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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Economic Profit
ConocoPhillips, economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial performance from 2021 through 2025 is characterized by a significant peak in value creation in 2022, followed by a consistent decline in economic profit. This trajectory indicates a period of high operational volatility where the growth in the capital base has outpaced the generation of net operating profits in the latter years of the period.
- Net Operating Profit After Taxes (NOPAT)
- A substantial increase in NOPAT is observed between 2021 and 2022, with values rising from 10,273 million US$ to a peak of 21,159 million US$. Following this peak, a continuous downward trend occurred, with NOPAT declining each subsequent year to reach 8,950 million US$ by the end of 2025.
- Invested Capital
- The invested capital base remained relatively stable through 2022 but entered a phase of expansion starting in 2023. A significant increase is noted between 2023 and 2024, where the capital base grew from 81,278 million US$ to 106,371 million US$, before stabilizing slightly at 105,245 million US$ in 2025.
- Cost of Capital
- The cost of capital exhibited minimal volatility throughout the analyzed period, fluctuating within a tight range between 8.25% and 8.49%. This stability suggests that the required rate of return remained constant despite the fluctuations in operating performance and capital expansion.
- Economic Profit
- Economic profit experienced a sharp spike in 2022, reaching 14,746 million US$, which represents the period of maximum value creation. Subsequently, a precipitous decline is observed, with economic profit falling to 1,200 million US$ in 2024 and further eroding to 195 million US$ by 2025. This deterioration is attributed to the convergence of declining NOPAT and a larger invested capital base, which increased the total capital charge and reduced the surplus profit over the cost of capital.
Net Operating Profit after Taxes (NOPAT)
ConocoPhillips, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited significant fluctuation over the five-year period. While net income experienced volatility, NOPAT demonstrated a more pronounced pattern of increase followed by decline. A clear trend of increasing profitability was observed between 2021 and 2022, followed by a subsequent decrease through 2025.
- Overall Trend
- NOPAT increased substantially from US$10,273 million in 2021 to US$21,159 million in 2022, representing a growth of approximately 106%. This was followed by a consistent decline over the subsequent three years, decreasing to US$8,950 million by 2025. This represents an overall decrease of approximately 58% from the 2022 peak.
- Year-over-Year Changes
- The largest year-over-year increase occurred between 2021 and 2022, with NOPAT growing by US$10,886 million. The most significant decrease was observed between 2022 and 2023, with a reduction of US$8,802 million. Subsequent declines were more moderate, with decreases of US$369 million between 2023 and 2024, and US$1,026 million between 2024 and 2025.
- Relationship to Net Income
- While both NOPAT and net income fluctuated, NOPAT consistently exceeded net income throughout the period. The difference between NOPAT and net income suggests the presence of significant non-operating items or differences in accounting treatment impacting reported net income. The gap between NOPAT and net income also varied year to year, indicating changes in these non-operating factors.
The observed decline in NOPAT from 2022 to 2025 warrants further investigation to determine the underlying drivers. Potential factors could include changes in operating expenses, revenue fluctuations, or shifts in the effective tax rate. The consistent difference between NOPAT and net income also suggests a need for detailed analysis of non-operating items to fully understand the company’s profitability.
Cash Operating Taxes
ConocoPhillips, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The income tax provision and cash operating taxes exhibited fluctuating behavior over the five-year period. A significant increase in both metrics occurred between 2021 and 2022, followed by subsequent adjustments in the following years.
- Income Tax Provision
- The income tax provision increased substantially from US$4,633 million in 2021 to US$9,548 million in 2022. This represents a more than 100% increase. Following this peak, the provision decreased to US$5,331 million in 2023 and further to US$4,427 million in 2024. A slight increase to US$4,668 million was observed in 2025, remaining relatively close to the 2021 level.
- Cash Operating Taxes
- Cash operating taxes mirrored the trend observed in the income tax provision, increasing from US$3,469 million in 2021 to US$7,594 million in 2022. This also represents an increase exceeding 100%. Subsequent years saw a decline to US$4,270 million in 2023, followed by US$4,150 million in 2024. The value increased slightly in 2025, reaching US$4,242 million.
The close correlation between the income tax provision and cash operating taxes suggests a strong link between reported accounting income and actual cash outflows for tax purposes. The substantial increase in 2022, followed by declines in 2023 and 2024, could be attributable to changes in taxable income, tax rates, or the timing of tax payments. The stabilization in 2025 indicates a potential leveling off of these factors.
- Relationship between Metrics
- Cash operating taxes consistently remained below the income tax provision throughout the period. This difference could be due to various factors, including deferred tax assets or liabilities, tax credits, or differences in the timing of recognition for accounting and tax purposes. The magnitude of this difference remained relatively stable across the observed years.
Further investigation into the underlying drivers of these fluctuations, such as changes in revenue, expenses, and applicable tax laws, would be necessary to provide a more comprehensive understanding of these trends.
Invested Capital
ConocoPhillips, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
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 equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of marketable securities.
The reported invested capital exhibited a fluctuating pattern over the five-year period. Initially, a slight decrease is observed between 2021 and 2022, followed by a period of growth and then a minor contraction. Concurrent changes are noted in the components contributing to invested capital – total reported debt & leases and equity.
- Invested Capital Trend
- Invested capital decreased marginally from US$76,355 million in 2021 to US$75,520 million in 2022, representing a decline of approximately 1.1%. A subsequent increase occurred, with invested capital reaching US$81,278 million in 2023. This growth accelerated in 2024, with invested capital rising to US$106,371 million. A slight decrease was then recorded in 2025, with invested capital settling at US$105,245 million.
- Debt & Leases
- Total reported debt & leases decreased significantly from US$20,601 million in 2021 to US$17,188 million in 2022. An increase followed in 2023, reaching US$19,634 million, and continued into 2024, with debt & leases rising to US$25,348 million. A modest decrease was observed in 2025, with the value reported as US$24,394 million.
- Equity
- Equity demonstrated a consistent upward trend from 2021 to 2024. It increased from US$45,406 million in 2021 to US$48,003 million in 2022, then to US$49,279 million in 2023, and reached US$64,796 million in 2024. A slight decrease was recorded in 2025, with equity reported at US$64,487 million.
The substantial increase in invested capital between 2023 and 2024 appears to be driven by a combination of increased debt & leases and a significant rise in equity. The minor decrease in invested capital in 2025 is attributable to a slight reduction in both debt & leases and equity. The growth in equity is more pronounced than the fluctuations in debt & leases, suggesting equity is becoming a more dominant component of the invested capital base.
Cost of Capital
ConocoPhillips, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance leases3 | ÷ | = | × | × (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 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance leases3 | ÷ | = | × | × (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 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance leases3 | ÷ | = | × | × (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 Debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance leases3 | ÷ | = | × | × (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 Debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ConocoPhillips, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility, characterized by a sharp peak in 2022 followed by a consistent and steep decline in value generation through 2025.
- Economic Profit Trends
- Economic profit experienced a substantial increase between 2021 and 2022, rising from 3,973 million USD to a peak of 14,746 million USD. This peak was followed by a rapid and sustained contraction, with profit falling to 5,513 million USD in 2023, 1,200 million USD in 2024, and reaching a minimum of 195 million USD by the end of 2025.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2021 and 2022, staying within the 75,000 to 76,000 million USD range. A growth trend emerged starting in 2023, resulting in a significant expansion of the capital base to 106,371 million USD in 2024, with a slight adjustment to 105,245 million USD in 2025.
- Economic Spread Ratio Interpretation
- The economic spread ratio demonstrates a precipitous decline after 2022. From a high of 19.53% in 2022, the ratio fell to 6.78% in 2023, 1.13% in 2024, and nearly neutralized at 0.19% in 2025. The divergence between the increasing invested capital and the decreasing economic profit indicates a diminishing capacity to generate returns above the cost of capital, suggesting that the capital expansions in 2023 and 2024 did not yield commensurate economic gains.
Economic Profit Margin
ConocoPhillips, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales and other operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 through 2025 is characterized by a significant peak in value creation during 2022, followed by a sustained and sharp contraction in economic profitability. While revenues remained relatively stable in the later years, the ability to generate economic profit above the cost of capital diminished substantially toward the end of the period.
- Economic Profit Trends
- Economic profit experienced a dramatic increase between 2021 and 2022, rising from 3,973 million US$ to a peak of 14,746 million US$. However, this peak was followed by a consistent downward trajectory. By 2025, economic profit declined to 195 million US$, representing a near-complete erosion of the surplus value generated during the 2022 fiscal year.
- Revenue Performance
- Sales and other operating revenues mirrored the initial growth seen in economic profit, peaking at 78,494 million US$ in 2022. Following this peak, revenues corrected to 56,141 million US$ in 2023 and remained relatively stable through 2025, ending at 58,944 million US$. The disconnect between the stabilized revenue levels and the falling economic profit suggests an increase in the cost of capital or a reduction in operating efficiency.
- Economic Profit Margin Compression
- The economic profit margin demonstrates the most acute decline in efficiency. After reaching a high of 18.79% in 2022, the margin contracted to 9.82% in 2023, 2.19% in 2024, and finally 0.33% in 2025. This persistent compression indicates that the business moved closer to its cost-of-capital break-even point, significantly reducing the economic value added per dollar of revenue generated.