Value Add Books & Charts for a Mature Industry.

Stern Stewart & Co.—later rebranded as Stern Value Management—was founded in the early 1980s, and soon after introduced Economic Value Added (EVA®), a concept that fundamentally reframed how we evaluate corporate performance. It wouldn’t be a stretch to say that their thinking was deeply influenced by the two decades that preceded them—years marked by rising interest rates, flat equity markets, and a sharply higher cost of capital.

Source: Shiller Data, NYU Damodaran Data

If there’s one book that distills their approach, it’s The Quest for Value (HERE)— a must-read for anyone in the world of finance.

The core idea behind EVA® is deceptively simple but incredibly powerful: A company only creates real value when it earns returns above its cost of capital.

Integrated Oil & Gas: A Capital Discipline Story

Let’s be blunt: Oil & gas is no longer a high-growth industry. Sustained increases in production volumes have become increasingly rare.

The challenges intensify when you remember that the bulk of revenues and profits still comes from one commodity: crude oil.

Which brings us to the critical question: How does this group manage capital effectively—and deliver returns in excess of its rising cost? Especially in a mature industry.

In the chart below, I aggregate data from 35 of the largest integrated oil & gas companies—both historical and current—to show Integrated Oil & Gas Return on Capital vs. Industry Cost of Capital, going back to 1912.