ConocoPhillips (NYSE:COP)

The analysis of the financial data reveals several notable trends and insights regarding profitability, capital efficiency, and value creation over the five-year period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited significant fluctuations. Initially, there was a considerable loss of approximately $2.99 billion at the end of 2020. This turned positive and strongly increased in 2021 and 2022, reaching a peak of around $21.16 billion in 2022. After this peak, NOPAT declined in the subsequent years to approximately $12.36 billion in 2023 and further decreased to about $9.98 billion by the end of 2024. Despite the decline, the company sustained positive operating profitability from 2021 onwards, reflecting an operational turnaround from the loss recorded in 2020.

Cost of Capital

The cost of capital showed a gradual increase from 13.95% in 2020 to a peak of 15.41% in 2022. Thereafter, it slightly decreased to 15.19% in 2023 and further to 14.77% in 2024. The increase in cost of capital over the first three years suggests rising risks or financing costs, which somewhat abated in the last two years but remained elevated compared to the 2020 level.

Invested Capital

The invested capital demonstrated a consistent upward trend over the period, increasing from about $50.87 billion in 2020 to $106.37 billion by the end of 2024, effectively more than doubling. This indicates substantial reinvestment or asset expansion despite the volatile profitability. The sizeable capital base in the later years reflects either growth initiatives or a strategy focused on asset-intensive operations.

Economic Profit

Economic profit, which accounts for the cost of capital and capital employed, showed a recovery from a large negative value of approximately -$10.09 billion in 2020 to nearly breakeven at -$987 million in 2021. It then turned positive in 2022 with a substantial $9.52 billion, indicating value creation above the company's cost of capital for that year. However, the economic profit virtually vanished in 2023, dropping to a nominal $9 million, and subsequently reversed to a significant negative economic profit of about -$5.73 billion by 2024. This pattern suggests that despite NOPAT remaining positive, the returns on invested capital were insufficient to cover the cost of capital in the final year analyzed, leading to value destruction.

In summary, the company experienced a marked improvement in operational profitability following a large loss in 2020, peaking in 2022. However, profitability and economic profit declined afterwards, particularly in 2024, despite a steady increase in invested capital. The cost of capital rose over the period, impacting economic profitability negatively in the latter years. The inability to sustain economic profit in the later years calls for a reassessment of capital allocation and operational efficiency to enhance value creation consistently.

Net Income (Loss) Attributable to ConocoPhillips

The net income attributable to the company demonstrated significant volatility over the analyzed period. In 2020, the figure was a substantial loss of 2,701 million US dollars, indicating a challenging financial year. However, a dramatic recovery occurred in 2021, with net income rising to 8,079 million US dollars, reflecting a strong turnaround.

The upward trend continued in 2022, with net income reaching a peak of 18,680 million US dollars, more than doubling the previous year's performance. Despite a notable decline in 2023 to 10,957 million US dollars, net income remained robust and significantly positive. In 2024, the figure further declined to 9,245 million US dollars, representing a tapering off of profitability but maintaining a solid profit level relative to earlier years.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes followed a pattern similar to net income, though with some differences in magnitude. The company recorded a negative NOPAT of 2,991 million US dollars in 2020, aligning with the overall loss experienced that year.

A sharp improvement occurred in 2021, with NOPAT rising to 10,273 million US dollars. This growth trend accelerated in 2022, reaching a peak at 21,159 million US dollars, which was the highest point in the observed period. Subsequently, NOPAT decreased to 12,357 million US dollars in 2023 and then to 9,976 million US dollars in 2024.

Despite these declines in the last two years, NOPAT remained significantly positive, indicating continued operational profitability post-tax, though at a lower level than the peak in 2022.

Overall Trend Summary

The financial results demonstrate a recovery from significant losses in 2020 to strong profitability in subsequent years. Both net income and NOPAT peaked in 2022, followed by decreases in the later years of 2023 and 2024, suggesting a potential moderation in earnings after a period of exceptional growth.

The alignment in trends between net income and NOPAT suggests consistent operational performance after tax impacts are considered. The decline after the peak year may indicate changing market conditions, operational challenges, or strategic shifts impacting profitability, but the company remains financially robust relative to 2020 lows.

Income Tax Provision (Benefit)

The income tax provision exhibited significant volatility over the five-year period. In 2020, the provision was a benefit amounting to -485 million USD, indicating a tax credit or refund. This trend reversed dramatically in 2021 with a substantial increase to 4633 million USD, followed by further escalation in 2022 reaching 9548 million USD. Thereafter, the provision declined notably in 2023 to 5331 million USD and continued to decrease in 2024 to 4427 million USD. This pattern suggests a shift from a net tax benefit to considerable tax expenses, peaking in 2022 before trending downward in subsequent years.

Cash Operating Taxes

Cash operating taxes demonstrated an overall upward trajectory from 2020 through 2022, increasing from 502 million USD in 2020 to 7594 million USD in 2022. However, after this peak, the amount decreased significantly to 4270 million USD in 2023 and saw a slight further reduction to 4150 million USD in 2024. This indicates that while the company’s cash tax payments rose sharply in the initial years, they moderated in the most recent periods.

Comparative Insights

Both the income tax provision and cash operating taxes followed similar trends with increases up to 2022 and subsequent declines. The notable spike in 2022 for both metrics may reflect higher taxable income or changes in tax rates or structures influencing the tax liabilities. The subsequent decline may indicate improved tax planning, tax rate reductions, or decreased taxable income in the latter years.

Total Reported Debt & Leases

The total reported debt and leases exhibit a fluctuating yet overall increasing trend from 2020 through 2024. The debt rose significantly from 16,154 million in 2020 to a peak of 20,601 million in 2021, followed by a decline to 17,188 million in 2022. Subsequently, the debt increased again, reaching 19,634 million in 2023 and further escalating to 25,348 million by the end of 2024. This pattern indicates periods of both deleveraging and increased borrowing or lease obligations, with a notable surge in the final reported year.

Common Stockholders’ Equity

Common stockholders’ equity demonstrates a consistent upward trajectory across all years presented. Starting at 29,849 million in 2020, equity grew substantially each year, reaching 45,406 million in 2021, 48,003 million in 2022, and 49,279 million in 2023. The growth accelerates notably in 2024 with equity rising to 64,796 million. This steady increase reflects a strengthening equity base, likely supported by retained earnings growth and possibly additional equity issuance or valuation gains.

Invested Capital

Invested capital shows an overall growth trend with slight volatility. Beginning at 50,870 million in 2020, it increased sharply to 76,355 million in 2021 but then edged down marginally to 75,520 million in 2022. Afterwards, invested capital resumed growth, climbing to 81,278 million in 2023 and making a more pronounced leap to 106,371 million in 2024. The upward movement in invested capital corresponds with the increases in both equity and debt, indicating expanding asset bases or capital expenditures that may be financed through both debt and equity.

Economic Profit

The economic profit exhibited significant volatility over the analyzed period. Initially, there was a substantial loss of approximately US$10,087 million at the end of 2020, which improved markedly by the end of 2021, reducing the loss to US$987 million. The year 2022 saw a notable positive turnaround, with economic profit reaching a peak of US$9,520 million. However, this positive trend did not sustain, as economic profit plummeted to nearly zero by the end of 2023 and then declined again to a loss of US$5,734 million by the end of 2024.

Invested Capital

Invested capital consistently increased throughout the period, indicating ongoing capital deployment or asset accumulation. The invested capital rose from US$50,870 million in 2020 to over US$106,371 million in 2024, more than doubling over the four-year span. This suggests significant investment in the company's operations or expansion efforts despite fluctuations in economic profit.

Economic Spread Ratio

The economic spread ratio mirrored the economic profit trends but in percentage terms, reflecting the relationship between returns and the cost of capital. The ratio was strongly negative at -19.83% in 2020, improved substantially to nearly breakeven at -1.29% in 2021, and became strongly positive at 12.61% in 2022. However, it sharply declined again to nearly zero in 2023 (0.01%) and turned negative to -5.39% in 2024. This pattern highlights considerable volatility in value creation relative to the invested capital.

Summary of Trends

The data reveals a cycle of recovery followed by decline in economic profitability despite a steady increase in invested capital. The peak performance in 2022 indicates a temporary improvement in capital efficiency and profitability. The subsequent deterioration in 2023 and 2024 suggests challenges in maintaining economic value, possibly reflecting operational or market difficulties. The persistent growth in invested capital, alongside declining economic profit and spread in the later years, may raise concerns about capital allocation effectiveness and the sustainability of returns going forward.

Economic Profit

The economic profit experienced significant fluctuations over the observed period. Starting with a substantial loss of -10,087 million USD at the end of 2020, it improved dramatically to a near-break-even loss of -987 million USD in 2021. In 2022, there was a notable positive shift with economic profit reaching 9,520 million USD. However, in 2023, economic profit declined sharply to 9 million USD, nearing zero again. The trend reversed in 2024, with economic profit falling back into negative territory at -5,734 million USD, indicating considerable volatility in profitability over the five years.

Sales and Other Operating Revenues

Sales and operating revenues showed an overall increasing trend, though with variability. Revenues more than doubled from 18,784 million USD in 2020 to 45,828 million USD in 2021. This upward momentum continued robustly into 2022, reaching a peak of 78,494 million USD. In 2023, revenues declined to 56,141 million USD, representing a substantial reduction from the prior year. Revenues further slightly decreased in 2024 to 54,745 million USD, suggesting some stabilization at a reduced level compared to the 2022 peak.

Economic Profit Margin

The economic profit margin fluctuated markedly in line with the economic profit figures. It was deeply negative at -53.7% in 2020, improving significantly to -2.15% in 2021. In 2022, the margin turned positive to 12.13%, consistent with the strong economic profit achieved that year. The margin then nearly normalized in 2023, falling to a marginal positive 0.02%, before dropping again to a negative margin of -10.47% in 2024. These swings depict instability in profitability relative to sales over the examined period.

Overall Analysis

The data reveals a period marked by volatility in profitability metrics despite generally higher revenue levels during the middle years. Economic profit and margin both peaked in 2022 but witnessed substantial reversals afterward. The decline in revenues in 2023 and 2024 accompanied by deteriorating economic profit suggests challenges in maintaining profitability despite relatively strong sales in earlier years. This pattern indicates fluctuating operational efficiency or cost structures influencing economic outcomes beyond revenue generation.