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 – 19.35% × 22,064,152 = -1,547,688
The analysis of economic profit from 2018 to 2022 reveals a consistent failure to generate positive economic value added. Throughout the five-year period, economic profit remained negative, indicating that the net operating profit after taxes was insufficient to cover the cost of the capital invested in the business.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trend is observed in operational profitability. NOPAT increased from 1,887,822 thousand US$ in 2018 to 2,040,364 thousand US$ in 2019, before experiencing a significant decline to 1,365,278 thousand US$ in 2020. A strong recovery followed, with NOPAT rising to 2,553,175 thousand US$ in 2021 and reaching a period peak of 2,721,886 thousand US$ by December 31, 2022.
- Cost of Capital
- The cost of capital fluctuated between a high of 20.22% in 2018 and a low of 16.13% in 2020. Following the 2020 trough, the cost of capital trended upward, reaching 19.35% in 2022. The consistently high cost of capital serves as a significant hurdle for the achievement of positive economic profit.
- Invested Capital
- There was a steady expansion of the capital base during the early part of the period, with invested capital growing from 16,415,008 thousand US$ in 2018 to 21,625,131 thousand US$ in 2020. This figure remained relatively stable over the subsequent two years, closing at 22,064,152 thousand US$ in 2022.
- Economic Profit Trends
- Economic profit remained negative for all reported years, with the deficit deepening from -1,431,817 thousand US$ in 2018 to a peak loss of -2,123,882 thousand US$ in 2020. While a partial recovery occurred in 2021 with a loss of -1,338,830 thousand US$, the economic profit declined again to -1,547,688 thousand US$ in 2022. The persistent gap between NOPAT and the capital charge suggests that the growth in invested capital has not been matched by a proportional increase in operating returns.
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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 | × | 26.07% | = | 18.13% | ||
| 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 | 19.35% | ||||||||||
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 | × | 26.07% | = | 16.79% | ||
| 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 | 18.18% | ||||||||||
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 | × | 26.07% | = | 14.40% | ||
| 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 | 16.13% | ||||||||||
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 | × | 26.07% | = | 17.82% | ||
| 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 | 18.99% | ||||||||||
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 | × | 26.07% | = | 19.09% | ||
| 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 | 20.22% | ||||||||||
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 | (1,547,688) | (1,338,830) | (2,123,882) | (1,736,521) | (1,431,817) | |
| Invested capital2 | 22,064,152) | 21,409,739) | 21,625,131) | 19,885,058) | 16,415,008) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -7.01% | -6.25% | -9.82% | -8.73% | -8.72% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | 6.69% | -2.42% | — | — | — | |
| ConocoPhillips | 19.30% | 4.99% | — | — | — | |
| Exxon Mobil Corp. | 11.84% | 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 × -1,547,688 ÷ 22,064,152 = -7.01%
4 Click competitor name to see calculations.
The financial performance over the five-year period from 2018 to 2022 is characterized by consistent negative economic profit, indicating that the returns generated on invested capital were insufficient to cover the company's cost of capital. While there was a notable recovery in 2021, the overall trend reflects a sustained period of value destruction.
- Economic Profit Analysis
- Economic profit remained negative throughout the reporting period, with values fluctuating between -1.34 billion and -2.12 billion US dollars. A progressive decline was observed from 2018 to 2020, where the economic loss peaked at 2.12 billion US dollars. A significant improvement occurred in 2021, reducing the loss to 1.34 billion US dollars, before the loss widened again to 1.55 billion US dollars in 2022.
- Invested Capital Trends
- Invested capital demonstrated a general upward trajectory, increasing from 16.42 billion US dollars in 2018 to 22.06 billion US dollars by 2022. The most rapid growth occurred between 2018 and 2020, where the capital base expanded by approximately 31.7%. The capital levels remained relatively stable between 2020 and 2022, suggesting a shift from aggressive expansion toward capital maintenance.
- Economic Spread Ratio Interpretation
- The economic spread ratio remained negative for the entire duration, mirroring the trends seen in economic profit. The ratio deteriorated from -8.72% in 2018 to its lowest point of -9.82% in 2020, signifying the widest gap between the actual return on capital and the required cost of capital. An improvement was noted in 2021, where the ratio rose to -6.25%, indicating a reduction in the cost-of-capital deficit. However, this gain was partially offset in 2022 as the ratio declined to -7.01%.
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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 | (1,547,688) | (1,338,830) | (2,123,882) | (1,736,521) | (1,431,817) | |
| Revenues | 22,386,892) | 16,540,309) | 8,542,242) | 10,164,367) | 12,593,196) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -6.91% | -8.09% | -24.86% | -17.08% | -11.37% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | 6.03% | -3.01% | — | — | — | |
| ConocoPhillips | 18.57% | 8.31% | — | — | — | |
| Exxon Mobil Corp. | 8.82% | 3.17% | — | — | — | |
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 × -1,547,688 ÷ 22,386,892 = -6.91%
3 Click competitor name to see calculations.
An analysis of the economic performance from 2018 to 2022 reveals a persistent state of negative economic profit, indicating that the return on capital did not exceed the cost of capital throughout the observed period. Despite the continuous deficit, there is a notable improvement in the economic profit margin starting in 2021, which correlates with a significant expansion in revenue scale.
- Economic Profit Trends
- Economic profit experienced a downward trajectory between 2018 and 2020, reaching its lowest point in 2020 at negative 2,123,882 thousand US dollars. A partial recovery occurred in 2021, where the deficit narrowed to negative 1,338,830 thousand US dollars, before widening slightly again in 2022 to negative 1,547,688 thousand US dollars.
- Revenue Trajectory
- Revenues exhibited a volatile pattern, characterized by a decline from 2018 through 2020, falling from 12,593,196 thousand US dollars to a period low of 8,542,242 thousand US dollars. This trend reversed sharply in 2021 and 2022, with revenues climbing to 16,540,309 thousand US dollars and 22,386,892 thousand US dollars, respectively.
- Economic Profit Margin Analysis
- The economic profit margin deteriorated significantly during the initial three-year period, moving from -11.37% in 2018 to -24.86% in 2020. However, a strong recovery in the margin is observed in the subsequent two years. The margin improved to -8.09% in 2021 and further to -6.91% in 2022. This improvement suggests that while the entity continued to generate negative economic value, the scale of revenue growth outpaced the growth of the economic profit deficit, reducing the relative impact of the capital charge.
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