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
ONEOK Inc., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,721,886 – 19.30% × 22,064,152 = -1,536,750
The financial performance between 2018 and 2022 is characterized by a persistent inability to generate positive economic profit, despite an overall upward trajectory in net operating profit after taxes (NOPAT). The organization has consistently operated below its cost of capital, resulting in a continuous destruction of economic value throughout the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated significant volatility, with a notable contraction in 2020, where values fell to 1.37 billion US$ from 2.04 billion US$ in 2019. Following this decline, a robust recovery occurred, with NOPAT increasing to 2.55 billion US$ in 2021 and reaching 2.72 billion US$ by 2022. This represents an overall increase in operational profitability compared to the 2018 level of 1.89 billion US$.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily from 16.42 billion US$ in 2018 to 22.06 billion US$ in 2022, reflecting an increase in the total capital deployed in operations. The cost of capital fluctuated during this period, reaching a minimum of 16.10% in 2020 before trending upward to 19.30% in 2022. The sustained high cost of capital, combined with an expanding capital base, has increased the financial hurdle required to achieve economic value creation.
- Economic Profit Analysis
- Economic profit remained negative across all five years, indicating that operating returns failed to cover the cost of invested capital. The deficit widened from -1.42 billion US$ in 2018 to a peak of -2.12 billion US$ in 2020. Although there was a partial recovery in 2021, where the economic loss narrowed to -1.33 billion US$, the deficit expanded again to -1.54 billion US$ in 2022. The data indicates that the growth in NOPAT has not been sufficient to outpace the growth in the total capital charge.
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Net Operating Profit after Taxes (NOPAT)
ONEOK Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income attributable to ONEOK.
3 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 80,399 × 3.54% = 2,846
4 2022 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 678,792 × 21.00% = 142,546
5 Addition of after taxes interest expense to net income attributable to ONEOK.
The financial data reveals notable trends in the profitability metrics over the five-year period.
- Net income attributable to ONEOK
- The net income demonstrates fluctuations within the observed timeframe. It increased from 1,151,703 thousand USD in 2018 to 1,278,577 thousand USD in 2019, representing moderate growth. In 2020, there was a significant decline to 612,809 thousand USD, indicating a considerable reduction in profitability. However, the trend reversed in the subsequent years, with net income rising sharply to 1,499,706 thousand USD in 2021 and further increasing to 1,722,221 thousand USD in 2022. This rebound suggests a recovery and improvement in operational performance post-2020.
- Net operating profit after taxes (NOPAT)
- NOPAT followed a pattern similar to net income but with higher absolute values, reflecting operating efficiency post-tax adjustments. Starting at 1,887,822 thousand USD in 2018, it rose to 2,040,364 thousand USD in 2019. A decline was again observed in 2020, dropping to 1,365,278 thousand USD, which parallels the dip in net income during the same year. Subsequently, NOPAT experienced a strong recovery, reaching 2,553,175 thousand USD in 2021 and rising further to 2,721,886 thousand USD in 2022. This trajectory indicates improvements in operating profitability and effective tax management after 2020.
Overall, both net income and NOPAT reveal a downturn in 2020, likely attributable to adverse economic or operational conditions during that period, followed by considerable recovery and growth in the following years. The magnitude of increase post-2020 surpasses the pre-2020 levels, implying strengthened financial performance and resilience.
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Cash Operating Taxes
ONEOK Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
The financial data reveals a notable pattern in the provision for income taxes and cash operating taxes from 2018 to 2022.
- Provision for Income Taxes
- The provision for income taxes experienced a decline from 2018 (US$ 362,903 thousand) to 2020 (US$ 189,507 thousand). This drop was followed by a sharp increase in 2021 (US$ 484,498 thousand) and continued to rise in 2022, reaching US$ 527,424 thousand. This trend indicates a significant fluctuation, with the provision nearly tripling between 2020 and 2022.
- Cash Operating Taxes
- Cash operating taxes showed a steady upward trend over the entire period. Beginning at US$ 100,721 thousand in 2018, the amount increased each year, reaching US$ 206,551 thousand in 2022. The growth rate appears consistent, indicating increasing cash outflows related to operating taxes year over year.
Overall, the provision for income taxes showed volatility with a sharp recovery and growth after 2020, while cash operating taxes steadily increased throughout the observed periods. This may suggest changes in tax liabilities or profitability affecting the provisions, coupled with a consistent increase in actual cash taxes paid.
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Invested Capital
ONEOK Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to total ONEOK shareholders’ equity.
4 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases have shown an overall increasing trend from 2018 to 2020, rising sharply from approximately 9.4 billion US dollars to around 14.36 billion US dollars. Thereafter, it experienced a slight decrease in 2021, followed by stabilization in 2022 at approximately 13.7 billion US dollars.
- Total ONEOK shareholders’ equity
- Shareholders’ equity declined steadily from about 6.58 billion US dollars in 2018 to around 6 billion US dollars in 2021, indicating a gradual reduction in net assets relative to common shareholders. However, in 2022, equity saw a moderate increase to roughly 6.49 billion US dollars, reversing the prior downward trend.
- Invested capital
- Invested capital expanded significantly over the observed period. Starting from approximately 16.4 billion US dollars in 2018, it increased nearly continuously to about 22.06 billion US dollars by 2022. A peak occurred in 2020 at around 21.63 billion US dollars, followed by a marginal dip in 2021 before rising again in 2022.
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Cost of Capital
ONEOK Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,270,613) | 29,270,613) | ÷ | 42,093,265) | = | 0.70 | 0.70 | × | 26.00% | = | 18.08% | ||
| Series E Preferred Stock | 20,000) | 20,000) | ÷ | 42,093,265) | = | 0.00 | 0.00 | × | 5.50% | = | 0.00% | ||
| Debt and finance lease liability3 | 12,722,253) | 12,722,253) | ÷ | 42,093,265) | = | 0.30 | 0.30 | × | 5.09% × (1 – 21.00%) | = | 1.22% | ||
| Operating lease liability4 | 80,399) | 80,399) | ÷ | 42,093,265) | = | 0.00 | 0.00 | × | 3.54% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 42,093,265) | 1.00 | 19.30% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 28,477,332) | 28,477,332) | ÷ | 44,210,417) | = | 0.64 | 0.64 | × | 26.00% | = | 16.75% | ||
| Series E Preferred Stock | 20,000) | 20,000) | ÷ | 44,210,417) | = | 0.00 | 0.00 | × | 5.50% | = | 0.00% | ||
| Debt and finance lease liability3 | 15,623,666) | 15,623,666) | ÷ | 44,210,417) | = | 0.35 | 0.35 | × | 4.94% × (1 – 21.00%) | = | 1.38% | ||
| Operating lease liability4 | 89,419) | 89,419) | ÷ | 44,210,417) | = | 0.00 | 0.00 | × | 3.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 44,210,417) | 1.00 | 18.13% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 20,300,152) | 20,300,152) | ÷ | 36,745,668) | = | 0.55 | 0.55 | × | 26.00% | = | 14.36% | ||
| Series E Preferred Stock | 20,000) | 20,000) | ÷ | 36,745,668) | = | 0.00 | 0.00 | × | 5.50% | = | 0.00% | ||
| Debt and finance lease liability3 | 16,324,296) | 16,324,296) | ÷ | 36,745,668) | = | 0.44 | 0.44 | × | 4.91% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 101,220) | 101,220) | ÷ | 36,745,668) | = | 0.00 | 0.00 | × | 3.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 36,745,668) | 1.00 | 16.10% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,424,412) | 30,424,412) | ÷ | 44,506,049) | = | 0.68 | 0.68 | × | 26.00% | = | 17.77% | ||
| Series E Preferred Stock | 20,000) | 20,000) | ÷ | 44,506,049) | = | 0.00 | 0.00 | × | 5.50% | = | 0.00% | ||
| Debt and finance lease liability3 | 14,046,245) | 14,046,245) | ÷ | 44,506,049) | = | 0.32 | 0.32 | × | 4.69% × (1 – 21.00%) | = | 1.17% | ||
| Operating lease liability4 | 15,392) | 15,392) | ÷ | 44,506,049) | = | 0.00 | 0.00 | × | 4.58% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 44,506,049) | 1.00 | 18.94% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 26,462,496) | 26,462,496) | ÷ | 36,129,007) | = | 0.73 | 0.73 | × | 26.00% | = | 19.04% | ||
| Series E Preferred Stock | 20,000) | 20,000) | ÷ | 36,129,007) | = | 0.00 | 0.00 | × | 5.50% | = | 0.00% | ||
| Debt and finance lease liability3 | 9,628,009) | 9,628,009) | ÷ | 36,129,007) | = | 0.27 | 0.27 | × | 5.34% × (1 – 21.00%) | = | 1.12% | ||
| Operating lease liability4 | 18,502) | 18,502) | ÷ | 36,129,007) | = | 0.00 | 0.00 | × | 5.34% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 36,129,007) | 1.00 | 20.17% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ONEOK Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (1,536,750) | (1,328,998) | (2,115,365) | (1,726,830) | (1,423,246) | |
| Invested capital2 | 22,064,152) | 21,409,739) | 21,625,131) | 19,885,058) | 16,415,008) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -6.96% | -6.21% | -9.78% | -8.68% | -8.67% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | 6.75% | -2.37% | — | — | — | |
| ConocoPhillips | 19.35% | 5.03% | — | — | — | |
| Exxon Mobil Corp. | 11.89% | 3.26% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,536,750 ÷ 22,064,152 = -6.96%
4 Click competitor name to see calculations.
Financial performance between 2018 and 2022 indicates a consistent inability to generate positive economic value. The persistence of negative economic profit across the five-year period suggests that the returns on invested capital remained below the company's weighted average cost of capital, resulting in a continuous destruction of shareholder value.
- Invested Capital Trends
- Invested capital exhibited a general upward trajectory, increasing from 16.42 billion USD in 2018 to 22.06 billion USD in 2022. A period of significant capital expansion was observed between 2018 and 2020, during which invested capital grew by approximately 31.7%. Following 2020, the capital base stabilized, showing marginal fluctuations between 2021 and 2022.
- Economic Profit Analysis
- Economic profit remained negative throughout the analyzed period. The deficit widened from -1.42 billion USD in 2018 to its most severe point in 2020, reaching -2.12 billion USD. A partial recovery occurred in 2021, with the loss narrowing to -1.33 billion USD, before increasing again to -1.54 billion USD in 2022. This pattern indicates that increased capital investment did not translate into a positive economic return.
- Economic Spread Ratio Evaluation
- The economic spread ratio remained negative for the duration of the period, confirming that the cost of capital exceeded the return on invested capital. The ratio deteriorated to its lowest point of -9.78% in 2020, coinciding with the peak in negative economic profit. A notable improvement was recorded in 2021, where the ratio rose to -6.21%, though this gain was partially reversed in 2022 as the ratio fell to -6.96%.
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Economic Profit Margin
ONEOK Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (1,536,750) | (1,328,998) | (2,115,365) | (1,726,830) | (1,423,246) | |
| Revenues | 22,386,892) | 16,540,309) | 8,542,242) | 10,164,367) | 12,593,196) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -6.86% | -8.03% | -24.76% | -16.99% | -11.30% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | 6.08% | -2.95% | — | — | — | |
| ConocoPhillips | 18.61% | 8.39% | — | — | — | |
| Exxon Mobil Corp. | 8.86% | 3.21% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -1,536,750 ÷ 22,386,892 = -6.86%
3 Click competitor name to see calculations.
The financial data reveals a consistent period of negative economic profit from 2018 through 2022, indicating that the company did not generate returns in excess of its cost of capital during this timeframe. While the absolute economic loss fluctuated, there is a visible divergence between the trajectory of total revenues and the economic profit margin starting in 2021.
- Economic Profit Trends
- Economic profit remained negative throughout the five-year period, with a notable decline reaching its lowest point in 2020 at negative 2,115,365 thousand US dollars. A partial recovery occurred in 2021, where losses narrowed to negative 1,328,998 thousand US dollars, before slipping again in 2022 to negative 1,536,750 thousand US dollars. The persistence of these negative values suggests a sustained gap between operating profits and the required return on capital employed.
- Revenue Volatility and Growth
- Revenues experienced a significant U-shaped trajectory. A downward trend was observed from 2018 to 2020, with revenues falling from 12,593,196 thousand US dollars to a low of 8,542,242 thousand US dollars. This was followed by an aggressive expansion phase, with revenues surging to 16,540,309 thousand US dollars in 2021 and further increasing to 22,386,892 thousand US dollars by the end of 2022.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the revenue decline initially, deteriorating from negative 11.30% in 2018 to a peak deficit of negative 24.76% in 2020. However, the subsequent surge in revenues led to a marked improvement in the margin. Despite the absolute economic profit remaining negative, the margin improved to negative 8.03% in 2021 and further to negative 6.86% in 2022. This indicates that while the company is still not creating economic value, the scale of operations has reduced the relative impact of the economic loss per dollar of revenue.
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