Marathon Oil Corp. (NYSE:MRO)

The annual financial data reveals significant fluctuations in several key performance indicators over the five-year period analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a highly variable pattern, beginning with a substantial negative value in 2017 at -659 million USD. This is followed by a sharp improvement in 2018, reaching 1,350 million USD. The figure declines again in 2019 to 654 million USD and plunges into negative territory in 2020 with -1,242 million USD before recovering to 1,116 million USD in 2021. This volatility indicates inconsistent operational profitability throughout the timeframe, with especially pronounced downturns in 2017 and 2020.

Cost of Capital

The cost of capital exhibits an overall upward trend, starting at 24.83% in 2017 and fluctuating modestly through 2018 to 2020 (ranging between 21.28% and 25.9%). In 2021, the cost of capital spikes to its highest level at 27.91%. This rising trend suggests increasing opportunity costs or risk premiums associated with the invested capital.

Invested Capital

Invested capital decreases steadily over the five-year span, declining from 17,726 million USD in 2017 to 14,862 million USD in 2021. This decline may indicate asset divestitures, depreciation exceeding reinvestment, or strategic reductions in capital employed in operations.

Economic Profit

Economic profit remains negative throughout the entire period, indicating that returns generated were consistently below the cost of capital. The values range from -5,060 million USD in 2017 to -3,032 million USD in 2021. Despite some improvement after the severe low in 2017 and 2020, the economic profit figures reflect persistent value destruction for shareholders.

In summary, the data indicates that while operational profitability experienced intermittent positive results, the consistently negative economic profit and increasing cost of capital underscore ongoing challenges in generating returns above the required threshold. Decreasing invested capital further complements a narrative of scale reduction or capital optimization efforts amidst volatile profit performance.

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 shows a negative trend throughout the period, indicating ongoing value destruction. It starts at -5060 million US$ in 2017 and improves to -3201 million US$ in 2018, remaining relatively stable in 2019 at -3166 million US$. However, in 2020 there is a deterioration to -4820 million US$, before improving again in 2021 to -3032 million US$. Despite some fluctuations, economic profit remains significantly negative, suggesting challenges in generating returns above the cost of capital.

Invested Capital

Invested capital demonstrates a downward trend over the period, decreasing from 17726 million US$ in 2017 to 14862 million US$ in 2021. The decline is gradual but consistent, with a slight dip noted especially in 2020 and 2021. This reduction may reflect asset disposals, depreciation, or strategic shifts in capital allocation.

Economic Spread Ratio

The economic spread ratio is consistently negative, reflecting that the company’s returns are below its cost of capital. It begins at -28.55% in 2017, improves moderately through 2018 to -18.22% and remains similar in 2019 at -17.63%. It worsens substantially in 2020 to -29.73% before partially recovering to -20.4% in 2021. This fluctuating yet negative spread indicates persistent challenges in generating economic value, with significant deterioration during the 2020 period.

Overall Analysis

The data reveals ongoing struggles to achieve positive economic profit and maintain a favorable economic spread. While invested capital trends downward, potentially indicating a reduction in asset base or efficient capital use, the persistent negative profitability metrics highlight underlying operational or market challenges. The especially sharp decline in economic performance in 2020 aligns with a period of increased economic pressure, followed by partial recovery in 2021. Continued negative spreads and economic profit suggest a need for strategic review to enhance value creation.

Economic Profit

The economic profit values exhibit a notably negative trend throughout the periods analyzed. The company experienced an economic loss each year, with the magnitude of losses fluctuating. The least severe loss was recorded in 2019 at -3166 million US dollars, while the most considerable loss occurred in 2017 at -5060 million US dollars. The loss decreased from 2017 to 2019, then increased significantly in 2020 to -4820 million before reducing again in 2021 to -3032 million. This indicates a challenging profitability landscape, with intermittent improvements but persistent negative economic profit.

Revenues

Revenue trends display considerable volatility over the five-year period. Revenue increased from 4373 million US dollars in 2017 to a peak of 5902 million in 2018, reflecting a strong growth phase. However, revenue then declined to 5063 million in 2019, followed by a sharp drop to 3097 million in 2020, coinciding with broader economic challenges during that year. In 2021, revenue rebounded strongly to 5601 million, nearing the levels seen in 2018. This pattern suggests sensitivity to market conditions and possibly operational or external factors impacting sales volumes or prices.

Economic Profit Margin

The economic profit margin remained deeply negative throughout the period, reflecting persistent underperformance relative to the company's capital costs. The margin improved significantly from -115.71% in 2017 to -54.23% in 2018, indicating a better relative profit position despite the negative value. Following this, the margin deteriorated modestly to -62.53% in 2019, before plummeting sharply to -155.63% in 2020, which signals a severe loss relative to revenues during that year. In 2021, the margin improved drastically back to -54.13%, aligning closely with the pre-pandemic period's margins. This volatility in economic profit margin highlights operational and market risks impacting the company's value creation capacity.