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.
Economic Profit
Occidental Petroleum Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,380 – 16.68% × 66,896 = -7,780
The financial trajectory between 2020 and 2024 is characterized by significant volatility in operational profitability and a consistent struggle to generate positive economic value. While a brief period of value creation occurred in 2022, the overall trend indicates a return to economic profit deficits, driven by a combination of declining net operating profits and a high cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A sharp recovery is observed following a substantial loss of 14,889 million US$ in 2020. Profitability peaked in 2022 at 12,526 million US$, before entering a steady decline through 2023 and 2024, ending at 3,380 million US$. This downward trend in the latter two years suggests a contraction in operational efficiency or a decline in market pricing for core outputs.
- Cost of Capital
- The cost of capital exhibited a marked upward trend from 11.97% in 2020 to a peak of 18.18% in 2022. Although a slight moderation occurred by 2024, reaching 16.68%, the cost of financing and risk remains significantly higher than the 2020 baseline, increasing the threshold for achieving positive economic profit.
- Invested Capital
- Invested capital decreased from 63,270 million US$ in 2020 to a low of 56,295 million US$ in 2022, indicating a period of capital reduction or divestment. However, a significant increase is noted by 2024, with invested capital rising to 66,896 million US$, the highest level in the five-year period.
- Economic Profit
- Economic profit remained negative for the majority of the analyzed period, indicating that the returns on invested capital were insufficient to cover the cost of capital. A sole instance of value creation was recorded in 2022 with an economic profit of 2,292 million US$. Subsequently, the trend reversed, with losses widening to 4,728 million US$ in 2023 and 7,780 million US$ in 2024. The divergence in 2024 is particularly notable, as a simultaneous increase in invested capital and a decrease in NOPAT accelerated the destruction of economic value.
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Net Operating Profit after Taxes (NOPAT)
Occidental Petroleum Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Occidental.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 988 × 4.77% = 47
6 2024 Calculation
Tax benefit of interest and debt expense, net = Adjusted interest and debt expense, net × Statutory income tax rate
= 1,222 × 21.00% = 257
7 Addition of after taxes interest expense to net income (loss) attributable to Occidental.
8 Elimination of discontinued operations.
- Net income (loss) attributable to Occidental
- The net income shows a significant turnaround from a substantial loss of -14,831 million USD in 2020 to a positive net income of 2,322 million USD in 2021. This positive trend continues with a peak net income of 13,304 million USD in 2022, indicating a strong recovery and profitability increase. However, the net income declines in subsequent years, dropping to 4,696 million USD in 2023 and further to 3,056 million USD in 2024, suggesting some challenges or decreased profitability in the most recent periods.
- Net operating profit after taxes (NOPAT)
- The NOPAT also follows a similar pattern, starting with a negative value of -14,889 million USD in 2020, reflecting operating losses. A considerable improvement occurs in 2021 with a positive NOPAT of 4,213 million USD, followed by a substantial increase to 12,526 million USD in 2022. Like net income, the NOPAT decreases over the subsequent periods to 5,524 million USD in 2023 and declining further to 3,380 million USD in 2024, indicating reduced operating profitability after a peak performance in 2022.
- Overall Trend and Insights
- The data reflects a strong recovery and improved profitability between 2020 and 2022, both in net income and operating profits. This suggests effective operational improvements or favorable market conditions during this interval. However, the decline from 2023 onwards in both metrics points to emerging challenges or less favorable conditions impacting profitability. Despite the reductions, the figures remain positive in the latest years, indicating ongoing profitability, albeit at a reduced level compared to the 2022 peak.
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Cash Operating Taxes
Occidental Petroleum Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data indicates notable fluctuations in tax-related expenses over the five-year period. The income tax expense (benefit) shows a significant shift from a substantial tax benefit in 2020 to positive tax expenses in subsequent years. Specifically, there was a large negative expense (tax benefit) recorded in 2020, which reversed sharply to a positive tax expense in 2021 and remained positive through 2024. While the amount decreased slightly in 2022 compared to 2021, it increased again in 2023 before declining somewhat in 2024.
Cash operating taxes demonstrated a clear upward trajectory from 2020 through 2022, tripling over this period. This growth slowed noticeably in 2023, where the cash taxes decreased from the previous year, and remained relatively stable into 2024. The spike in cash operating taxes in 2022 could reflect an underlying increase in taxable income or changes in operational profitability or tax regulations during that year.
- Income Tax Expense (Benefit)
- Exhibited a transition from a tax benefit of -2,172 million US dollars in 2020 to positive expenses in the range of 813 to 1,733 million US dollars in the following years, indicating a reversal from a net tax credit to a liability position.
- Cash Operating Taxes
- Increased substantially from 655 million US dollars in 2020 to a peak of 2,681 million US dollars in 2022, before declining and stabilizing around 1,887 to 1,892 million US dollars in 2023 and 2024 respectively.
Overall, the data suggests a period of tax volatility in 2020 followed by a normalization to consistent tax payments. The divergence between income tax expense and cash operating taxes in some years may reflect timing differences, deferred tax items, or adjustments related to tax regulations and accounting interpretations. The reduction in cash taxes from the 2022 peak hints at either improved tax planning, changes in profitability, or external factors affecting taxable income in recent years.
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Invested Capital
Occidental Petroleum Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 LIFO reserve. See details »
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases showed a significant decline from 37,299 million USD at the end of 2020 to 20,765 million USD by the end of 2022. This reduction indicates a deleveraging trend over the initial two years. However, from 2023 onwards, there was a slight increase in debt levels, rising to 20,911 million USD, followed by a more pronounced rise to 27,104 million USD in 2024. This suggests a possible shift toward increased leverage or additional financing after a period of debt reduction.
- Stockholders' Equity
- Stockholders’ equity exhibited a consistent upward trajectory over the entire period. Starting at 18,573 million USD in 2020, it increased to 20,327 million USD in 2021 and continued the upward trend to 30,085 million USD in 2022. The growth persisted in subsequent years, reaching 30,250 million USD in 2023 and further advancing to 34,159 million USD in 2024. This steady increase reflects positive retained earnings and/or additional equity contributions, strengthening the company's net asset base.
- Invested Capital
- Invested capital declined from 63,270 million USD in 2020 to 56,295 million USD in 2022, indicating a contraction in capital employed. The level stabilized slightly in 2023 at 56,860 million USD but then experienced a substantial increase to 66,896 million USD in 2024. This late surge could be indicative of renewed investment or capital infusion, possibly aligning with the increase in reported debt during the same period.
- Overall Analysis
- The financial data depict an initial phase of deleveraging combined with growth in equity and reduced invested capital through the first three years. From 2023 onwards, there is a reversal in debt trend accompanied by a significant increase in invested capital and continued growth in equity. This pattern may imply strategic shifts such as expansion initiatives funded by a mix of increased leverage and equity strengthening. The overall positive trajectory in equity underscores improved net worth despite fluctuations in debt and capital employed.
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Cost of Capital
Occidental Petroleum Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,836) | 45,836) | ÷ | 79,111) | = | 0.58 | 0.58 | × | 24.82% | = | 14.38% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 79,111) | = | 0.10 | 0.10 | × | 8.00% | = | 0.84% | ||
| Long-term debt, including current maturities3 | 24,000) | 24,000) | ÷ | 79,111) | = | 0.30 | 0.30 | × | 5.91% × (1 – 21.00%) | = | 1.42% | ||
| Operating lease liability4 | 988) | 988) | ÷ | 79,111) | = | 0.01 | 0.01 | × | 4.77% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 79,111) | 1.00 | 16.68% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 50,395) | 50,395) | ÷ | 77,955) | = | 0.65 | 0.65 | × | 24.82% | = | 16.05% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 77,955) | = | 0.11 | 0.11 | × | 8.00% | = | 0.85% | ||
| Long-term debt, including current maturities3 | 18,100) | 18,100) | ÷ | 77,955) | = | 0.23 | 0.23 | × | 5.86% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,173) | 1,173) | ÷ | 77,955) | = | 0.02 | 0.02 | × | 4.94% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 77,955) | 1.00 | 18.03% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 53,068) | 53,068) | ÷ | 81,360) | = | 0.65 | 0.65 | × | 24.82% | = | 16.19% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 81,360) | = | 0.12 | 0.12 | × | 8.00% | = | 0.96% | ||
| Long-term debt, including current maturities3 | 17,600) | 17,600) | ÷ | 81,360) | = | 0.22 | 0.22 | × | 5.81% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 930) | 930) | ÷ | 81,360) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 81,360) | 1.00 | 18.18% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 36,354) | 36,354) | ÷ | 77,987) | = | 0.47 | 0.47 | × | 24.82% | = | 11.57% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 77,987) | = | 0.13 | 0.13 | × | 8.00% | = | 1.00% | ||
| Long-term debt, including current maturities3 | 31,100) | 31,100) | ÷ | 77,987) | = | 0.40 | 0.40 | × | 5.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 771) | 771) | ÷ | 77,987) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 77,987) | 1.00 | 14.32% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,789) | 24,789) | ÷ | 69,465) | = | 0.36 | 0.36 | × | 24.82% | = | 8.86% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 69,465) | = | 0.14 | 0.14 | × | 8.00% | = | 1.12% | ||
| Long-term debt, including current maturities3 | 33,800) | 33,800) | ÷ | 69,465) | = | 0.49 | 0.49 | × | 5.01% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 1,114) | 1,114) | ÷ | 69,465) | = | 0.02 | 0.02 | × | 4.73% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 69,465) | 1.00 | 11.97% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Occidental Petroleum Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (7,780) | (4,728) | 2,292) | (4,099) | (22,462) | |
| Invested capital2 | 66,896) | 56,860) | 56,295) | 58,059) | 63,270) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.63% | -8.32% | 4.07% | -7.06% | -35.50% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.09% | -3.71% | 6.79% | -2.33% | — | |
| ConocoPhillips | 1.12% | 6.77% | 19.51% | 5.19% | — | |
| Exxon Mobil Corp. | -0.83% | 3.28% | 12.05% | 3.41% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -7,780 ÷ 66,896 = -11.63%
4 Click competitor name to see calculations.
The financial trajectory regarding economic value added exhibits a period of significant volatility, characterized by a sharp recovery peaking in 2022 followed by a consistent deterioration in value creation through 2024.
- Economic Profit
- A profound deficit of US$ 22,462 million was recorded in 2020, which improved substantially to a surplus of US$ 2,292 million by 2022. However, this positive momentum was not sustained, as economic profit reverted to negative territory in 2023 and further declined to a loss of US$ 7,780 million by the end of 2024.
- Invested Capital
- Invested capital showed a contraction phase between 2020 and 2022, decreasing from US$ 63,270 million to a low of US$ 56,295 million. This trend reversed in the subsequent period, with a marginal increase in 2023 followed by a significant expansion to US$ 66,896 million in 2024, marking the highest capital deployment in the observed period.
- Economic Spread Ratio
- The spread ratio mirrored the fluctuations in economic profit, moving from a low of -35.50% in 2020 to a peak of 4.07% in 2022, indicating a brief period where returns exceeded the cost of capital. This positive spread was short-lived, as the ratio declined to -8.32% in 2023 and further weakened to -11.63% in 2024.
The correlation between the increase in invested capital and the decline in the economic spread ratio during 2023 and 2024 suggests that recent capital expansions have not yet translated into positive economic value. The inability to maintain the positive spread achieved in 2022 indicates a recurring challenge in generating returns that exceed the cost of the capital employed.
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Economic Profit Margin
Occidental Petroleum Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (7,780) | (4,728) | 2,292) | (4,099) | (22,462) | |
| Net sales | 26,725) | 28,257) | 36,634) | 25,956) | 17,809) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -29.11% | -16.73% | 6.26% | -15.79% | -126.13% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -3.33% | -4.00% | 6.12% | -2.89% | — | |
| ConocoPhillips | 2.17% | 9.80% | 18.78% | 8.65% | — | |
| Exxon Mobil Corp. | -0.92% | 3.01% | 8.98% | 3.36% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -7,780 ÷ 26,725 = -29.11%
3 Click competitor name to see calculations.
The financial performance from 2020 to 2024 is characterized by significant volatility in value creation, with a brief period of positive economic profit followed by a return to value erosion.
- Economic Profit Trajectory
- A sharp recovery was observed between 2020 and 2022, as economic profit moved from a deficit of US$ 22,462 million to a surplus of US$ 2,292 million. However, this positive momentum was not sustained, with results reverting to negative territory in 2023 and further deteriorating to negative US$ 7,780 million by 2024.
- Net Sales Correlation
- Net sales exhibited a strong upward trend peaking in 2022 at US$ 36,634 million, coinciding with the only period of positive economic profit. The subsequent decline in sales to US$ 26,725 million by 2024 aligns with the return to negative economic profit, suggesting a strong correlation between top-line revenue scale and the ability to cover the cost of capital.
- Economic Profit Margin Analysis
- The economic profit margin showed extreme fluctuations, starting at -126.13% in 2020, indicating a severe misalignment between earnings and capital charges. While the margin reached a peak of 6.26% in 2022, it experienced a steady decline thereafter, reaching -29.11% in 2024. This trend indicates that the operation is currently generating insufficient returns to justify the cost of the capital employed.
Overall, the data reflects a cycle of recovery and subsequent contraction, where the gains achieved in 2022 were offset by increasing economic losses in the following two fiscal years.
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