ONEOK Inc. (NYSE:OKE)

Cash provided by operating activities

The cash provided by operating activities demonstrates a generally increasing trend over the five-year period. Starting at approximately 2.19 billion USD in 2018, it slightly declined to around 1.95 billion USD in 2019 and further to 1.90 billion USD in 2020. However, from 2020 onwards, there was a significant increase, reaching roughly 2.55 billion USD in 2021 and continuing up to about 2.91 billion USD in 2022. This indicates an improvement in operational cash generation following the dip during 2019 and 2020.

Free cash flow to the firm (FCFF)

The free cash flow to the firm shows substantial volatility across the years. The value was positive at 384.6 million USD in 2018 but experienced a sharp decline resulting in a negative free cash flow of about -1.48 billion USD in 2019. It recovered to positive territory in 2020 with approximately 342.5 million USD and saw a marked increase in 2021, reaching approximately 2.39 billion USD. In 2022, FCFF decreased slightly but remained strong at over 2.19 billion USD. This pattern suggests a challenging year in 2019 with potential heavy investments or other cash outflows, followed by a recovery and significant improvement in free cash flow generation in subsequent years.

Over the five-year period, the effective income tax rate (EITR) exhibited relative stability, fluctuating within a narrow range between approximately 22.56% and 24.42%. The lowest rate was observed in 2019 at 22.56%, followed by slight increases and decreases, with a marginal decline to 23.44% in 2022. This consistency suggests a stable tax environment or effective tax planning strategies maintaining the rate within a consistent band.

Regarding cash paid for interest, net of amounts capitalized and net of tax, a notable upward trend is seen from 2018 through 2020. The figure increased from approximately $318 million in 2018 to $581 million in 2020, indicating a substantial rise in interest expenses or debt obligations during this period. However, following 2020, there was a reduction, with interest payments declining to about $523 million in 2021 and further to $445 million in 2022. This decrease may reflect debt repayments, refinancing at lower rates, or improved capital structure management.

Capitalized interest, net of tax, shows considerable volatility over the period. Starting at approximately $21 million in 2018, it spiked sharply to over $83 million in 2019, then decreased significantly to around $58 million in 2020. The amount declined further to roughly $19 million in 2021, before rising again to approximately $44 million in 2022. These fluctuations could indicate varying levels of capital projects or asset investments requiring interest capitalization, reflecting changes in the company's investment or construction activity cycles over these years.

Effective Income Tax Rate (EITR)

Stable between 22.56% and 24.42%, with minor fluctuations.

Cash Paid for Interest (Net)

Increased significantly from 2018 to 2020, followed by a consistent decline through 2022.

Capitalized Interest (Net)

Highly variable, with peaks in 2019 and 2022, and lows in 2018 and 2021, indicating fluctuating capital investment activities.

The financial data exhibits notable fluctuations in both enterprise value and free cash flow to the firm over the examined period. The enterprise value (EV) demonstrates variability, increasing from approximately 35.86 billion US dollars at the end of 2018 to a peak of about 43.14 billion in 2019, followed by a decline to 34.04 billion in 2020. Subsequently, there is a recovery phase with EV rising again to near 42.00 billion in 2021 and slightly increasing further to around 42.69 billion in 2022.

Free cash flow to the firm (FCFF) reveals more pronounced volatility. Initially positive at approximately 385 million US dollars in 2018, FCFF declines sharply in 2019, reaching a negative value close to -1.48 billion US dollars, indicative of a substantial cash outflow or reinvestment exceeding operating cash flows for that year. This metric recovers in 2020 to a positive 343 million US dollars and demonstrates significant improvement in 2021 and 2022, rising to over 2.39 billion and 2.19 billion US dollars, respectively.

Regarding valuation multiples, the EV to FCFF ratio is exceptionally high in years with lower or negative free cash flow, specifically reaching 93.23 in 2018 and climbing to nearly 99.36 in 2020, despite missing data for 2019 due to negative FCFF. This ratio drops markedly to 17.56 in 2021 and slightly increases to 19.47 in 2022, reflecting a stronger FCFF base relative to enterprise value in those years. Such movements suggest improved cash generation capacity, potentially signaling enhanced operational efficiency or favorable market conditions contributing to stabilization in valuation metrics.

Enterprise Value (EV)

Shows an overall trend of volatility with a peak in 2019, a dip in 2020, and recovery through 2021 and 2022.

Free Cash Flow to the Firm (FCFF)

Varies significantly, experiencing a pronounced negative value in 2019, followed by sustained positive growth in subsequent years, indicating improvement in cash-generating ability.

EV/FCFF Ratio

Extremely elevated in years with low or negative FCFF, decreasing substantially in the last two years under review, which implies better alignment between enterprise valuation and cash flow performance.