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.
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Pioneer Natural Resources Co. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Pioneer Natural Resources Co., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of economic performance from 2019 to 2023 reveals a period of significant volatility in operating profitability and a substantial increase in the capital base, resulting in inconsistent economic value creation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme fluctuations throughout the period. After a decline into negative territory in 2020, profits recovered sharply in 2021 and reached a peak of 9,759 million US$ in 2022. However, a contraction occurred in 2023, with NOPAT falling to 5,533 million US$, indicating a sensitivity to external market conditions and operational volatility.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable between 2019 and 2020 but experienced a sharp increase in 2021, rising from 17,004 million US$ to 32,653 million US$. This expanded capital base was maintained through 2023, ending at 33,333 million US$. Concurrently, the cost of capital remained consistently high and stable, fluctuating within a narrow range between 18.55% and 19.39%.
- Economic Profit Trends
- Economic profit remained negative for the majority of the analyzed period, indicating that the returns generated from operations were insufficient to cover the cost of the capital employed. Significant losses were recorded from 2019 through 2021, with the deficit peaking in 2020 at -3,342 million US$. A singular instance of positive economic value creation occurred in 2022, where a surge in NOPAT allowed for an economic profit of 3,656 million US$. By 2023, the metric reverted to a negative value of -930 million US$, as the reduction in operating profit was insufficient to offset the capital charge associated with the enlarged invested capital base.
The overall trend suggests that while the company achieved a temporary breakthrough in economic profitability in 2022, the substantial increase in invested capital since 2021 has created a higher threshold for achieving positive economic profit, leaving the company vulnerable to fluctuations in operating income.
Net Operating Profit after Taxes (NOPAT)
Pioneer Natural Resources Co., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in employee-related obligations.
3 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to common stockholders.
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income (loss) attributable to common stockholders.
- Net Income (Loss) Attributable to Common Stockholders
- The net income experienced significant volatility over the analyzed periods. In 2019, the company reported a positive net income of 756 million US dollars. However, in 2020, there was a notable decline resulting in a net loss of 200 million US dollars, indicating a challenging year likely impacted by adverse conditions. The financial position improved markedly in 2021 with net income rising sharply to 2,118 million US dollars. This upward trend intensified dramatically in 2022, reaching a peak of 7,845 million US dollars, reflecting a period of strong profitability. In 2023, net income decreased substantially to 4,894 million US dollars but remained significantly higher than the levels seen prior to 2021, indicating sustained profitability despite some contraction.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored the trends observed in net income, exhibiting considerable fluctuations across the years. Initially, in 2019, NOPAT was positive at 1,075 million US dollars before declining sharply to a negative 149 million US dollars in 2020, suggesting operational challenges that year. An impressive rebound occurred in 2021, with NOPAT increasing to 2,831 million US dollars, more than offsetting the previous year's loss. The peak was achieved in 2022 with a substantial increase in operational profitability to 9,759 million US dollars. In 2023, NOPAT decreased to 5,533 million US dollars but remained well above the pre-2021 levels, indicating that operational efficiency and profitability remained robust.
- Overall Trends and Insights
- Both net income and NOPAT demonstrate a notable turnaround starting in 2021 after significant setbacks in 2020. The year 2020 represents a clear outlier characterized by a steep decline, likely due to extraordinary factors impacting performance. Following this, the company recovered strongly, reaching record high levels in 2022 for both profitability metrics, before experiencing a retrenchment in 2023. The persistence of positive and elevated profitability figures post-2020 suggests improved operational effectiveness and market conditions, despite some volatility. The gap between net income and NOPAT across the years indicates the influence of factors beyond core operations affecting bottom-line results. The data suggests a resilient financial performance trajectory after overcoming a period of adversity.
Cash Operating Taxes
Pioneer Natural Resources Co., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Income Tax Provision (Benefit)
- The income tax provision exhibits significant volatility over the analyzed periods. It declined from 231 million USD in 2019 to a benefit of 61 million USD in 2020, indicating a reversal or reduction in tax obligations during that year. Subsequently, it surged to 628 million USD in 2021, followed by a sharp increase to 2,106 million USD in 2022. In 2023, the provision decreased to 1,353 million USD, remaining substantially higher than the levels observed in 2019 and 2021. This pattern suggests fluctuating taxable income or changes in tax regulations impacting the company's tax expenses.
- Cash Operating Taxes
- Cash operating taxes have shown a consistent upward trend throughout the periods analyzed. Beginning at 23 million USD in 2019, the amount slightly decreased to 19 million USD in 2020 but then increased markedly to 80 million USD in 2021. The upward trend accelerated in subsequent years, reaching 328 million USD in 2022 and further rising to 882 million USD in 2023. This steady growth indicates increasing cash tax outflows related to operating activities, possibly reflecting higher taxable income or changes in operational structure or tax policy.
Invested Capital
Pioneer Natural Resources Co., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of employee-related obligations.
4 Addition of equity equivalents to equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of short-term investment.
- Total Reported Debt & Leases
- The total reported debt and leases exhibit considerable variability across the five-year period. Starting at 3,167 million US dollars in 2019, the debt increased to 4,066 million in 2020. A significant surge is observed in 2021, with the debt nearly doubling to 7,835 million. However, the subsequent years show a decline, dropping to 5,786 million in 2022 and remaining relatively stable at 5,760 million in 2023. This pattern suggests a peak in borrowing or leasing obligations in 2021 followed by deleveraging efforts or repayment in the following years.
- Equity
- Equity values show a generally positive trajectory over the period analyzed. Beginning at 12,119 million US dollars in 2019, equity slightly declined to 11,569 million in 2020. Post-2020, there is a dramatic increase in equity to 22,837 million in 2021, maintaining a stable level around 22,541 million in 2022 before rising modestly to 23,171 million in 2023. The substantial equity growth in 2021 may indicate a significant capital infusion, improved retained earnings, or revaluation of assets.
- Invested Capital
- Invested capital follows a trend closely aligned with equity and total debt movements. Starting at 16,681 million US dollars in 2019, it shows a mild increase to 17,004 million in 2020. A large increase occurs in 2021, where invested capital nearly doubles to 32,653 million. The invested capital slightly decreases to 32,194 million in 2022 but then increases again to 33,333 million in 2023. This coincides with the variations in debt and equity, implying changes in the company's financing and asset base.
Cost of Capital
Pioneer Natural Resources Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (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 and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (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 and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (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 and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (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 and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liability, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liability, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Pioneer Natural Resources Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| 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: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by significant volatility in value creation and a substantial expansion of the capital base. Economic profit remained negative for the majority of the period, indicating that the returns generated were insufficient to cover the cost of invested capital, with a notable exception in 2022.
- Invested Capital Trends
- Invested capital remained relatively stable between 2019 and 2020, hovering around 17 billion USD. A significant increase occurred in 2021, where capital nearly doubled to 32.65 billion USD. This elevated level of investment persisted through 2023, ending at 33.33 billion USD, suggesting a major capital expansion or strategic acquisition during the 2021 fiscal year.
- Economic Profit Fluctuations
- Economic profit exhibited a cyclical pattern, starting with a deficit of 2.1 billion USD in 2019 and deepening to a low of 3.34 billion USD in 2020. While the deficit narrowed slightly in 2021, the company achieved a positive economic profit of 3.66 billion USD in 2022. However, this trend reversed in 2023, with economic profit returning to a negative value of 930 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of economic profit, reflecting the gap between the return on invested capital and the cost of capital. The ratio reached its lowest point in 2020 at -19.65%, indicating maximum value erosion. A recovery phase followed, culminating in a peak positive spread of 11.36% in 2022, which marks the only period in the five-year sequence where the company generated a return exceeding its cost of capital. By 2023, the ratio declined to -2.79%, signaling a return to negative economic value added, although the erosion was less severe than in the 2019-2021 period.
Overall, the data indicates a period of instability in economic value generation. The significant increase in invested capital since 2021 has increased the financial threshold required to achieve a positive economic spread, a target that was only met during the 2022 fiscal year.
Economic Profit Margin
Pioneer Natural Resources Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue from contracts with purchasers | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue from contracts with purchasers
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant volatility between 2019 and 2023, characterized by consistent value destruction for four of the five years analyzed, punctuated by a singular period of value creation.
- Correlation Between Revenue and Economic Profitability
- A strong correlation is observed between revenue fluctuations and the economic profit margin. Revenue reached its peak in 2022 at 24,384 million USD, which coincided with the only positive economic profit margin of 14.99%. Conversely, the lowest revenue recorded in 2020 (7,024 million USD) corresponds with the most severe economic profit margin deficit of -47.58%.
- Analysis of Value Destruction Periods
- Between 2019 and 2021, the company consistently failed to generate returns above its cost of capital. Although the economic profit margin improved from -47.58% in 2020 to -18.06% in 2021, the company remained in a state of economic loss despite a significant increase in revenue during the 2021 period.
- Short-term Performance Reversal
- The positive momentum observed in 2022, where economic profit reached 3,656 million USD, was not sustained into 2023. The economic profit margin reverted to a negative position of -4.80%, reflecting a contraction in revenue to 19,374 million USD and a return to a negative economic profit of -930 million USD.