Stock Analysis on Net

Marathon Oil Corp. (NYSE:MRO)

$22.49

This company has been moved to the archive! The financial data has not been updated since August 4, 2022.

Economic Value Added (EVA)

Microsoft Excel

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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Economic Profit

Marathon Oil Corp., economic profit calculation

US$ in millions

Microsoft Excel
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 NOPAT figures exhibit significant fluctuations over the five-year period. Initially, there was a negative value in 2017, followed by a sharp improvement in 2018, reaching a peak of 1350 million USD. However, this positive trend was not sustained, as NOPAT decreased substantially in 2019 and turned negative again in 2020 at -1242 million USD. The year 2021 marked a recovery with a positive NOPAT of 1116 million USD, indicating volatility but an overall recovery tendency towards the end of the period.
Cost of Capital
The cost of capital showed a generally increasing trend, starting at 24.59% in 2017 and gradually rising to 27.64% in 2021. There were minor fluctuations during the years, with a slight dip observed in 2019, but the overall trajectory indicates a rising cost of capital, peaking in 2021, which could imply increased risk or capital expenses for the company.
Invested Capital
Invested capital demonstrated a declining pattern through the period under review. Beginning at 17,726 million USD in 2017, it marginally decreased in 2018 and 2019, followed by a more pronounced reduction in 2020 and 2021, where it reached 14,862 million USD. This downward trend suggests a contraction in the company’s capital base, possibly due to divestitures, asset sales, or reduced reinvestment.
Economic Profit
The economic profit remained consistently negative throughout the five years, indicating that the company did not generate returns above its cost of capital during this period. Although the magnitude of negative economic profit lessened somewhat in 2018 and 2019, it worsened again in 2020 before improving in 2021, yet never reaching profitability. This persistent negative economic profit underlines challenges in value creation relative to capital costs.

Net Operating Profit after Taxes (NOPAT)

Marathon Oil Corp., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income (loss)
Deferred income tax expense (benefit)1
Increase (decrease) in reserve for credit losses2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
(Income) loss from discontinued operations, net of tax9
Net operating profit after taxes (NOPAT)

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

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Income tax provisions (benefits)
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

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

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Current portion of long-term finance lease liability
Long-term debt due within one year
Long-term debt, excluding due within one year
Long-term finance lease liability, excluding current portion
Operating lease liability1
Total reported debt & leases
Stockholders’ equity
Net deferred tax (assets) liabilities2
Reserve for credit losses3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Adjusted stockholders’ equity
Invested capital

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

Microsoft Excel
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.
Occidental Petroleum 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 consistently remained negative over the five-year period, indicating the company did not generate returns exceeding its cost of capital in any year. The value improved from -5018 million US$ in 2017 to -2992 million US$ in 2021, though there were fluctuations, including a temporary decline reaching -4787 million US$ in 2020. The overall trend shows a partial recovery but still reflects persistent economic losses.
Invested Capital
There was a gradual decrease in invested capital from 17,726 million US$ in 2017 to 14,862 million US$ in 2021. The reduction was relatively steady with a small increase observed in 2019 compared to 2018, but the general direction was downward. This decline in invested capital might suggest divestitures, asset sales, or a more conservative investment approach over the period.
Economic Spread Ratio
The economic spread ratio remained negative throughout the period, indicating that the returns on invested capital were below the cost of capital, contributing to the negative economic profits. The ratio improved slightly from -28.31% in 2017 to -20.13% in 2021, despite a worsening in 2020 when it dropped to -29.52%. This pattern underscores ongoing challenges in achieving returns sufficient to cover the capital costs, though some progress toward improvement is evident by the end of the period.

Economic Profit Margin

Marathon Oil Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
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.
Occidental Petroleum 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
Revenues experienced fluctuations over the five-year period. Starting at $4,373 million in 2017, revenues increased significantly to $5,902 million in 2018, followed by a decline to $5,063 million in 2019. The most notable drop occurred in 2020 when revenues fell sharply to $3,097 million. However, revenues recovered in 2021, rising again to $5,601 million, nearing pre-2019 levels.
Economic Profit
The economic profit remained negative throughout the period, indicating consistent economic losses. It started at -$5,018 million in 2017 and improved somewhat in 2018 to -$3,158 million. The losses stayed relatively stable in 2019, at -$3,131 million. In 2020, economic profit deteriorated markedly to -$4,787 million, coinciding with the significant revenue decline. Improvement was noted in 2021, with economic losses reducing to -$2,992 million.
Economic Profit Margin
The economic profit margin was consistently negative, reflecting losses relative to revenues. The margin was extremely negative in 2017 at -114.76%, improving to -53.5% in 2018. Although there was a slight deterioration to -61.85% in 2019, the margin worsened substantially in 2020 to -154.57%, indicating losses exceeding revenues. By 2021, the margin improved again to -53.42%, similar to 2018 levels.
Overall Trends and Insights
The data indicates that the company struggled to generate positive economic profit throughout the five-year span. Revenue volatility, notably the sharp decline during 2020, likely contributed to the deepening economic losses that year. The subsequent recovery in revenues in 2021 helped improve the economic profit and margin but did not reverse losses entirely. The persistently negative economic profit margins highlight ongoing challenges in achieving profitability relative to the company's revenue base.