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 – 16.52% × 66,896 = -7,670
The financial performance between 2020 and 2024 is characterized by significant volatility in value creation, with a brief period of positive economic profit followed by a returning downward trend. The overall trajectory indicates a struggle to sustain returns that exceed the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A sharp recovery is observed from a substantial loss of 14,889 million US$ in 2020 to a peak of 12,526 million US$ in 2022. However, this momentum reversed in the subsequent two years, with NOPAT declining to 5,524 million US$ in 2023 and further dropping to 3,380 million US$ by 2024.
- Cost of Capital
- The cost of capital exhibited a steady increase from 11.87% in 2020 to a peak of 17.99% in 2022. While a slight moderation occurred in 2023 and 2024, ending at 16.52%, the rate remains significantly elevated compared to the start of the period, increasing the threshold for value creation.
- Invested Capital
- Invested capital showed a gradual decline from 63,270 million US$ in 2020 to 56,295 million US$ in 2022. This trend reversed sharply in 2024, where invested capital rose to 66,896 million US$, representing the highest level of capital employment within the analyzed timeframe.
- Economic Profit
- Economic profit remained negative for the majority of the period. A significant recovery occurred between 2020 and 2022, with the only positive value of 2,396 million US$ recorded in 2022. Since then, economic profit has deteriorated, reaching -7,670 million US$ in 2024. This decline is attributed to the simultaneous reduction in NOPAT and the expansion of the invested capital base against a high cost of capital.
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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.
A volatile financial trajectory is observed over the five-year period, characterized by a sharp recovery from substantial losses in 2020 to a performance peak in 2022, followed by a steady contraction in profitability through 2024.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT experienced a dramatic reversal, moving from a deficit of -14,889 million US$ in 2020 to a peak of 12,526 million US$ in 2022. Following this peak, a downward trend emerged, with values declining to 5,524 million US$ in 2023 and further decreasing to 3,380 million US$ in 2024.
- Correlation Between NOPAT and Net Income
- A strong positive correlation exists between NOPAT and net income, as both metrics mirror the same cyclical pattern of loss, rapid growth, and subsequent decline. Notably, in the profitable years of 2021, 2023, and 2024, NOPAT remained consistently higher than net income. This gap indicates that non-operating costs, likely related to financing and interest expenses, exerted a downward pressure on the final net income relative to the operating performance.
- Profitability Volatility
- The data reflects significant earnings volatility. The transition from 2020 to 2022 represents a total NOPAT swing of approximately 27,415 million US$, underscoring a period of extreme operational fluctuation before the trend stabilized into a moderate decline over the final two years of the period.
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Cash Operating Taxes
Occidental Petroleum Corp., cash operating taxes calculation
US$ 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).
An analysis of the tax-related figures between 2020 and 2024 reveals a significant divergence between accrued income tax expenses and actual cash operating tax outflows. While income tax expenses exhibited high volatility, shifting from a substantial tax benefit to varying levels of expense, cash operating taxes followed a more consistent growth pattern before stabilizing in the final two years of the period.
- Income Tax Expense Volatility
- A notable reversal is observed between 2020 and 2021, where a tax benefit of 2,172 million US dollars transitioned into a tax expense of 915 million US dollars. Following a slight dip in 2022, the expense peaked in 2023 at 1,733 million US dollars before moderating to 1,174 million US dollars by the end of 2024.
- Cash Operating Tax Trajectory
- Cash operating taxes demonstrated a strong upward trend in the early part of the period, rising from 655 million US dollars in 2020 to a peak of 2,681 million US dollars in 2022. This represents a significant increase in actual cash outflows for taxes. Subsequently, the figures stabilized, remaining nearly constant between 2023 and 2024 at approximately 1,887 million and 1,892 million US dollars, respectively.
- Divergence Between Accruals and Cash Outflows
- There is a marked disparity between the reported income tax expense and cash operating taxes, particularly in 2020 and 2022. In 2020, the company recorded a significant tax benefit despite a cash tax payment of 655 million US dollars. In 2022, cash operating taxes reached their highest point at 2,681 million US dollars, substantially exceeding the recorded income tax expense of 813 million US dollars for the same period. This suggests a high volume of non-deductible items or the utilization of deferred tax assets and liabilities during these windows.
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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.
The financial trajectory from 2020 through 2024 reveals a strategic realignment of the capital structure, characterized by an initial phase of aggressive deleveraging followed by a recent expansion of the capital base. Invested capital experienced a gradual decline between 2020 and 2022 before stabilizing and subsequently increasing significantly in 2024.
- Debt and Lease Obligations
- A pronounced downward trend in total reported debt and leases occurred between 2020 and 2022, with obligations falling from 37,299 million US$ to 20,765 million US$. This represents a substantial reduction in leverage over a two-year period. Following a period of stability in 2023, debt levels rose to 27,104 million US$ by the end of 2024, indicating a shift toward increased borrowing or lease acquisitions.
- Stockholders' Equity Growth
- Stockholders' equity maintained a consistent upward trajectory throughout the analyzed period. The most significant growth occurred between 2021 and 2022, where equity increased from 20,327 million US$ to 30,085 million US$. This growth continued more moderately through 2024, reaching 34,159 million US$, reflecting a strengthening of the company's internal funding base and overall book value.
- Invested Capital Dynamics
- The aggregate invested capital exhibited a U-shaped pattern. From 2020 to 2022, invested capital contracted from 63,270 million US$ to 56,295 million US$, as the rapid reduction in debt outweighed the gains in stockholders' equity. After remaining relatively flat in 2023, invested capital surged to 66,896 million US$ in 2024. This final increase was driven by the simultaneous growth of both debt and equity, marking the highest level of invested capital within the five-year period.
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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 | × | 24.54% | = | 14.22% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 79,111) | = | 0.10 | 0.10 | × | 8.00% | = | 0.84% | ||
| Long-term debt, including current maturities3 | 24,000) | 24,000) | ÷ | 79,111) | = | 0.30 | 0.30 | × | 5.91% × (1 – 21.00%) | = | 1.42% | ||
| Operating lease liability4 | 988) | 988) | ÷ | 79,111) | = | 0.01 | 0.01 | × | 4.77% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 79,111) | 1.00 | 16.52% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ 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 | × | 24.54% | = | 15.86% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 77,955) | = | 0.11 | 0.11 | × | 8.00% | = | 0.85% | ||
| Long-term debt, including current maturities3 | 18,100) | 18,100) | ÷ | 77,955) | = | 0.23 | 0.23 | × | 5.86% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,173) | 1,173) | ÷ | 77,955) | = | 0.02 | 0.02 | × | 4.94% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 77,955) | 1.00 | 17.85% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | × | 24.54% | = | 16.01% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 81,360) | = | 0.12 | 0.12 | × | 8.00% | = | 0.96% | ||
| Long-term debt, including current maturities3 | 17,600) | 17,600) | ÷ | 81,360) | = | 0.22 | 0.22 | × | 5.81% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 930) | 930) | ÷ | 81,360) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 81,360) | 1.00 | 17.99% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 24.54% | = | 11.44% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 77,987) | = | 0.13 | 0.13 | × | 8.00% | = | 1.00% | ||
| Long-term debt, including current maturities3 | 31,100) | 31,100) | ÷ | 77,987) | = | 0.40 | 0.40 | × | 5.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 771) | 771) | ÷ | 77,987) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 77,987) | 1.00 | 14.18% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 24.54% | = | 8.76% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 69,465) | = | 0.14 | 0.14 | × | 8.00% | = | 1.12% | ||
| Long-term debt, including current maturities3 | 33,800) | 33,800) | ÷ | 69,465) | = | 0.49 | 0.49 | × | 5.01% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 1,114) | 1,114) | ÷ | 69,465) | = | 0.02 | 0.02 | × | 4.73% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 69,465) | 1.00 | 11.87% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | (7,670) | (4,624) | 2,396) | (4,022) | (22,398) | |
| Invested capital2 | 66,896) | 56,860) | 56,295) | 58,059) | 63,270) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.47% | -8.13% | 4.26% | -6.93% | -35.40% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.13% | -3.75% | 6.75% | -2.37% | — | |
| ConocoPhillips | 0.96% | 6.61% | 19.35% | 5.03% | — | |
| Exxon Mobil Corp. | -0.99% | 3.12% | 11.89% | 3.26% | — | |
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 × -7,670 ÷ 66,896 = -11.47%
4 Click competitor name to see calculations.
The financial performance between 2020 and 2024 is characterized by a period of significant volatility in economic value generation. After a substantial deficit in 2020, a recovery phase culminated in a positive economic result in 2022, followed by a renewed downward trend in both economic profit and the spread ratio through 2024.
- Economic Profit Trends
- A sharp recovery is observed from 2020 to 2022, as losses decreased from 22,398 million US$ to a surplus of 2,396 million US$. This positive trajectory was short-lived, as the company returned to a deficit position in 2023 and 2024, with economic profit falling to -4,624 million US$ and -7,670 million US$, respectively.
- Invested Capital Dynamics
- Invested capital experienced a gradual decline from 63,270 million US$ in 2020 to a low of 56,295 million US$ in 2022. This contraction was reversed in the subsequent years, with a notable surge in 2024, where invested capital reached 66,896 million US$, the highest level recorded in the five-year period.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of the economic profit, shifting from a deeply negative -35.40% in 2020 to a positive 4.26% in 2022. This peak indicates a period where the return on invested capital exceeded the cost of capital. However, the ratio deteriorated to -8.13% in 2023 and further to -11.47% in 2024, signaling a consistent failure to generate value above the cost of capital in the final two years of the analyzed timeframe.
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Economic Profit Margin
Occidental Petroleum Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (7,670) | (4,624) | 2,396) | (4,022) | (22,398) | |
| Net sales | 26,725) | 28,257) | 36,634) | 25,956) | 17,809) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -28.70% | -16.36% | 6.54% | -15.50% | -125.77% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -3.38% | -4.05% | 6.08% | -2.95% | — | |
| ConocoPhillips | 1.86% | 9.56% | 18.61% | 8.39% | — | |
| Exxon Mobil Corp. | -1.10% | 2.87% | 8.86% | 3.21% | — | |
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 × -7,670 ÷ 26,725 = -28.70%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of extreme volatility between 2020 and 2024, characterized by a significant recovery peaking in 2022 followed by a subsequent deterioration in value creation. The transition from substantial value destruction to a brief window of positive economic profit indicates a high sensitivity to revenue fluctuations and capital costs.
- Economic Profit Margin Trends
- A severe deficit was observed in 2020, with the economic profit margin reaching -125.77%, signifying that economic losses significantly exceeded total net sales. This figure improved sharply to -15.50% in 2021 and achieved a positive peak of 6.54% in 2022. However, this positive trend was not sustained, as the margin reverted to -16.36% in 2023 and widened further to -28.70% by the end of 2024.
- Relationship Between Net Sales and Economic Profit
- A strong correlation is evident between net sales volume and the ability to generate economic profit. Net sales grew from 17,809 million in 2020 to a peak of 36,634 million in 2022, which coincides exactly with the only period of positive economic profit (2,396 million). The subsequent decline in net sales to 26,725 million by 2024 mirrors the return to negative economic profit, suggesting that a high revenue threshold is required to offset the cost of capital.
- Analysis of Recent Value Deterioration
- The trajectory from 2022 through 2024 indicates a consistent decline in economic performance. Economic profit fell from a surplus of 2,396 million in 2022 to a deficit of -4,624 million in 2023, and further decreased to -7,670 million in 2024. This downward trend, coupled with a shrinking economic profit margin, suggests an increasing inability to generate returns exceeding the company's cost of capital in the most recent fiscal periods.
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