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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.

Occidental Petroleum Corp., economic profit calculation

US$ in millions

	12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

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.	Occidental Petroleum Corp.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Occidental Petroleum Corp., NOPAT calculation

US$ in millions

	12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income (loss) attributable to common stock
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in equity equivalents⁴
	Interest and debt expense, net
	Interest expense, operating lease liability⁵
	Adjusted interest and debt expense, net
	Tax benefit of interest and debt expense, net⁶
	Adjusted interest and debt expense, net, after taxes⁷
	(Gain) loss on marketable securities
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	(Income) loss from discontinued operations, net of tax¹⁰
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

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 common stock.

⁵ 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

⁶ 2018 Calculation
Tax benefit of interest and debt expense, net = Adjusted interest and debt expense, net × Statutory income tax rate
= × 21.00% =

⁷ Addition of after taxes interest expense to net income (loss) attributable to common stock.

⁸ 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

⁹ Elimination of after taxes investment income.

¹⁰ Elimination of discontinued operations.

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.	Occidental Petroleum Corp.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Occidental Petroleum Corp., cash operating taxes calculation

US$ in millions

	12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Provisions (credits) for domestic and foreign income taxes on continuing operations
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest and debt expense, net
	Less: Tax imposed on investment income
	Cash operating taxes

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.	Occidental Petroleum Corp.’s cash operating taxes increased from 2016 to 2017 and from 2017 to 2018.

Occidental Petroleum Corp., invested capital calculation (financing approach)

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current maturities of long-term debt
	Long-term debt, net, excluding current maturities
	Operating lease liability¹
	Total reported debt & leases
	Stockholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	LIFO reserve⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Adjusted stockholders’ equity
	Available for sale investment in California Resources stock⁷
	Invested capital

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.

⁷ Subtraction of available for sale investment in California Resources stock.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Occidental Petroleum Corp.’s invested capital decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Occidental Petroleum Corp., cost of capital calculations


Equity²	÷	=	×		=
Long-term debt, including current maturities³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

¹ US$ in millions