements, or strategic divestments.
- Economic Spread Ratio
- The economic spread ratio, expressed as a percentage, remained negative throughout the period, implying that the returns on invested capital were consistently below the cost of capital. The ratio improved from -28.91% in 2017 to -18.6% in 2018 and remained around -18% in 2019. However, it worsened significantly to -30.04% in 2020 before slightly improving to -20.81% in 2021. This negative spread throughout the period confirms the persistent challenge in generating adequate returns relative to capital costs, with the year 2020 again standing out as particularly difficult.
Economic Profit Margin
Marathon Oil 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 ÷ Revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenues
- The revenue figures exhibit significant fluctuations over the five-year period. Beginning at $4,373 million in 2017, revenues increased to $5,902 million in 2018 before declining to $5,063 million in 2019. A sharp decrease occurred in 2020, with revenues falling to $3,097 million, likely impacted by external market conditions. However, a substantial recovery was seen in 2021, where revenues rebounded to $5,601 million, approaching prior levels seen before the decline.
- Economic Profit
- The company consistently reported negative economic profit throughout the period, indicating that it did not generate returns above its cost of capital. Economic profit improved from a significant loss of $5,124 million in 2017 to a lesser loss of $3,267 million in 2018, with a slight worsening in 2019 at a loss of $3,220 million. A notable deterioration occurred in 2020, with economic profit falling to a loss of $4,871 million, aligning with the revenue decline. This was followed by an improvement in 2021, where the loss decreased to $3,093 million.
- Economic Profit Margin
- The economic profit margin percentages mirror the trend seen in economic profit, reflecting persistent negative margins throughout the entire timeframe. The margin improved substantially from -117.18% in 2017 to -55.35% in 2018 but experienced a slight decline to -63.59% in 2019. The year 2020 saw the margin worsen significantly to -157.27%, underscoring the severe profitability challenges during that period. A recovery trend is observable in 2021 with the margin improving back to -55.21%.
- Overall Analysis
- The financial data indicates that the company faced sustained profitability challenges over the five years, marked by continuous negative economic profit and margins. Revenue volatility is pronounced, with notable decline aligned with external market disruptions in 2020, followed by a recovery in 2021. The economic profit and its margin trends suggest that despite recovering top-line revenue levels, the company has struggled to generate sufficient returns above its capital costs consistently. The improvement in 2021 points towards some operational or market conditions improvement, though profitability remains under pressure.