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
Pioneer Natural Resources Co., economic profit 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 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
= 5,533 – 19.40% × 33,333 = -933
The financial trajectory from 2019 to 2023 is characterized by high volatility in operating profitability and a significant expansion of the capital base, resulting in inconsistent economic value creation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated extreme fluctuations over the five-year period. After a decline to -149 million in 2020, a sharp recovery occurred, culminating in a peak of 9,759 million in 2022. This peak was followed by a contraction in 2023, where NOPAT decreased to 5,533 million, suggesting a high degree of sensitivity to market cycles.
- Invested Capital and Cost of Capital
- The cost of capital remained remarkably stable, fluctuating slightly between a low of 18.56% in 2021 and a high of 19.40% in 2023. In contrast, invested capital saw a substantial increase between 2020 and 2021, rising from 17,004 million to 32,653 million. This capital base remained elevated through 2023, ending at 33,333 million, which effectively doubled the capital charge the company needed to overcome to achieve positive economic profit.
- Economic Profit and Value Creation
- Economic profit was negative for four of the five years analyzed, indicating that the company failed to generate returns above its cost of capital for the majority of the period. Value destruction was most significant between 2019 and 2021, with the lowest point reached in 2020 at -3,343 million. A singular instance of value creation occurred in 2022, when economic profit reached 3,653 million, driven by the surge in NOPAT. However, this trend was not sustained, as economic profit returned to a negative value of -933 million in 2023.
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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
= 423 × 3.60% = 15
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 168 × 21.00% = 35
6 Addition of after taxes interest expense to net income (loss) attributable to common stockholders.
The financial performance between 2019 and 2023 is characterized by significant volatility, featuring a sharp contraction in 2020 followed by a substantial surge that peaked in 2022. Both Net Income attributable to common stockholders and Net Operating Profit After Taxes (NOPAT) mirror this trajectory, indicating a strong correlation between operating efficiency and overall profitability.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited extreme fluctuations over the five-year period. After declining from 1,075 million USD in 2019 to a negative 149 million USD in 2020, the metric experienced rapid growth, reaching a peak of 9,759 million USD in 2022. A subsequent contraction was observed in 2023, with NOPAT decreasing to 5,533 million USD.
- Comparative Analysis of NOPAT and Net Income
- A consistent divergence is observed between NOPAT and Net Income, with NOPAT remaining higher than Net Income in all positive-earning years. This gap was most pronounced in 2022, where NOPAT exceeded Net Income by 1,914 million USD, suggesting the influence of non-operating expenses or financing costs on the final earnings attributable to stockholders.
- Operational Profitability Cycle
- The transition from operating losses in 2020 to record high profits in 2022 reflects a period of intense expansion in operational value. The reduction in both NOPAT and Net Income in 2023 indicates a reversal of the previous growth trend, signaling a stabilization or decline in the economic environment following the 2022 peak.
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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).
The analysis of tax-related expenditures from 2019 to 2023 reveals a significant divergence between accounting tax provisions and actual cash tax outflows. While the income tax provision exhibited high volatility with a prominent peak in 2022, cash operating taxes followed a trajectory of consistent and accelerating growth over the five-year period.
- Income Tax Provision Trends
- The income tax provision fluctuated substantially, beginning at US$231 million in 2019 and shifting to a tax benefit of US$61 million in 2020. A sharp upward trend followed, with the provision rising to US$628 million in 2021 and reaching a peak of US$2,106 million in 2022, before decreasing to US$1,353 million in 2023.
- Cash Operating Tax Trajectory
- Cash operating taxes remained relatively low and stable between 2019 and 2020, recording US$23 million and US$19 million, respectively. Starting in 2021, cash outflows escalated rapidly, increasing to US$80 million in 2021, US$328 million in 2022, and reaching a period high of US$882 million by the end of 2023.
- Provision versus Cash Outflow Correlation
- A notable disparity is observed between reported provisions and cash payments, particularly during the 2022 fiscal year, where the provision of US$2,106 million far exceeded the cash tax payment of US$328 million. By 2023, the gap narrowed as cash operating taxes surged to US$882 million against a reduced provision of US$1,353 million, indicating a shift toward higher actual cash tax realizations.
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Invested Capital
Pioneer Natural Resources Co., invested capital calculation (financing approach)
US$ 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.
Invested capital experienced a significant expansion over the five-year period, nearly doubling from 16,681 million USD in 2019 to 33,333 million USD by 2023. The most pronounced growth occurred between 2020 and 2021, during which invested capital increased by approximately 92%, followed by a period of relative stabilization through the end of 2023.
- Equity Contribution
- Equity served as the primary driver for the increase in invested capital. Following a marginal decline in 2020, equity rose sharply from 11,569 million USD to 22,837 million USD in 2021. This elevated level was maintained through 2023, closing at 23,171 million USD, which indicates a substantial strengthening of the company's capital base.
- Debt and Lease Obligations
- Total reported debt and leases followed a volatile trajectory, peaking in 2021 at 7,835 million USD. A subsequent deleveraging trend is observed from 2022 onward, with debt levels decreasing to 5,760 million USD by 2023. This reduction suggests a strategic effort to lower financial leverage following the capital surge of 2021.
- Capital Structure Dynamics
- The overall composition of invested capital shifted toward a higher reliance on equity over the period. While both debt and equity increased significantly in 2021, the subsequent reduction in debt coupled with stable equity levels resulted in a more conservative financing structure by the end of 2023.
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Cost of Capital
Pioneer Natural Resources Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 54,649) | 54,649) | ÷ | 60,862) | = | 0.90 | 0.90 | × | 21.35% | = | 19.17% | ||
| Long-term debt and finance lease liability, including current portion3 | 5,790) | 5,790) | ÷ | 60,862) | = | 0.10 | 0.10 | × | 2.76% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 423) | 423) | ÷ | 60,862) | = | 0.01 | 0.01 | × | 3.60% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 60,862) | 1.00 | 19.40% | ||||||||||
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 | 48,190) | 48,190) | ÷ | 54,759) | = | 0.88 | 0.88 | × | 21.35% | = | 18.79% | ||
| Long-term debt and finance lease liability, including current portion3 | 6,208) | 6,208) | ÷ | 54,759) | = | 0.11 | 0.11 | × | 1.82% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 361) | 361) | ÷ | 54,759) | = | 0.01 | 0.01 | × | 2.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 54,759) | 1.00 | 18.97% | ||||||||||
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 | 54,212) | 54,212) | ÷ | 63,111) | = | 0.86 | 0.86 | × | 21.35% | = | 18.34% | ||
| Long-term debt and finance lease liability, including current portion3 | 8,535) | 8,535) | ÷ | 63,111) | = | 0.14 | 0.14 | × | 1.99% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 364) | 364) | ÷ | 63,111) | = | 0.01 | 0.01 | × | 1.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 63,111) | 1.00 | 18.56% | ||||||||||
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 | 32,156) | 32,156) | ÷ | 37,048) | = | 0.87 | 0.87 | × | 21.35% | = | 18.53% | ||
| Long-term debt and finance lease liability, including current portion3 | 4,682) | 4,682) | ÷ | 37,048) | = | 0.13 | 0.13 | × | 2.43% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 210) | 210) | ÷ | 37,048) | = | 0.01 | 0.01 | × | 2.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 37,048) | 1.00 | 18.79% | ||||||||||
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 | 22,532) | 22,532) | ÷ | 25,856) | = | 0.87 | 0.87 | × | 21.35% | = | 18.61% | ||
| Long-term debt and finance lease liability, including current portion3 | 3,018) | 3,018) | ÷ | 25,856) | = | 0.12 | 0.12 | × | 4.60% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 306) | 306) | ÷ | 25,856) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 25,856) | 1.00 | 19.06% | ||||||||||
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 | (933) | 3,653) | (3,229) | (3,343) | (2,105) | |
| Invested capital2 | 33,333) | 32,194) | 32,653) | 17,004) | 16,681) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.80% | 11.35% | -9.89% | -19.66% | -12.62% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.78% | 6.72% | -2.40% | — | — | |
| ConocoPhillips | 6.55% | 19.29% | 4.98% | — | — | |
| ExxonMobil Holdings Corp. | 3.07% | 11.83% | 3.21% | — | — | |
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 × -933 ÷ 33,333 = -2.80%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by significant volatility in economic profit and a substantial expansion of the capital base. After a sustained period of value destruction between 2019 and 2021, a notable recovery occurred in 2022, followed by a return to negative economic profit in 2023.
- Economic Profit Trends
- Economic profit remained negative from 2019 through 2021, reaching a deficit of 3,343 million USD in 2020. A sharp reversal occurred in 2022, with profit surging to 3,653 million USD, marking the only instance in the observed period where the company generated value exceeding its cost of capital. This positive trajectory was not sustained into 2023, as economic profit reverted to -933 million USD.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2019 and 2020. A significant increase is observed in 2021, where capital grew from 17,004 million USD to 32,653 million USD, representing an expansion of approximately 92%. This elevated capital base remained consistent through 2023, concluding the period at 33,333 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio tracks the fluctuations in economic profit, reflecting the company's ability to generate returns above its cost of capital. The ratio hit a minimum of -19.66% in 2020 before improving to a peak of 11.35% in 2022. By 2023, the ratio declined to -2.80%, indicating a return to value destruction, although the magnitude of the negative spread was less severe than in the 2019-2021 period.
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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 | (933) | 3,653) | (3,229) | (3,343) | (2,105) | |
| Revenue from contracts with purchasers | 19,374) | 24,384) | 17,870) | 7,024) | 9,671) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -4.82% | 14.98% | -18.07% | -47.60% | -21.77% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -4.08% | 6.05% | -2.98% | — | — | |
| ConocoPhillips | 9.48% | 18.56% | 8.30% | — | — | |
| ExxonMobil Holdings Corp. | 2.82% | 8.82% | 3.16% | — | — | |
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 × -933 ÷ 19,374 = -4.82%
3 Click competitor name to see calculations.
The financial performance from 2019 through 2023 is characterized by significant volatility in both revenue generation and economic value creation. A pattern of substantial deficits in economic profit was observed for the majority of the period, interrupted by a single year of positive economic value added in 2022.
- Economic Profit Margin Trends
- The economic profit margin exhibited extreme fluctuations, reaching its lowest point in 2020 at -47.60%. A recovery phase followed, with the margin improving to -18.07% in 2021 and peaking at 14.98% in 2022. However, this positive trajectory was reversed in 2023, as the margin returned to negative territory at -4.82%, although this remains a substantial improvement over the depths seen between 2019 and 2021.
- Revenue Correlation and Economic Value
- There is a observable correlation between revenue growth and the ability to generate economic profit. Revenue declined from US$ 9,671 million in 2019 to US$ 7,024 million in 2020, coinciding with the widest economic profit deficit of US$ -3,343 million. Conversely, a sharp increase in revenue to US$ 24,384 million in 2022 facilitated the only period of positive economic profit, totaling US$ 3,653 million.
- Analysis of the 2023 Reversal
- Despite maintaining a revenue base (US$ 19,374 million) that was significantly higher than 2019 and 2020 levels, the economic profit returned to a deficit of US$ -933 million in 2023. This suggests that while the scale of operations increased, the returns on capital employed were insufficient to cover the cost of capital in the final year of the analyzed period.
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