Economic Value Added (EVA)
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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.
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Occidental Petroleum Corp. pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Analysis of Revenues
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Occidental Petroleum Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The period under review demonstrates significant fluctuations in economic profit. Initially, the company experienced substantial economic losses, followed by a period of profitability, and then a return to losses. These shifts correlate with changes in net operating profit after taxes, cost of capital, and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a dramatic recovery from a substantial loss in 2020 to a positive value in 2021. This positive trend continued into 2022, reaching a peak, before declining in both 2023 and 2024. The decrease in NOPAT from 2022 to 2024 suggests potential challenges in maintaining profitability.
- Cost of Capital
- The cost of capital increased steadily from 2020 to 2022, peaking at 18.08%. While it decreased slightly in 2023, it remained elevated. A further decrease was observed in 2024, but the cost of capital remained above the 2020 level. This increasing cost of capital likely contributed to the negative economic profit observed in later years.
- Invested Capital
- Invested capital generally decreased from 2020 to 2022, then stabilized in 2023, and increased significantly in 2024. The substantial increase in invested capital in 2024, coupled with declining NOPAT, likely exacerbated the economic loss experienced in that year.
- Economic Profit
- Economic profit mirrored the NOPAT trend, starting with a large loss in 2020. It improved to a smaller loss in 2021 and then turned positive in 2022. However, economic profit became negative again in 2023 and experienced a further decline in 2024, reaching its lowest point over the observed period. The negative economic profit in 2023 and 2024 indicates that the company’s returns are not exceeding its cost of capital.
The interplay between NOPAT, cost of capital, and invested capital significantly impacted economic profit. While improvements were seen in 2021 and 2022, the subsequent decline in NOPAT and increase in invested capital in 2024 resulted in a substantial economic loss. Continued monitoring of these factors is crucial for assessing the company’s financial performance and value creation.
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
= × =
6 2024 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 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.
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.
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.
Cost of Capital
Occidental Petroleum Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, at $1.00 per share par value (book value) | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, at $1.00 per share par value (book value) | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, at $1.00 per share par value (book value) | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, at $1.00 per share par value (book value) | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, at $1.00 per share par value (book value) | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited considerable fluctuation over the five-year period. Initially negative, the ratio improved significantly in 2022 before declining again in subsequent years. This movement correlates with changes in economic profit and invested capital.
- Economic Spread Ratio Trend
- In 2020, the economic spread ratio was -35.44%, indicating a substantial shortfall in returns relative to the cost of capital. A marked improvement occurred in 2021, with the ratio increasing to -6.99%, suggesting a narrowing of the gap between returns and capital costs. The ratio turned positive in 2022, reaching 4.18%, signifying that returns exceeded the cost of capital for that year. However, this positive trend reversed in 2023, with the ratio falling to -8.21%, and continued to decline in 2024, reaching -11.54%. This indicates a worsening performance relative to the cost of capital in the latter two years.
The economic spread ratio’s movement is closely tied to the economic profit. While the ratio was improving from 2020 to 2022, economic profit was also increasing, moving from a substantial loss to a positive value. The subsequent decline in the economic spread ratio in 2023 and 2024 coincides with economic profit returning to negative values.
- Invested Capital Influence
- Invested capital decreased from 2020 to 2022, then stabilized before increasing notably in 2024. The decrease in invested capital from 2020 to 2022 likely contributed to the initial improvement in the economic spread ratio, as a lower capital base requires a smaller profit to achieve the same return on investment. The increase in invested capital in 2024, coupled with negative economic profit, likely exacerbated the decline in the economic spread ratio.
Overall, the analysis suggests a period of improving financial performance between 2020 and 2022, followed by a deterioration in performance relative to the cost of capital in 2023 and 2024. The economic spread ratio serves as a key indicator of this trend, reflecting the interplay between economic profit and invested capital.
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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuations over the five-year period. Initially negative, it demonstrated improvement before declining again, culminating in a substantial negative value in the most recent year.
- Economic Profit Margin Trend
- In 2020, the economic profit margin was markedly negative, registering at -125.92%. This indicates a substantial shortfall between returns generated and the cost of capital employed. A considerable improvement was observed in 2021, with the margin increasing to -15.63%, suggesting a reduction in the gap between returns and capital costs. The year 2022 saw a positive economic profit margin of 6.42%, indicating that returns exceeded the cost of capital. However, this positive performance was short-lived. The margin reverted to negative territory in 2023, reaching -16.53%, and experienced a further decline in 2024, ending at -28.88%.
The economic profit margin’s movement closely mirrors that of economic profit. The negative economic profit values in 2020, 2021, 2023, and 2024 directly contribute to the negative margins observed in those years. The positive economic profit in 2022 is reflected in the positive margin for that year.
- Relationship to Net Sales
- Net sales increased substantially from 2020 to 2022, rising from US$17,809 million to US$36,634 million. However, sales decreased in both 2023 and 2024, reaching US$28,257 million and US$26,725 million respectively. Despite the initial increase in sales, the inability to translate this into sustained positive economic profit, as evidenced by the declining economic profit margin in later years, suggests potential issues with cost management or capital efficiency.
The increasing negativity of the economic profit margin in the final two years warrants further investigation. The combination of declining sales and continued negative economic profit suggests a worsening financial performance relative to the capital invested.