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 – 19.25% × 22,064,152 = -1,526,049
The analysis of economic profit from 2018 to 2022 reveals a consistent failure to generate value above the cost of capital. Economic profit remained negative throughout the five-year period, indicating that the Net Operating Profit After Taxes (NOPAT) was insufficient to cover the capital charge associated with the invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory despite a significant contraction in 2020. After rising from 1.89 billion USD in 2018 to 2.04 billion USD in 2019, the figure dropped to 1.37 billion USD in 2020. A strong recovery followed, with profits increasing to 2.55 billion USD in 2021 and reaching a peak of 2.72 billion USD by the end of 2022.
- Invested Capital Trends
- A period of aggressive capital expansion is observed between 2018 and 2020, with invested capital increasing from 16.42 billion USD to 21.63 billion USD. Following this growth phase, the invested capital base stabilized, fluctuating slightly to end the period at 22.06 billion USD in 2022.
- Cost of Capital Fluctuations
- The cost of capital demonstrated volatility, starting at 20.12% in 2018 and declining to a period low of 16.06% in 2020. This trend reversed in the subsequent two years, with the cost rising to 18.09% in 2021 and further to 19.25% in 2022.
- Economic Profit Performance
- Economic profit remained negative throughout the entire observation window. The deficit peaked in 2020 at -2.11 billion USD, driven by the simultaneous occurrence of the lowest NOPAT and a high level of invested capital. Although there was a partial recovery in 2021, where the loss narrowed to -1.32 billion USD, the economic profit deteriorated again to -1.53 billion USD in 2022. This suggests that the growth in operating profits was outpaced by the rising cost of capital and the expanded capital base.
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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 performance between 2018 and 2022 is characterized by a period of moderate growth, a significant contraction in 2020, and a subsequent robust recovery. Both Net Operating Profit After Taxes (NOPAT) and net income attributable to shareholders followed a synchronized trajectory, reflecting a strong correlation between operating efficiency and bottom-line results.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited a V-shaped trajectory over the five-year period. After an initial increase from 1.89 billion USD in 2018 to 2.04 billion USD in 2019, a sharp decline occurred in 2020, with values falling to 1.37 billion USD. This contraction was followed by a rapid acceleration in 2021, where NOPAT rose to 2.55 billion USD, eventually peaking at 2.72 billion USD by the end of 2022. This overall growth indicates a significant expansion in operating profitability relative to the 2018 baseline.
- Net Income Analysis
- Net income followed a similar pattern but experienced higher volatility. The 2020 decline was more pronounced than the drop in NOPAT, with net income falling to 612.8 million USD, representing a substantial decrease from the 1.28 billion USD reported in 2019. The recovery phase was equally aggressive, with net income reaching 1.50 billion USD in 2021 and continuing upward to 1.72 billion USD in 2022.
- Comparative Analysis of NOPAT and Net Income
- A consistent gap is observed where NOPAT remains substantially higher than net income across all reported years. This divergence suggests a significant impact from non-operating expenses, likely associated with interest payments on debt, which is typical for capital-intensive operations. The gap was most prominent during the recovery years of 2021 and 2022, where NOPAT exceeded net income by approximately 1 billion USD, highlighting the scale of operating profitability before the deduction of financial costs.
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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 distinct divergence between the accounting provision for income taxes and the actual cash operating taxes from 2018 to 2022. While the provision for income taxes experienced significant volatility, cash operating taxes demonstrated a consistent and steady upward trajectory throughout the period.
- Provision for Income Taxes Trends
- The provision for income taxes exhibited a volatile pattern, beginning at 362,903 thousand US$ in 2018 and increasing slightly in 2019. A substantial contraction occurred in 2020, where the provision fell to 189,507 thousand US$, representing a decrease of approximately 49% from the previous year. This was followed by a sharp recovery in 2021 to 484,498 thousand US$ and a further increase to 527,424 thousand US$ by the end of 2022.
- Cash Operating Taxes Trends
- In contrast to the provision, cash operating taxes grew consistently every year. Starting at 100,721 thousand US$ in 2018, the figure rose steadily to 206,551 thousand US$ by 2022. Notably, the most significant single-year increase occurred between 2019 and 2020, where cash tax payments rose by approximately 48%, coinciding with the period when the tax provision was at its lowest point.
- Comparative Analysis and EVA Implications
- The divergence between these two metrics suggests a significant influence of non-cash tax adjustments, such as deferred tax assets or liabilities, on the reported tax provision. For the purposes of Economic Value Added (EVA) calculations, the steady increase in cash operating taxes indicates a growing cash outflow for tax obligations, regardless of the accounting fluctuations seen in the provision. By 2022, cash operating taxes had more than doubled compared to 2018 levels, reflecting an increasing cash tax burden over the five-year horizon.
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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.
Invested capital exhibited a consistent growth trajectory from 2018 to 2022, rising from US$ 16,415,008 thousand to US$ 22,064,152 thousand. The most significant expansion occurred between 2018 and 2020, after which the capital base entered a period of relative stabilization with a slight further increase in the final year.
- Total Reported Debt and Leases
- A substantial increase in debt and lease obligations is observed from 2018 to 2020, where values rose from US$ 9,427,495 thousand to a peak of US$ 14,361,587 thousand. Following this period of rapid growth, debt levels stabilized, showing a slight downward trend to US$ 13,723,486 thousand by December 31, 2022.
- Total Shareholders’ Equity
- Shareholders' equity experienced a gradual decline between 2018 and 2021, decreasing from US$ 6,579,543 thousand to a low of US$ 6,015,163 thousand. This downward trend was reversed in 2022, with equity recovering to US$ 6,493,885 thousand, nearly returning to 2018 levels.
- Composition of Invested Capital
- The growth in total invested capital was primarily driven by the surge in reported debt and leases rather than equity contributions. Between 2018 and 2020, the expansion of the capital base coincided with a significant increase in leverage, while equity remained stagnant or declined. By 2022, the capital structure relied more heavily on debt, which accounted for approximately 62% of the total invested capital.
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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 | × | 25.93% | = | 18.03% | ||
| 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 | 19.25% | ||||||||||
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 | × | 25.93% | = | 16.70% | ||
| 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 | 18.09% | ||||||||||
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 | × | 25.93% | = | 14.32% | ||
| 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 | 16.06% | ||||||||||
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 | × | 25.93% | = | 17.72% | ||
| 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 | 18.90% | ||||||||||
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 | × | 25.93% | = | 18.99% | ||
| 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 | 20.12% | ||||||||||
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 | (1,526,049) | (1,319,380) | (2,107,033) | (1,717,350) | (1,414,861) | |
| Invested capital2 | 22,064,152) | 21,409,739) | 21,625,131) | 19,885,058) | 16,415,008) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -6.92% | -6.16% | -9.74% | -8.64% | -8.62% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | 6.72% | -2.40% | — | — | — | |
| ConocoPhillips | 19.29% | 4.98% | — | — | — | |
| ExxonMobil Holdings Corp. | 11.83% | 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 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,526,049 ÷ 22,064,152 = -6.92%
4 Click competitor name to see calculations.
The analysis of economic value indicators from 2018 to 2022 reveals a consistent failure to generate positive economic profit, indicating that the return on invested capital remained below the cost of capital throughout the entire period.
- Economic Profit
- Economic profit remained negative for the duration of the five-year period. A downward trend was observed between 2018 and 2020, with the deficit widening from -1.41 billion US$ to a peak loss of -2.11 billion US$. A significant recovery occurred in 2021, as the loss narrowed to -1.32 billion US$, before reverting to a loss of -1.53 billion US$ in 2022.
- Invested Capital
- Invested capital exhibited a general upward trajectory, increasing from 16.42 billion US$ in 2018 to 22.06 billion US$ by the end of 2022. This growth suggests a continued expansion of the asset base, despite a marginal contraction observed between 2020 and 2021.
- Economic Spread Ratio
- The economic spread ratio remained consistently negative, confirming that the entity failed to create economic value. The ratio reached its lowest point in 2020 at -9.74%, which correlates with the peak in economic losses. A partial recovery was recorded in 2021, with the ratio improving to -6.16%, followed by a slight decline to -6.92% in 2022.
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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 | (1,526,049) | (1,319,380) | (2,107,033) | (1,717,350) | (1,414,861) | |
| Revenues | 22,386,892) | 16,540,309) | 8,542,242) | 10,164,367) | 12,593,196) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -6.82% | -7.98% | -24.67% | -16.90% | -11.24% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | 6.05% | -2.98% | — | — | — | |
| ConocoPhillips | 18.56% | 8.30% | — | — | — | |
| ExxonMobil Holdings Corp. | 8.82% | 3.16% | — | — | — | |
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 × -1,526,049 ÷ 22,386,892 = -6.82%
3 Click competitor name to see calculations.
Between 2018 and 2022, the organization consistently recorded negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital employed. While absolute economic losses persisted throughout the period, the economic profit margin exhibited a notable recovery trend following a period of significant deterioration.
- Economic Profit Trends
- Economic losses intensified from 2018 through 2020, reaching a peak deficit of US$ 2,107,033 thousand in 2020. A recovery phase began in 2021, where losses narrowed to US$ 1,319,380 thousand, followed by a slight increase in the deficit to US$ 1,526,049 thousand in 2022. The persistence of negative values confirms that the company did not achieve a positive Economic Value Added (EVA) during this five-year window.
- Revenue Trajectory
- A V-shaped revenue pattern is observed. Revenues declined from US$ 12,593,196 thousand in 2018 to a low of US$ 8,542,242 thousand in 2020. This was followed by an aggressive expansion, with revenues surging to US$ 16,540,309 thousand in 2021 and reaching US$ 22,386,892 thousand by the end of 2022.
- Economic Profit Margin Analysis
- The economic profit margin demonstrated a strong correlation with revenue performance. The margin deteriorated from -11.24% in 2018 to its lowest point of -24.67% in 2020, coinciding with the period of revenue contraction. However, the substantial increase in revenues in 2021 and 2022 drove a significant improvement in the margin, which recovered to -7.98% and -6.82%, respectively. This trend suggests that while economic value is still not being created, the gap between operating returns and the cost of capital is narrowing as the scale of operations increases.
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