Return on Capital Employed Explained: How One Company Ranks First and Last in the Same Year

What does ROCE measure?

For every dollar invested in the business, how many cents of operating profit came back. It is the measure boards use to judge whether a capital-heavy company earns more than its capital costs; Shell's target is at least 10%. The formula is simple (profit from operations over the capital that produced it), and everything that follows is about what each company chose to put in each half.

Which profit goes on top?

Two of the four use a cleaned-up profit; two use the profit they reported.

BP starts from "underlying replacement cost profit": 7.5 billion dollars, after removing 6.4 billion of adjusting items and 1.0 billion of inventory losses. Its reported profit for the year was 55 million. Shell starts from "adjusted earnings", but its one-off items netted to only 53 million, so adjusted and reported are almost the same number. ExxonMobil and Chevron use what they reported and remove nothing.

Put reported profit into every numerator, change nothing else, and BP moves from first to last on that one decision.

Which capital goes underneath?

Here the choices pull the same way.

• BP takes out goodwill and leaves out 14.6 billion of lease liabilities. Both shrink the base, and a smaller base means a higher return.
• Shell keeps goodwill and counts leases as debt.
• Exxon and Chevron keep goodwill and do not deduct cash, which makes their base larger and their return lower.
• Chevron's average also carries half a year of Hess capital against a part-year of Hess earnings, after the acquisition closed mid-year.

Rebuilt on one rule (total equity including minorities, plus debt, plus lease liabilities, less cash, averaged across the two year-ends), BP's capital base rises from its own 83 billion to 111 billion. Shell's barely moves, because Shell already measures it this way. Exxon's and Chevron's fall a little once cash comes out.

(The year-end inputs are in the box under the first table.)

So who actually earned the most on its capital?

On reported profit and one capital base: Exxon, Shell, Chevron, BP. On adjusted profit and one capital base: BP, Exxon, Shell, Chevron, but BP's lead over Exxon shrinks from four and a half points to under one. Whichever profit you prefer, the published table overstates the spread between the leader and the rest by a wide margin.

Neither Shell's release nor BP's answers these questions for the other company. A table that lifts four published figures into one column has not answered them for anyone.

How does Rebase do this?

It maps every income statement and balance sheet, IFRS or US GAAP, to one canonical template and rebuilds both halves of the ratio from the same lines:

1. Profit: reported profit plus minority interests plus after-tax finance costs is the headline; the adjusted figure sits beside it with each adjustment listed.
2. Capital: total equity plus borrowings plus lease liabilities, less cash and marketable securities: leases in, goodwill in, cash out, for everyone.
3. Dates: the average of opening and closing balance sheets from the filings themselves, with mid-year acquisitions flagged.
4. Trace: every figure points back to the printed line it came from, so any treatment can be checked and reversed.

Return on capital employed is the right measure for this industry. It is only a comparable one when the four fractions are built from the same lines.

Frequently asked questions

Sources: Shell plc, fourth quarter and full year 2025 unaudited results, ROACE reference note; bp p.l.c., fourth quarter and full year 2025 results, ROACE reconciliation and net debt note; ExxonMobil, 2025 results, return on average capital employed schedule; Chevron, fourth quarter 2025 results, ROCE and capital employed data. Reported-profit numerators for Shell and BP computed by removing each company's disclosed adjustments from its published numerator. One-definition capital employed built from year-end balance sheets in the FY2024 and FY2025 Forms 10-K (ExxonMobil, Chevron) and 20-F (Shell, bp): total equity including minority interests, plus total debt, plus lease liabilities, less cash, cash equivalents, time deposits and marketable securities.