Intrinsic value of Apache - APA

Previous Close

$40.63

  Intrinsic Value

$4.13

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

-75%

Previous close

$40.63

 
Intrinsic value

$4.13

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

-75%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of APA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 15.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -19.29
  41.80
  38.12
  34.81
  31.83
  29.14
  26.73
  24.56
  22.60
  20.84
  19.26
  17.83
  16.55
  15.39
  14.35
  13.42
  12.58
  11.82
  11.14
  10.52
  9.97
  9.47
  9.03
  8.62
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
Revenue, $m
  5,333
  7,562
  10,445
  14,081
  18,562
  23,972
  30,379
  37,840
  46,392
  56,061
  66,856
  78,778
  91,814
  105,947
  121,155
  137,413
  154,695
  172,978
  192,243
  212,474
  233,660
  255,797
  278,887
  302,938
  327,965
  353,991
  381,042
  409,154
  438,367
  468,728
  500,289
Variable operating expenses, $m
 
  21,492
  29,684
  40,017
  52,753
  68,128
  86,339
  107,541
  131,846
  159,325
  190,006
  223,887
  260,936
  301,103
  344,323
  390,527
  439,643
  491,604
  546,355
  603,851
  664,062
  726,975
  792,596
  860,950
  932,077
  1,006,042
  1,082,922
  1,162,816
  1,245,840
  1,332,126
  1,421,823
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,015
  21,492
  29,684
  40,017
  52,753
  68,128
  86,339
  107,541
  131,846
  159,325
  190,006
  223,887
  260,936
  301,103
  344,323
  390,527
  439,643
  491,604
  546,355
  603,851
  664,062
  726,975
  792,596
  860,950
  932,077
  1,006,042
  1,082,922
  1,162,816
  1,245,840
  1,332,126
  1,421,823
Operating income, $m
  -1,682
  -13,930
  -19,240
  -25,936
  -34,191
  -44,156
  -55,959
  -69,701
  -85,454
  -103,264
  -123,150
  -145,109
  -169,122
  -195,155
  -223,168
  -253,114
  -284,948
  -318,626
  -354,112
  -391,377
  -430,402
  -471,178
  -513,710
  -558,012
  -604,112
  -652,051
  -701,880
  -753,662
  -807,473
  -863,398
  -921,533
EBITDA, $m
  936
  -11,114
  -15,351
  -20,694
  -27,281
  -35,231
  -44,649
  -55,613
  -68,182
  -82,392
  -98,259
  -115,780
  -134,939
  -155,711
  -178,062
  -201,955
  -227,355
  -254,226
  -282,540
  -312,273
  -343,410
  -375,945
  -409,880
  -445,228
  -482,011
  -520,260
  -560,018
  -601,334
  -644,269
  -688,890
  -735,275
Interest expense (income), $m
  413
  410
  738
  1,161
  1,694
  2,351
  3,144
  4,084
  5,178
  6,433
  7,851
  9,434
  11,183
  13,095
  15,168
  17,398
  19,782
  22,317
  24,999
  27,824
  30,791
  33,899
  37,146
  40,532
  44,060
  47,730
  51,547
  55,515
  59,638
  63,923
  68,375
Earnings before tax, $m
  -1,682
  -14,340
  -19,977
  -27,097
  -35,885
  -46,507
  -59,104
  -73,785
  -90,633
  -109,697
  -131,000
  -154,543
  -180,304
  -208,250
  -238,336
  -270,512
  -304,730
  -340,943
  -379,111
  -419,201
  -461,193
  -505,077
  -550,855
  -598,544
  -648,172
  -699,781
  -753,427
  -809,177
  -867,111
  -927,320
  -989,909
Tax expense, $m
  -442
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,405
  -14,340
  -19,977
  -27,097
  -35,885
  -46,507
  -59,104
  -73,785
  -90,633
  -109,697
  -131,000
  -154,543
  -180,304
  -208,250
  -238,336
  -270,512
  -304,730
  -340,943
  -379,111
  -419,201
  -461,193
  -505,077
  -550,855
  -598,544
  -648,172
  -699,781
  -753,427
  -809,177
  -867,111
  -927,320
  -989,909

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,377
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  22,519
  30,009
  41,448
  55,875
  73,659
  95,126
  120,554
  150,158
  184,096
  222,463
  265,303
  312,610
  364,342
  420,427
  480,775
  545,288
  613,868
  686,422
  762,870
  843,151
  927,222
  1,015,068
  1,106,694
  1,202,135
  1,301,450
  1,404,725
  1,512,072
  1,623,628
  1,739,554
  1,860,034
  1,985,276
Adjusted assets (=assets-cash), $m
  21,142
  30,009
  41,448
  55,875
  73,659
  95,126
  120,554
  150,158
  184,096
  222,463
  265,303
  312,610
  364,342
  420,427
  480,775
  545,288
  613,868
  686,422
  762,870
  843,151
  927,222
  1,015,068
  1,106,694
  1,202,135
  1,301,450
  1,404,725
  1,512,072
  1,623,628
  1,739,554
  1,860,034
  1,985,276
Revenue / Adjusted assets
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
Average production assets, $m
  19,853
  28,154
  38,886
  52,422
  69,106
  89,247
  113,103
  140,878
  172,718
  208,714
  248,906
  293,290
  341,824
  394,442
  451,061
  511,587
  575,929
  643,998
  715,722
  791,041
  869,916
  952,332
  1,038,296
  1,127,838
  1,221,015
  1,317,907
  1,418,620
  1,523,281
  1,632,042
  1,745,076
  1,862,578
Working capital, $m
  1,398
  30
  42
  56
  74
  96
  122
  151
  186
  224
  267
  315
  367
  424
  485
  550
  619
  692
  769
  850
  935
  1,023
  1,116
  1,212
  1,312
  1,416
  1,524
  1,637
  1,753
  1,875
  2,001
Total debt, $m
  8,544
  15,370
  24,178
  35,287
  48,980
  65,510
  85,089
  107,885
  134,017
  163,560
  196,546
  232,973
  272,806
  315,991
  362,460
  412,135
  464,941
  520,808
  579,673
  641,489
  706,224
  773,865
  844,417
  917,907
  994,379
  1,073,901
  1,156,559
  1,242,457
  1,331,719
  1,424,489
  1,520,925
Total liabilities, $m
  16,281
  23,107
  31,915
  43,024
  56,717
  73,247
  92,826
  115,622
  141,754
  171,297
  204,283
  240,710
  280,543
  323,728
  370,197
  419,872
  472,678
  528,545
  587,410
  649,226
  713,961
  781,602
  852,154
  925,644
  1,002,116
  1,081,638
  1,164,296
  1,250,194
  1,339,456
  1,432,226
  1,528,662
Total equity, $m
  6,238
  6,902
  9,533
  12,851
  16,942
  21,879
  27,727
  34,536
  42,342
  51,167
  61,020
  71,900
  83,799
  96,698
  110,578
  125,416
  141,190
  157,877
  175,460
  193,925
  213,261
  233,466
  254,540
  276,491
  299,333
  323,087
  347,777
  373,434
  400,097
  427,808
  456,613
Total liabilities and equity, $m
  22,519
  30,009
  41,448
  55,875
  73,659
  95,126
  120,553
  150,158
  184,096
  222,464
  265,303
  312,610
  364,342
  420,426
  480,775
  545,288
  613,868
  686,422
  762,870
  843,151
  927,222
  1,015,068
  1,106,694
  1,202,135
  1,301,449
  1,404,725
  1,512,073
  1,623,628
  1,739,553
  1,860,034
  1,985,275
Debt-to-equity ratio
  1.370
  2.230
  2.540
  2.750
  2.890
  2.990
  3.070
  3.120
  3.170
  3.200
  3.220
  3.240
  3.260
  3.270
  3.280
  3.290
  3.290
  3.300
  3.300
  3.310
  3.310
  3.310
  3.320
  3.320
  3.320
  3.320
  3.330
  3.330
  3.330
  3.330
  3.330
Adjusted equity ratio
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,405
  -14,340
  -19,977
  -27,097
  -35,885
  -46,507
  -59,104
  -73,785
  -90,633
  -109,697
  -131,000
  -154,543
  -180,304
  -208,250
  -238,336
  -270,512
  -304,730
  -340,943
  -379,111
  -419,201
  -461,193
  -505,077
  -550,855
  -598,544
  -648,172
  -699,781
  -753,427
  -809,177
  -867,111
  -927,320
  -989,909
Depreciation, amort., depletion, $m
  2,618
  2,815
  3,889
  5,242
  6,911
  8,925
  11,310
  14,088
  17,272
  20,871
  24,891
  29,329
  34,182
  39,444
  45,106
  51,159
  57,593
  64,400
  71,572
  79,104
  86,992
  95,233
  103,830
  112,784
  122,101
  131,791
  141,862
  152,328
  163,204
  174,508
  186,258
Funds from operations, $m
  2,583
  -11,524
  -16,089
  -21,855
  -28,974
  -37,582
  -47,793
  -59,697
  -73,361
  -88,825
  -106,110
  -125,214
  -146,122
  -168,806
  -193,229
  -219,353
  -247,137
  -276,543
  -307,539
  -340,097
  -374,202
  -409,844
  -447,025
  -485,760
  -526,070
  -567,990
  -611,565
  -656,849
  -703,907
  -752,813
  -803,651
Change in working capital, $m
  153
  9
  12
  15
  18
  22
  26
  30
  34
  39
  43
  48
  52
  57
  61
  65
  69
  73
  77
  81
  85
  89
  92
  96
  100
  104
  108
  112
  117
  121
  126
Cash from operations, $m
  2,430
  -11,533
  -16,100
  -21,869
  -28,992
  -37,604
  -47,819
  -59,727
  -73,395
  -88,864
  -106,153
  -125,262
  -146,174
  -168,862
  -193,290
  -219,418
  -247,207
  -276,617
  -307,616
  -340,178
  -374,286
  -409,932
  -447,118
  -485,856
  -526,170
  -568,094
  -611,673
  -656,961
  -704,023
  -752,934
  -803,777
Maintenance CAPEX, $m
  0
  -1,985
  -2,815
  -3,889
  -5,242
  -6,911
  -8,925
  -11,310
  -14,088
  -17,272
  -20,871
  -24,891
  -29,329
  -34,182
  -39,444
  -45,106
  -51,159
  -57,593
  -64,400
  -71,572
  -79,104
  -86,992
  -95,233
  -103,830
  -112,784
  -122,101
  -131,791
  -141,862
  -152,328
  -163,204
  -174,508
New CAPEX, $m
  -1,768
  -8,302
  -10,732
  -13,536
  -16,684
  -20,141
  -23,856
  -27,775
  -31,840
  -35,996
  -40,192
  -44,383
  -48,534
  -52,618
  -56,619
  -60,526
  -64,341
  -68,070
  -71,723
  -75,319
  -78,876
  -82,416
  -85,963
  -89,542
  -93,177
  -96,892
  -100,713
  -104,661
  -108,761
  -113,034
  -117,502
Cash from investing activities, $m
  -1,660
  -10,287
  -13,547
  -17,425
  -21,926
  -27,052
  -32,781
  -39,085
  -45,928
  -53,268
  -61,063
  -69,274
  -77,863
  -86,800
  -96,063
  -105,632
  -115,500
  -125,663
  -136,123
  -146,891
  -157,980
  -169,408
  -181,196
  -193,372
  -205,961
  -218,993
  -232,504
  -246,523
  -261,089
  -276,238
  -292,010
Free cash flow, $m
  770
  -21,820
  -29,648
  -39,293
  -50,919
  -64,655
  -80,599
  -98,812
  -119,323
  -142,132
  -167,217
  -194,536
  -224,037
  -255,663
  -289,353
  -325,051
  -362,707
  -402,279
  -443,739
  -487,069
  -532,266
  -579,340
  -628,314
  -679,228
  -732,131
  -787,088
  -844,177
  -903,484
  -965,113
  -1,029,172
  -1,095,786
Issuance/(repayment) of debt, $m
  -181
  6,826
  8,808
  11,109
  13,693
  16,530
  19,579
  22,795
  26,132
  29,543
  32,987
  36,427
  39,833
  43,185
  46,468
  49,675
  52,806
  55,866
  58,865
  61,816
  64,735
  67,641
  70,552
  73,489
  76,473
  79,522
  82,657
  85,898
  89,263
  92,770
  96,436
Issuance/(repurchase) of shares, $m
  0
  16,381
  22,608
  30,415
  39,975
  51,445
  64,952
  80,594
  98,438
  118,521
  140,854
  165,424
  192,203
  221,149
  252,216
  285,350
  320,504
  357,631
  396,694
  437,666
  480,530
  525,281
  571,929
  620,495
  671,014
  723,534
  778,117
  834,835
  893,774
  955,031
  1,018,714
Cash from financing (excl. dividends), $m  
  -481
  23,207
  31,416
  41,524
  53,668
  67,975
  84,531
  103,389
  124,570
  148,064
  173,841
  201,851
  232,036
  264,334
  298,684
  335,025
  373,310
  413,497
  455,559
  499,482
  545,265
  592,922
  642,481
  693,984
  747,487
  803,056
  860,774
  920,733
  983,037
  1,047,801
  1,115,150
Total cash flow (excl. dividends), $m
  289
  1,386
  1,769
  2,231
  2,750
  3,319
  3,931
  4,577
  5,247
  5,932
  6,624
  7,314
  7,998
  8,672
  9,331
  9,975
  10,604
  11,218
  11,820
  12,413
  12,999
  13,582
  14,167
  14,757
  15,356
  15,968
  16,598
  17,248
  17,924
  18,628
  19,364
Retained Cash Flow (-), $m
  1,650
  -16,381
  -22,608
  -30,415
  -39,975
  -51,445
  -64,952
  -80,594
  -98,438
  -118,521
  -140,854
  -165,424
  -192,203
  -221,149
  -252,216
  -285,350
  -320,504
  -357,631
  -396,694
  -437,666
  -480,530
  -525,281
  -571,929
  -620,495
  -671,014
  -723,534
  -778,117
  -834,835
  -893,774
  -955,031
  -1,018,714
Prev. year cash balance distribution, $m
 
  1,377
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -13,617
  -20,840
  -28,185
  -37,226
  -48,125
  -61,020
  -76,017
  -93,191
  -112,589
  -134,230
  -158,109
  -184,204
  -212,478
  -242,885
  -275,375
  -309,900
  -346,413
  -384,874
  -425,253
  -467,531
  -511,699
  -557,762
  -605,738
  -655,658
  -707,566
  -761,519
  -817,587
  -875,850
  -936,403
  -999,350
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  -12,726
  -18,084
  -22,550
  -27,257
  -31,993
  -36,517
  -40,581
  -43,952
  -46,432
  -47,877
  -48,208
  -47,421
  -45,579
  -42,813
  -39,299
  -35,249
  -30,886
  -26,430
  -22,078
  -17,994
  -14,299
  -11,072
  -8,346
  -6,121
  -4,362
  -3,018
  -2,024
  -1,316
  -827
  -502
Current shareholders' claim on cash, %
  100
  42.2
  18.1
  7.9
  3.5
  1.6
  0.7
  0.3
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Apache Corporation, an independent energy company, explores for, develops, and produces natural gas, crude oil, and natural gas liquids. It operates onshore and offshore assets primarily in the Permian Basin, the Midcontinent/Gulf Coast, Canada, and the Gulf of Mexico, as well as Egypt and the North Sea, the United Kingdom. As of December 31, 2016, it had total estimated proved reserves of 642 million barrels of crude oil, 192 million barrels of natural gas liquids, and 2.9 trillion cubic feet of natural gas. Apache Corporation was founded in 1954 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Apache (APA)

Valuation Ratios
P/E Ratio -11
Price to Sales 2.9
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 23.3
Growth Rates
Sales Growth Rate -19.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.2%
Cap. Spend. - 3 Yr. Gr. Rate -28%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 137%
Total Debt to Equity 137%
Interest Coverage -3
Management Effectiveness
Return On Assets -4.6%
Ret/ On Assets - 3 Yr. Avg. -12.6%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -20.3%
Return On Equity -19.9%
Return On Equity - 3 Yr. Avg. -33.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72%
Gross Margin - 3 Yr. Avg. 75.5%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. -15.6%
Operating Margin -31.5%
Oper. Margin - 3 Yr. Avg. -79.2%
Pre-Tax Margin -31.5%
Pre-Tax Margin - 3 Yr. Avg. -79.2%
Net Profit Margin -26.3%
Net Profit Margin - 3 Yr. Avg. -75.1%
Effective Tax Rate 26.3%
Eff/ Tax Rate - 3 Yr. Avg. 3.7%
Payout Ratio -27%

APA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APA stock intrinsic value calculation we used $5333 million for the last fiscal year's total revenue generated by Apache. The default revenue input number comes from 2016 income statement of Apache. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our APA stock valuation model: a) initial revenue growth rate of 41.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7%, whose default value for APA is calculated based on our internal credit rating of Apache, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Apache.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of APA stock the variable cost ratio is equal to 284.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for APA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.8% for Apache.

Corporate tax rate of 27% is the nominal tax rate for Apache. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the APA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for APA are equal to 372.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Apache operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for APA is equal to 0.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6238 million for Apache - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 377.337 million for Apache is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Apache at the current share price and the inputted number of shares is $15.3 billion.

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COMPANY NEWS

▶ Apache Corp. Value Analysis (NYSE:APA) : August 16, 2017   [Aug-16-17 07:52PM  Capital Cube]
▶ Apache Completes Strategic Exit from Canada   [10:07AM  GlobeNewswire]
▶ What Does Whiting Petroleums Implied Volatility Show?   [Aug-10-17 03:06PM  Market Realist]
▶ Apache misses Street 2Q forecasts   [02:28AM  Associated Press]
▶ Will Crude Oil Inventories Pressure Oil Futures?   [Aug-02-17 11:35AM  Market Realist]
▶ [$$] The Leftovers, S&P 500 Edition   [Jul-29-17 12:01AM  Barrons.com]
▶ Apache Corporation in 5 Charts   [Jul-28-17 07:12AM  Motley Fool]
▶ What to Expect from Apache in 2Q17   [Jul-21-17 03:50PM  Market Realist]
▶ Permian Oil Reserves Are Grossly Exaggerated   [Jul-19-17 07:00PM  Oilprice.com]
▶ Oil downgrades, financials & retail in the blitz   [Jul-17-17 01:43PM  CNBC Videos]
▶ [$$] 8 Great Energy Stocks at Bargain Prices   [Jul-15-17 12:01AM  Barrons.com]
▶ Apache to exit Canada in deals totaling $713M   [Jul-14-17 10:50AM  American City Business Journals]
▶ Retail, oil and autos embolden broader rally   [Jul-13-17 07:04PM  CNBC Videos]
▶ Bear of the Day: Apache (APA)   [06:27AM  Zacks]
▶ [$$] Oil Prices Could Rise by 35% This Year   [Jul-08-17 01:15AM  Barrons.com]
▶ PRESS DIGEST- Canada-July 7   [06:45AM  Reuters]
▶ Apache to Exit Canada   [Jul-06-17 08:00PM  Rigzone.com]
▶ Apache Announces Strategic Exit From Canada   [06:10PM  GlobeNewswire]
▶ New Strong Sell Stocks for July 5th   [Jul-05-17 08:51AM  Zacks]
▶ Meet the top 5 largest employers in the Uptown and Galleria area   [Jun-30-17 03:00AM  American City Business Journals]
▶ Apache Corp.: The Bear Case From a Bull   [Jun-27-17 10:43AM  Motley Fool]
▶ Nvidia and AMD: Cramer's Top Takeaways   [Jun-22-17 04:16PM  TheStreet.com]
▶ Price Strength Didn't Last for Apache   [02:23PM  TheStreet.com]
▶ The Most Ignored Oil Price Influencer   [Jun-21-17 05:00PM  Oilprice.com]
▶ Apache Corp. Value Analysis (NYSE:APA) : June 20, 2017   [Jun-20-17 03:39PM  Capital Cube]
▶ ETFs with exposure to Apache Corp. : June 15, 2017   [Jun-15-17 01:04PM  Capital Cube]
▶ Better Buy: Apache Corp. vs. Anadarko   [Jun-13-17 10:50AM  Motley Fool]
▶ Bullish on EOG Resources Inc? You'll Love These Stocks   [Jun-12-17 04:30PM  Motley Fool]
▶ Apache extends headquarters lease near Galleria again   [04:14PM  American City Business Journals]
▶ New Strong Sell Stocks for June 7th   [Jun-07-17 07:56AM  Zacks]
▶ Oil Prices Rebound As EIA Reports Big Crude Draw   [Jun-01-17 11:27AM  TheStreet.com]
▶ The Oil Stocks: Cheap or a Value Trap?   [May-31-17 05:53PM  Zacks]
▶ Deal finalized to acquire Galleria-area's Blvd Place   [May-30-17 03:37PM  American City Business Journals]
▶ Better Buy: Apache Corp. vs. Devon   [10:47AM  Motley Fool]
▶ 3 Key Takeaways Hidden in Apache's Q1 Earnings   [May-24-17 08:14AM  Motley Fool]
Stock chart of APA Financial statements of APA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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