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 – 16.37% × 66,896 = -7,572
The financial trajectory from 2020 to 2024 is characterized by significant volatility in economic profit, reflecting a period of rapid recovery followed by a decline in value creation.
- Net Operating Profit After Taxes (NOPAT)
- A sharp recovery is observed between 2020 and 2022, with NOPAT moving from a deficit of 14,889 million USD to a peak of 12,526 million USD. However, this trend reversed after 2022, with profits declining to 3,380 million USD by 2024, indicating a contraction in operational profitability over the final two years of the period.
- Cost of Capital
- The cost of capital experienced a steady increase from 11.78% in 2020 to a peak of 17.83% in 2022. While a slight moderation occurred in 2024, reaching 16.37%, the hurdle rate remained substantially higher than the 2020 baseline, increasing the requirement for higher operational returns to achieve value addition.
- Invested Capital
- Invested capital showed a general downward trend from 2020 to 2022, decreasing from 63,270 million USD to 56,295 million USD. This period of contraction was followed by a significant increase in 2024, where capital rose to 66,896 million USD, marking the highest level of investment within the analyzed timeframe.
- Economic Profit
- Economic profit remained negative for the majority of the period, with a sole exception in 2022, when a positive value of 2,490 million USD was recorded. This peak coincided with the highest NOPAT and the lowest level of invested capital. By 2024, economic profit deteriorated to -7,572 million USD, a result of the simultaneous decline in NOPAT, a persistently high cost of capital, and an expanded capital base.
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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 | × | 24.28% | = | 14.07% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 79,111) | = | 0.10 | 0.10 | × | 8.00% | = | 0.84% | ||
| Long-term debt, including current maturities3 | 24,000) | 24,000) | ÷ | 79,111) | = | 0.30 | 0.30 | × | 5.91% × (1 – 21.00%) | = | 1.42% | ||
| Operating lease liability4 | 988) | 988) | ÷ | 79,111) | = | 0.01 | 0.01 | × | 4.77% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 79,111) | 1.00 | 16.37% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ 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 | × | 24.28% | = | 15.70% | ||
| Preferred stock, at $1.00 per share par value (book value) | 8,287) | 8,287) | ÷ | 77,955) | = | 0.11 | 0.11 | × | 8.00% | = | 0.85% | ||
| Long-term debt, including current maturities3 | 18,100) | 18,100) | ÷ | 77,955) | = | 0.23 | 0.23 | × | 5.86% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,173) | 1,173) | ÷ | 77,955) | = | 0.02 | 0.02 | × | 4.94% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 77,955) | 1.00 | 17.68% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | × | 24.28% | = | 15.84% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 81,360) | = | 0.12 | 0.12 | × | 8.00% | = | 0.96% | ||
| Long-term debt, including current maturities3 | 17,600) | 17,600) | ÷ | 81,360) | = | 0.22 | 0.22 | × | 5.81% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 930) | 930) | ÷ | 81,360) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 81,360) | 1.00 | 17.83% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 24.28% | = | 11.32% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 77,987) | = | 0.13 | 0.13 | × | 8.00% | = | 1.00% | ||
| Long-term debt, including current maturities3 | 31,100) | 31,100) | ÷ | 77,987) | = | 0.40 | 0.40 | × | 5.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 771) | 771) | ÷ | 77,987) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 77,987) | 1.00 | 14.07% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 24.28% | = | 8.67% | ||
| Preferred stock, at $1.00 per share par value (book value) | 9,762) | 9,762) | ÷ | 69,465) | = | 0.14 | 0.14 | × | 8.00% | = | 1.12% | ||
| Long-term debt, including current maturities3 | 33,800) | 33,800) | ÷ | 69,465) | = | 0.49 | 0.49 | × | 5.01% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 1,114) | 1,114) | ÷ | 69,465) | = | 0.02 | 0.02 | × | 4.73% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 69,465) | 1.00 | 11.78% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | (7,572) | (4,530) | 2,490) | (3,953) | (22,340) | |
| Invested capital2 | 66,896) | 56,860) | 56,295) | 58,059) | 63,270) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.32% | -7.97% | 4.42% | -6.81% | -35.31% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.25% | -3.87% | 6.63% | -2.48% | — | |
| ConocoPhillips | 0.72% | 6.35% | 19.09% | 4.79% | — | |
| Exxon Mobil Corp. | -1.23% | 2.88% | 11.64% | 3.03% | — | |
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 × -7,572 ÷ 66,896 = -11.32%
4 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility, characterized by a brief window of positive economic profit followed by a return to value destruction. The overall trajectory indicates difficulty in maintaining a return on invested capital that consistently exceeds the cost of capital.
- Economic Profit
- A substantial recovery was observed between 2020 and 2022, with economic profit moving from a deficit of US$ 22,340 million to a surplus of US$ 2,490 million. However, this positive momentum was not sustained; economic profit reverted to negative figures in 2023 (US$ -4,530 million) and further deteriorated by 2024, reaching US$ -7,572 million.
- Invested Capital
- Invested capital followed a U-shaped trend over the five-year period. A reduction in the capital base occurred from 2020 to 2022, decreasing from US$ 63,270 million to a low of US$ 56,295 million. Starting in 2023, a reversal occurred, with capital expanding to US$ 66,896 million by the end of 2024, representing the highest capital investment level in the analyzed period.
- Economic Spread Ratio
- The economic spread ratio mirrors the volatility of economic profit, fluctuating between deep negative territory and a marginal positive peak. The ratio improved from -35.31% in 2020 to a positive 4.42% in 2022. Following this peak, the ratio declined to -7.97% in 2023 and further to -11.32% in 2024, signaling that the return on capital has once again fallen below the required cost of capital.
The correlation between increasing invested capital and a declining economic spread ratio in the final two years suggests that recent capital expansions have not yet translated into economic value creation. The transition from a positive spread in 2022 to a negative spread in 2024 highlights an increasing gap between operational returns and the cost of financing the invested capital.
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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 | (7,572) | (4,530) | 2,490) | (3,953) | (22,340) | |
| Net sales | 26,725) | 28,257) | 36,634) | 25,956) | 17,809) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -28.33% | -16.03% | 6.80% | -15.23% | -125.44% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -3.50% | -4.18% | 5.97% | -3.09% | — | |
| ConocoPhillips | 1.39% | 9.20% | 18.36% | 7.98% | — | |
| Exxon Mobil Corp. | -1.38% | 2.64% | 8.67% | 2.98% | — | |
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 × -7,572 ÷ 26,725 = -28.33%
3 Click competitor name to see calculations.
The financial performance between 2020 and 2024 is characterized by extreme volatility in value creation, with a significant recovery period peaking in 2022 followed by a subsequent decline in economic profitability.
- Economic Profit Trends
- A profound deficit of 22,340 million US$ was recorded in 2020, representing a period of severe value destruction. This figure improved substantially in 2021 and transitioned into a positive value creation of 2,490 million US$ by 2022. However, this positive trajectory was not sustained, as economic profit returned to negative territory in 2023 at -4,530 million US$ and further deteriorated to -7,572 million US$ by 2024.
- Net Sales Performance
- Revenue exhibited a strong upward trend from 2020 to 2022, rising from 17,809 million US$ to a peak of 36,634 million US$. Following this peak, a downward trend occurred, with sales contracting to 28,257 million US$ in 2023 and 26,725 million US$ in 2024. The correlation between peak revenue and the only instance of positive economic profit suggests a high sensitivity of value creation to sales volume.
- Economic Profit Margin Analysis
- The economic profit margin fluctuated dramatically, starting at -125.44% in 2020, indicating that capital charges heavily outweighed operating returns. The margin recovered to -15.23% in 2021 and reached a positive peak of 6.80% in 2022. The subsequent decline to -16.03% in 2023 and -28.33% in 2024 demonstrates a failure to maintain returns above the cost of capital in the latter part of the period.
The overall pattern indicates that while a significant recovery was achieved by 2022, the organization has since faced a regression in its ability to generate economic value, with both net sales and economic profit margins trending downward over the final two years of the observed period.
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