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
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 18.09%. While it decreased slightly in 2023, it remained elevated before experiencing a further reduction in 2024. The higher cost of capital during 2021-2023 likely contributed to the negative economic profit observed in those years, despite positive NOPAT in 2021 and 2022.
- Invested Capital
- Invested capital generally decreased from 2020 to 2022, then stabilized in 2023, and increased notably in 2024. The increase in invested capital in 2024, coupled with a 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 significantly in 2021 and became positive in 2022. However, economic profit turned negative again in 2023 and experienced a further decline in 2024, reaching its second-lowest level over the observed period. The consistent negative economic profit in 2020, 2023, and 2024 indicates that the company’s returns are not consistently exceeding its cost of capital.
Overall, the analysis reveals a volatile period for the company. While improvements were observed in 2021 and 2022, the recent trend suggests increasing challenges in generating returns that cover the cost of capital. The increasing invested capital in 2024, alongside declining NOPAT, is a particular area of concern.
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 -35.45%, 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 4.16%, signifying that returns exceeded the cost of capital for that year. However, this positive trend reversed in 2023 and 2024, with the ratio declining to -8.22% and -11.55% respectively. This indicates a worsening performance relative to the cost of capital in the latter two years.
- Relationship to Economic Profit
- The economic spread ratio’s trajectory closely mirrors that of economic profit. The substantial negative economic profit in 2020 and 2021 contributed to the low economic spread ratios observed in those years. The positive economic profit in 2022 corresponded with the positive economic spread ratio. Conversely, the negative economic profit reported in 2023 and 2024 resulted in negative economic spread ratios for those periods.
- Relationship to Invested Capital
- Invested capital decreased from 2020 to 2022, then remained relatively stable before increasing in 2024. While decreasing invested capital could theoretically improve the economic spread ratio, the dominant factor appears to be economic profit. The increase in invested capital in 2024 occurred alongside a further decline in the economic spread ratio, suggesting that the increase in capital deployment did not generate sufficient returns to offset its cost.
Overall, the analysis suggests a volatile period for value creation. While a brief period of positive economic spread was achieved, the trend indicates a growing divergence between returns and the cost of capital in the most recent years examined.
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. A detailed examination of the trends reveals a complex performance pattern.
- Economic Profit Margin Trend
- In 2020, the economic profit margin was substantially negative, registering at -125.95%. This indicates a significant shortfall in generating returns exceeding the cost of capital. A marked improvement occurred in 2021, with the margin increasing to -15.65%, suggesting a reduction in the gap between economic profit and capital costs. The year 2022 saw a positive economic profit margin of 6.40%, indicating that the company generated economic profit during that period. However, this positive trend was reversed in 2023, with the margin declining to -16.55%. The most recent year, 2024, shows a further deterioration, with the economic profit margin reaching -28.91%, representing the lowest value observed during the analyzed timeframe.
The economic profit margin’s movement closely mirrors the trend in economic profit. The substantial negative economic profit in 2020 and 2021 directly contributed to the large negative margins. The positive economic profit in 2022 resulted in a positive margin, but subsequent negative economic profits in 2023 and 2024 led to negative margins once more. The increasing magnitude of the negative margin in the latter years suggests a widening disparity between returns and the cost of capital.
- Relationship to Net Sales
- Net sales increased considerably from 2020 to 2022, rising from US$17,809 million to US$36,634 million. However, despite this increase in sales, the economic profit margin did not consistently benefit. While the margin improved in 2021 and became positive in 2022 alongside rising sales, the decrease in net sales in 2023 and 2024 was accompanied by a return to, and further decline into, negative economic profit margins. This suggests that factors beyond revenue generation, such as cost of capital or operational expenses, significantly influence the economic profit margin.
The observed pattern indicates that while revenue growth can contribute to improved economic performance, it is not a sufficient condition. Maintaining a positive economic profit margin requires effective cost management and a favorable relationship between generated returns and the cost of capital employed.