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 – 16.49% × 66,896 = -7,648
The analysis of economic profit over the five-year period reveals a volatile trend characterized by significant fluctuations in operational profitability and a predominantly negative ability to generate value above the cost of capital. While a temporary recovery occurred in 2022, the overall trajectory indicates a struggle to maintain economic value added.
- Net Operating Profit After Taxes (NOPAT)
- A sharp recovery is observed from a substantial loss of 14,889 million USD in 2020 to a peak of 12,526 million USD in 2022. However, this operational performance trend reversed following 2022, with NOPAT declining to 5,524 million USD in 2023 and further decreasing to 3,380 million USD by the end of 2024.
- Cost of Capital
- The cost of capital exhibited a steady upward trend during the first three years, rising from 11.85% in 2020 to a peak of 17.96% in 2022. This elevated hurdle rate remained high through 2023 at 17.81% before experiencing a slight moderation to 16.49% in 2024.
- Invested Capital
- Invested capital decreased consistently between 2020 and 2022, falling from 63,270 million USD to 56,295 million USD. This contraction was followed by a period of stability in 2023 and a significant increase in 2024, where invested capital reached 66,896 million USD.
- Economic Profit
- Economic profit remained negative for four out of the five years analyzed. A severe deficit of 22,385 million USD in 2020 improved significantly, resulting in the only positive value creation year in 2022 with a profit of 2,418 million USD. This positivity was short-lived, as economic profit returned to negative territory in 2023 (-4,603 million USD) and deteriorated further in 2024 to -7,648 million USD.
The convergence of declining NOPAT and an increase in invested capital toward the end of the period has exacerbated economic losses. The 2024 results indicate that the return on invested capital has fallen significantly below the cost of capital, leading to a substantial 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.
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 | × | 24.48% | = | 14.18% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 79,111) | = | 0.10 | 0.10 | × | 8.00% | = | 0.84% | ||
| Long-term debt, including current maturities3 | 24,000) | 24,000) | ÷ | 79,111) | = | 0.30 | 0.30 | × | 5.91% × (1 – 21.00%) | = | 1.42% | ||
| Operating lease liability4 | 988) | 988) | ÷ | 79,111) | = | 0.01 | 0.01 | × | 4.77% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 79,111) | 1.00 | 16.49% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ 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 | × | 24.48% | = | 15.83% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 77,955) | = | 0.11 | 0.11 | × | 8.00% | = | 0.85% | ||
| Long-term debt, including current maturities3 | 18,100) | 18,100) | ÷ | 77,955) | = | 0.23 | 0.23 | × | 5.86% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,173) | 1,173) | ÷ | 77,955) | = | 0.02 | 0.02 | × | 4.94% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 77,955) | 1.00 | 17.81% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | × | 24.48% | = | 15.97% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 81,360) | = | 0.12 | 0.12 | × | 8.00% | = | 0.96% | ||
| Long-term debt, including current maturities3 | 17,600) | 17,600) | ÷ | 81,360) | = | 0.22 | 0.22 | × | 5.81% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 930) | 930) | ÷ | 81,360) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 81,360) | 1.00 | 17.96% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 24.48% | = | 11.41% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 77,987) | = | 0.13 | 0.13 | × | 8.00% | = | 1.00% | ||
| Long-term debt, including current maturities3 | 31,100) | 31,100) | ÷ | 77,987) | = | 0.40 | 0.40 | × | 5.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 771) | 771) | ÷ | 77,987) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 77,987) | 1.00 | 14.16% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 24.48% | = | 8.74% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 69,465) | = | 0.14 | 0.14 | × | 8.00% | = | 1.12% | ||
| Long-term debt, including current maturities3 | 33,800) | 33,800) | ÷ | 69,465) | = | 0.49 | 0.49 | × | 5.01% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 1,114) | 1,114) | ÷ | 69,465) | = | 0.02 | 0.02 | × | 4.73% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 69,465) | 1.00 | 11.85% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | (7,648) | (4,603) | 2,418) | (4,007) | (22,385) | |
| Invested capital2 | 66,896) | 56,860) | 56,295) | 58,059) | 63,270) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.43% | -8.09% | 4.29% | -6.90% | -35.38% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.16% | -3.78% | 6.72% | -2.40% | — | |
| ConocoPhillips | 0.90% | 6.55% | 19.29% | 4.98% | — | |
| ExxonMobil Holdings Corp. | -1.04% | 3.07% | 11.83% | 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 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -7,648 ÷ 66,896 = -11.43%
4 Click competitor name to see calculations.
The financial trajectory between 2020 and 2024 reflects a period of significant volatility in value creation, characterized by a sharp recovery in 2022 followed by a subsequent decline in economic performance. The overall trend indicates a return to negative economic value added, suggesting that the returns generated on invested capital have fallen below the cost of that capital in recent periods.
- Economic Profit
- A volatile pattern is observed, beginning with a substantial deficit of 22,385 million USD in 2020. This figure improved significantly over the next two years, reaching a peak positive value of 2,418 million USD in 2022. However, this momentum reversed in 2023 and 2024, with economic profit falling to -4,603 million USD and -7,648 million USD, respectively, indicating a failure to sustain the value creation achieved in 2022.
- Invested Capital
- The capital base experienced a gradual contraction from 63,270 million USD in 2020 to a low of 56,295 million USD in 2022. This trend shifted in 2024, where a significant increase in invested capital to 66,896 million USD occurred. The increase in the capital base during 2024 coincided with a decline in economic profit, suggesting that the additional capital deployed did not generate returns exceeding the cost of capital.
- Economic Spread Ratio
- The economic spread ratio mirrors the trend of economic profit, fluctuating from a deep negative of -35.38% in 2020 to a positive 4.29% in 2022. This positive spike represents the only period in the analyzed timeframe where the company generated a return above its cost of capital. The ratio subsequently deteriorated to -8.09% in 2023 and -11.43% in 2024, confirming a trend of shareholder value destruction in the most recent fiscal years.
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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 | (7,648) | (4,603) | 2,418) | (4,007) | (22,385) | |
| Net sales | 26,725) | 28,257) | 36,634) | 25,956) | 17,809) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -28.62% | -16.29% | 6.60% | -15.44% | -125.69% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -3.41% | -4.08% | 6.05% | -2.98% | — | |
| ConocoPhillips | 1.76% | 9.48% | 18.56% | 8.30% | — | |
| ExxonMobil Holdings Corp. | -1.16% | 2.82% | 8.82% | 3.16% | — | |
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 × -7,648 ÷ 26,725 = -28.62%
3 Click competitor name to see calculations.
The financial trajectory from 2020 to 2024 is characterized by extreme volatility in economic value creation, with a temporary shift into positive territory during 2022 followed by a subsequent decline.
- Economic Profit Trends
- A sharp recovery is observed between 2020 and 2022, where economic profit rose from a deficit of 22,385 million US dollars to a surplus of 2,418 million US dollars. This positive momentum was short-lived, as the figures returned to negative values in 2023 (-4,603 million US dollars) and continued to deteriorate in 2024, reaching -7,648 million US dollars.
- Net Sales Performance
- Net sales experienced a significant upward trend in the first three years, growing from 17,809 million US dollars in 2020 to a peak of 36,634 million US dollars in 2022. Following this peak, a downward trend emerged, with sales contracting to 28,257 million US dollars in 2023 and further decreasing to 26,725 million US dollars by the end of 2024.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. The period began with a severe margin of -125.69% in 2020, which improved drastically to 6.60% in 2022, coinciding with the peak in net sales. However, the margin eroded in the following years, falling to -16.29% in 2023 and -28.62% in 2024, indicating that the returns generated were insufficient to cover the cost of capital during these periods.
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