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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

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	1,116)	(1,242)	654)	1,350)	(659)
Cost of capital²	24.84%	19.73%	19.04%	23.08%	22.12%
Invested capital³	14,862)	16,214)	17,954)	17,565)	17,726)

Economic profit⁴	(2,576)	(4,441)	(2,764)	(2,705)	(4,580)

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
= 1,116 – 24.84% × 14,862 = -2,576

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Marathon Oil Corp. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Marathon Oil Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income (loss)	946)	(1,451)	480)	1,096)	(5,723)
Deferred income tax expense (benefit)¹	(27)	(22)	(34)	52)	(61)
Increase (decrease) in reserve for credit losses²	(7)	11)	—)	(1)	6)
Increase (decrease) in equity equivalents³	(34)	(11)	(34)	51)	(55)
Interest expense	257)	279)	280)	280)	377)
Interest expense, operating lease liability⁴	2)	4)	8)	8)	5)
Adjusted interest expense	259)	283)	288)	288)	382)
Tax benefit of interest expense⁵	(54)	(59)	(61)	(61)	(134)
Adjusted interest expense, after taxes⁶	205)	224)	228)	228)	248)
Interest income	(1)	(5)	(25)	(32)	(34)
Investment income, before taxes	(1)	(5)	(25)	(32)	(34)
Tax expense (benefit) of investment income⁷	—)	1)	5)	7)	12)
Investment income, after taxes⁸	(1)	(4)	(20)	(25)	(22)
(Income) loss from discontinued operations, net of tax⁹	—)	—)	—)	—)	4,893)
Net operating profit after taxes (NOPAT)	1,116)	(1,242)	654)	1,350)	(659)

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
= 63 × 3.00% = 2

⁵ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 259 × 21.00% = 54

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
= 1 × 21.00% = 0

⁸ Elimination of after taxes investment income.

⁹ Elimination of discontinued operations.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Marathon Oil Corp. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Marathon Oil Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income tax provisions (benefits)	58)	(14)	(88)	331)	376)
Less: Deferred income tax expense (benefit)	(27)	(22)	(34)	52)	(61)
Add: Tax savings from interest expense	54)	59)	61)	61)	134)
Less: Tax imposed on investment income	—)	1)	5)	7)	12)
Cash operating taxes	139)	66)	1)	333)	559)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Marathon Oil Corp. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

Marathon Oil Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Current portion of long-term finance lease liability	6)	—)	—)	—)	—)
Long-term debt due within one year	36)	—)	—)	—)	—)
Long-term debt, excluding due within one year	3,978)	5,404)	5,501)	5,499)	5,494)
Long-term finance lease liability, excluding current portion	24)	—)	—)	—)	—)
Operating lease liability¹	63)	137)	208)	184)	106)
Total reported debt & leases	4,107)	5,541)	5,709)	5,683)	5,600)
Stockholders’ equity	10,686)	10,561)	12,153)	12,128)	11,708)
Net deferred tax (assets) liabilities²	136)	163)	186)	(194)	344)
Reserve for credit losses³	15)	22)	11)	11)	12)
Equity equivalents⁴	151)	185)	197)	(183)	356)
Accumulated other comprehensive (income) loss, net of tax⁵	(82)	(73)	(105)	(63)	62)
Adjusted stockholders’ equity	10,755)	10,673)	12,245)	11,882)	12,126)
Invested capital	14,862)	16,214)	17,954)	17,565)	17,726)

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Marathon Oil Corp. invested capital decreased from 2019 to 2020 and from 2020 to 2021.

Marathon Oil Corp., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,996)	15,996)	÷	20,794)	=	0.77	0.77	×	31.13%	=	23.95%
Long-term debt and finance lease liability, including current portion³	4,735)	4,735)	÷	20,794)	=	0.23	0.23	×	4.89% × (1 – 21.00%)	=	0.88%
Operating lease liability⁴	63)	63)	÷	20,794)	=	0.00	0.00	×	3.00% × (1 – 21.00%)	=	0.01%
Total:	20,794)					1.00					24.84%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,806)	8,806)	÷	15,020)	=	0.59	0.59	×	31.13%	=	18.25%
Long-term debt and finance lease liability, including current portion³	6,077)	6,077)	÷	15,020)	=	0.40	0.40	×	4.54% × (1 – 21.00%)	=	1.45%
Operating lease liability⁴	137)	137)	÷	15,020)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	15,020)					1.00					19.73%

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 »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,157)	8,157)	÷	14,539)	=	0.56	0.56	×	31.13%	=	17.47%
Long-term debt and finance lease liability, including current portion³	6,174)	6,174)	÷	14,539)	=	0.42	0.42	×	4.55% × (1 – 21.00%)	=	1.53%
Operating lease liability⁴	208)	208)	÷	14,539)	=	0.01	0.01	×	4.00% × (1 – 21.00%)	=	0.05%
Total:	14,539)					1.00					19.04%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	13,653)	13,653)	÷	19,306)	=	0.71	0.71	×	31.13%	=	22.02%
Long-term debt and finance lease liability, including current portion³	5,469)	5,469)	÷	19,306)	=	0.28	0.28	×	4.61% × (1 – 21.00%)	=	1.03%
Operating lease liability⁴	184)	184)	÷	19,306)	=	0.01	0.01	×	4.61% × (1 – 21.00%)	=	0.03%
Total:	19,306)					1.00					23.08%

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 »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	12,899)	12,899)	÷	18,981)	=	0.68	0.68	×	31.13%	=	21.16%
Long-term debt and finance lease liability, including current portion³	5,976)	5,976)	÷	18,981)	=	0.31	0.31	×	4.61% × (1 – 35.00%)	=	0.94%
Operating lease liability⁴	106)	106)	÷	18,981)	=	0.01	0.01	×	4.61% × (1 – 35.00%)	=	0.02%
Total:	18,981)					1.00					22.12%

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 »

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	(2,576)	(4,441)	(2,764)	(2,705)	(4,580)
Invested capital²	14,862)	16,214)	17,954)	17,565)	17,726)
Performance Ratio
Economic spread ratio³	-17.33%	-27.39%	-15.40%	-15.40%	-25.84%
Benchmarks
Economic Spread Ratio, Competitors⁴
Chevron Corp.	-3.05%	-17.24%	-12.50%	—	—
ConocoPhillips	-0.24%	-18.90%	-0.26%	—	—
Exxon Mobil Corp.	0.46%	-22.80%	-5.62%	—	—
Marathon Petroleum Corp.	-2.17%	-26.21%	-2.99%	—	—
Occidental Petroleum Corp.	-4.41%	-33.48%	-10.56%	—	—
Valero Energy Corp.	-0.89%	-16.73%	-3.03%	—	—

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 × -2,576 ÷ 14,862 = -17.33%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Marathon Oil Corp. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 not reaching 2019 level.

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	(2,576)	(4,441)	(2,764)	(2,705)	(4,580)
Revenues	5,601)	3,097)	5,063)	5,902)	4,373)
Performance Ratio
Economic profit margin²	-45.98%	-143.39%	-54.60%	-45.83%	-104.72%
Benchmarks
Economic Profit Margin, Competitors³
Chevron Corp.	-3.80%	-36.00%	-17.49%	—	—
ConocoPhillips	-0.39%	-51.20%	-0.46%	—	—
Exxon Mobil Corp.	0.46%	-34.98%	-6.67%	—	—
Marathon Petroleum Corp.	-1.15%	-26.36%	-1.98%	—	—
Occidental Petroleum Corp.	-9.87%	-118.93%	-43.57%	—	—
Valero Energy Corp.	-0.35%	-10.56%	-1.14%	—	—

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 × -2,576 ÷ 5,601 = -45.98%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Marathon Oil Corp. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Marathon Oil Corp. (NYSE:MRO)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin