Intrinsic value of CNOOC ADR - CEO

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$109.38

  Intrinsic Value

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  Value-price divergence*

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$109.38

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

We calculate the intrinsic value of CEO 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 48.3

 

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, %
  -14.55
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  21,193
  174,866
  178,888
  183,485
  188,646
  194,366
  200,641
  207,474
  214,871
  222,839
  231,391
  240,541
  250,303
  260,697
  271,744
  283,467
  295,889
  309,039
  322,944
  337,637
  353,151
  369,520
  386,783
  404,980
  424,152
  444,345
  465,605
  487,983
  511,531
  536,304
  562,361
Variable operating expenses, $m
 
  67,296
  68,812
  70,545
  72,490
  74,646
  77,012
  79,587
  82,375
  85,379
  88,603
  90,671
  94,351
  98,269
  102,433
  106,852
  111,535
  116,491
  121,733
  127,272
  133,119
  139,290
  145,797
  152,656
  159,883
  167,495
  175,509
  183,944
  192,820
  202,158
  211,981
Fixed operating expenses, $m
 
  92,419
  94,730
  97,098
  99,525
  102,013
  104,564
  107,178
  109,857
  112,604
  115,419
  118,304
  121,262
  124,293
  127,401
  130,586
  133,850
  137,197
  140,627
  144,142
  147,746
  151,439
  155,225
  159,106
  163,084
  167,161
  171,340
  175,623
  180,014
  184,514
  189,127
Total operating expenses, $m
  21,542
  159,715
  163,542
  167,643
  172,015
  176,659
  181,576
  186,765
  192,232
  197,983
  204,022
  208,975
  215,613
  222,562
  229,834
  237,438
  245,385
  253,688
  262,360
  271,414
  280,865
  290,729
  301,022
  311,762
  322,967
  334,656
  346,849
  359,567
  372,834
  386,672
  401,108
Operating income, $m
  -349
  15,151
  15,346
  15,842
  16,631
  17,706
  19,066
  20,709
  22,638
  24,856
  27,370
  31,565
  34,690
  38,135
  41,910
  46,029
  50,504
  55,351
  60,585
  66,223
  72,286
  78,791
  85,761
  93,218
  101,185
  109,689
  118,756
  128,415
  138,696
  149,631
  161,254
EBITDA, $m
  9,620
  64,794
  66,100
  67,865
  70,078
  72,732
  75,823
  79,352
  83,323
  87,741
  92,614
  97,954
  103,774
  110,087
  116,912
  124,265
  132,169
  140,645
  149,717
  159,411
  169,755
  180,779
  192,513
  204,992
  218,251
  232,328
  247,263
  263,099
  279,879
  297,651
  316,465
Interest expense (income), $m
  738
  4,716
  4,907
  5,111
  5,345
  5,607
  5,898
  6,217
  6,564
  6,940
  7,345
  7,779
  8,244
  8,740
  9,269
  9,830
  10,426
  11,057
  11,725
  12,432
  13,178
  13,967
  14,798
  15,676
  16,600
  17,575
  18,601
  19,681
  20,818
  22,015
  23,274
Earnings before tax, $m
  -763
  10,435
  10,439
  10,731
  11,286
  12,099
  13,168
  14,492
  16,074
  17,916
  20,025
  23,786
  26,446
  29,394
  32,642
  36,199
  40,078
  44,294
  48,860
  53,792
  59,107
  64,824
  70,962
  77,542
  84,585
  92,115
  100,156
  108,735
  117,878
  127,617
  137,980
Tax expense, $m
  -855
  2,817
  2,819
  2,897
  3,047
  3,267
  3,555
  3,913
  4,340
  4,837
  5,407
  6,422
  7,140
  7,936
  8,813
  9,774
  10,821
  11,959
  13,192
  14,524
  15,959
  17,503
  19,160
  20,936
  22,838
  24,871
  27,042
  29,358
  31,827
  34,456
  37,255
Net income, $m
  92
  7,617
  7,621
  7,834
  8,239
  8,832
  9,612
  10,579
  11,734
  13,079
  14,618
  17,364
  19,305
  21,458
  23,828
  26,425
  29,257
  32,334
  35,667
  39,268
  43,148
  47,322
  51,803
  56,606
  61,747
  67,244
  73,114
  79,376
  86,051
  93,160
  100,725

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,424
  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
  92,255
  647,651
  662,547
  679,574
  698,691
  719,873
  743,114
  768,422
  795,817
  825,331
  857,005
  890,891
  927,048
  965,546
  1,006,460
  1,049,876
  1,095,885
  1,144,587
  1,196,090
  1,250,509
  1,307,966
  1,368,594
  1,432,531
  1,499,926
  1,570,934
  1,645,721
  1,724,463
  1,807,344
  1,894,558
  1,986,311
  2,082,820
Adjusted assets (=assets-cash), $m
  87,831
  647,651
  662,547
  679,574
  698,691
  719,873
  743,114
  768,422
  795,817
  825,331
  857,005
  890,891
  927,048
  965,546
  1,006,460
  1,049,876
  1,095,885
  1,144,587
  1,196,090
  1,250,509
  1,307,966
  1,368,594
  1,432,531
  1,499,926
  1,570,934
  1,645,721
  1,724,463
  1,807,344
  1,894,558
  1,986,311
  2,082,820
Revenue / Adjusted assets
  0.241
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
Average production assets, $m
  64,461
  241,315
  246,865
  253,209
  260,332
  268,225
  276,884
  286,314
  296,522
  307,518
  319,320
  331,946
  345,418
  359,762
  375,007
  391,184
  408,327
  426,473
  445,663
  465,940
  487,348
  509,938
  533,761
  558,872
  585,330
  613,196
  642,535
  673,416
  705,912
  740,100
  776,059
Working capital, $m
  7,951
  60,678
  62,074
  63,669
  65,460
  67,445
  69,622
  71,993
  74,560
  77,325
  80,293
  83,468
  86,855
  90,462
  94,295
  98,363
  102,673
  107,236
  112,062
  117,160
  122,543
  128,224
  134,214
  140,528
  147,181
  154,188
  161,565
  169,330
  177,501
  186,097
  195,139
Total debt, $m
  21,770
  140,203
  146,042
  152,717
  160,211
  168,514
  177,625
  187,546
  198,284
  209,854
  222,270
  235,553
  249,727
  264,818
  280,856
  297,875
  315,911
  335,002
  355,191
  376,523
  399,047
  422,813
  447,876
  474,295
  502,130
  531,447
  562,313
  594,803
  628,991
  664,958
  702,789
Total liabilities, $m
  36,936
  253,879
  259,718
  266,393
  273,887
  282,190
  291,301
  301,222
  311,960
  323,530
  335,946
  349,229
  363,403
  378,494
  394,532
  411,551
  429,587
  448,678
  468,867
  490,199
  512,723
  536,489
  561,552
  587,971
  615,806
  645,123
  675,989
  708,479
  742,667
  778,634
  816,465
Total equity, $m
  55,318
  393,772
  402,828
  413,181
  424,804
  437,683
  451,813
  467,201
  483,857
  501,801
  521,059
  541,662
  563,645
  587,052
  611,928
  638,325
  666,298
  695,909
  727,223
  760,309
  795,243
  832,105
  870,979
  911,955
  955,128
  1,000,599
  1,048,473
  1,098,865
  1,151,891
  1,207,677
  1,266,355
Total liabilities and equity, $m
  92,254
  647,651
  662,546
  679,574
  698,691
  719,873
  743,114
  768,423
  795,817
  825,331
  857,005
  890,891
  927,048
  965,546
  1,006,460
  1,049,876
  1,095,885
  1,144,587
  1,196,090
  1,250,508
  1,307,966
  1,368,594
  1,432,531
  1,499,926
  1,570,934
  1,645,722
  1,724,462
  1,807,344
  1,894,558
  1,986,311
  2,082,820
Debt-to-equity ratio
  0.394
  0.360
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.470
  0.470
  0.480
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.550
Adjusted equity ratio
  0.612
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  7,617
  7,621
  7,834
  8,239
  8,832
  9,612
  10,579
  11,734
  13,079
  14,618
  17,364
  19,305
  21,458
  23,828
  26,425
  29,257
  32,334
  35,667
  39,268
  43,148
  47,322
  51,803
  56,606
  61,747
  67,244
  73,114
  79,376
  86,051
  93,160
  100,725
Depreciation, amort., depletion, $m
  9,969
  49,643
  50,753
  52,022
  53,447
  55,025
  56,757
  58,643
  60,685
  62,884
  65,245
  66,389
  69,084
  71,952
  75,001
  78,237
  81,665
  85,295
  89,133
  93,188
  97,470
  101,988
  106,752
  111,774
  117,066
  122,639
  128,507
  134,683
  141,182
  148,020
  155,212
Funds from operations, $m
  9,285
  57,261
  58,374
  59,856
  61,686
  63,858
  66,370
  69,222
  72,419
  75,963
  79,863
  83,753
  88,389
  93,410
  98,830
  104,662
  110,922
  117,629
  124,800
  132,456
  140,618
  149,309
  158,555
  168,380
  178,813
  189,883
  201,621
  214,059
  227,234
  241,180
  255,937
Change in working capital, $m
  -1,256
  1,190
  1,396
  1,595
  1,791
  1,985
  2,177
  2,371
  2,567
  2,765
  2,968
  3,175
  3,388
  3,607
  3,833
  4,068
  4,311
  4,563
  4,825
  5,098
  5,383
  5,680
  5,990
  6,314
  6,653
  7,007
  7,377
  7,765
  8,171
  8,596
  9,042
Cash from operations, $m
  10,541
  276,205
  56,978
  58,261
  59,895
  61,873
  64,192
  66,851
  69,852
  73,198
  76,895
  80,578
  85,001
  89,803
  94,996
  100,594
  106,612
  113,066
  119,975
  127,357
  135,235
  143,629
  152,565
  162,066
  172,160
  182,876
  194,243
  206,294
  219,063
  232,584
  246,895
Maintenance CAPEX, $m
  0
  -47,325
  -48,263
  -49,373
  -50,642
  -52,066
  -53,645
  -55,377
  -57,263
  -59,304
  -61,504
  -63,864
  -66,389
  -69,084
  -71,952
  -75,001
  -78,237
  -81,665
  -85,295
  -89,133
  -93,188
  -97,470
  -101,988
  -106,752
  -111,774
  -117,066
  -122,639
  -128,507
  -134,683
  -141,182
  -148,020
New CAPEX, $m
  -7,428
  -4,690
  -5,550
  -6,344
  -7,123
  -7,892
  -8,660
  -9,430
  -10,207
  -10,997
  -11,802
  -12,626
  -13,472
  -14,344
  -15,245
  -16,177
  -17,143
  -18,146
  -19,190
  -20,276
  -21,409
  -22,590
  -23,823
  -25,111
  -26,458
  -27,866
  -29,339
  -30,881
  -32,496
  -34,187
  -35,959
Cash from investing activities, $m
  -4,044
  -52,015
  -53,813
  -55,717
  -57,765
  -59,958
  -62,305
  -64,807
  -67,470
  -70,301
  -73,306
  -76,490
  -79,861
  -83,428
  -87,197
  -91,178
  -95,380
  -99,811
  -104,485
  -109,409
  -114,597
  -120,060
  -125,811
  -131,863
  -138,232
  -144,932
  -151,978
  -159,388
  -167,179
  -175,369
  -183,979
Free cash flow, $m
  6,497
  224,190
  3,165
  2,543
  2,130
  1,914
  1,888
  2,045
  2,382
  2,897
  3,590
  4,088
  5,140
  6,376
  7,799
  9,416
  11,232
  13,254
  15,490
  17,948
  20,638
  23,570
  26,754
  30,203
  33,928
  37,944
  42,265
  46,906
  51,883
  57,214
  62,916
Issuance/(repayment) of debt, $m
  -3,470
  5,449
  5,839
  6,675
  7,494
  8,303
  9,111
  9,921
  10,739
  11,569
  12,416
  13,283
  14,174
  15,091
  16,038
  17,019
  18,036
  19,091
  20,189
  21,332
  22,523
  23,766
  25,063
  26,419
  27,835
  29,317
  30,867
  32,489
  34,188
  35,967
  37,831
Issuance/(repurchase) of shares, $m
  0
  0
  52
  1,135
  1,999
  2,661
  3,133
  3,422
  3,536
  3,478
  3,252
  3,231
  2,670
  1,940
  1,038
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -4,208
  5,449
  5,891
  7,810
  9,493
  10,964
  12,244
  13,343
  14,275
  15,047
  15,668
  16,514
  16,844
  17,031
  17,076
  17,019
  18,036
  19,091
  20,189
  21,332
  22,523
  23,766
  25,063
  26,419
  27,835
  29,317
  30,867
  32,489
  34,188
  35,967
  37,831
Total cash flow (excl. dividends), $m
  2,318
  229,639
  9,005
  9,218
  9,624
  10,217
  10,998
  11,965
  13,121
  14,466
  16,006
  17,371
  19,314
  21,467
  23,838
  26,435
  29,268
  32,346
  35,679
  39,281
  43,162
  47,336
  51,817
  56,621
  61,763
  67,261
  73,132
  79,395
  86,071
  93,181
  100,748
Retained Cash Flow (-), $m
  531
  -7,731
  -9,057
  -10,353
  -11,623
  -12,879
  -14,131
  -15,387
  -16,656
  -17,944
  -19,258
  -20,602
  -21,984
  -23,407
  -24,876
  -26,397
  -27,973
  -29,611
  -31,314
  -33,087
  -34,934
  -36,862
  -38,874
  -40,976
  -43,173
  -45,471
  -47,875
  -50,391
  -53,026
  -55,786
  -58,677
Prev. year cash balance distribution, $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 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
 
  221,909
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  38
  1,294
  2,735
  4,366
  6,194
  8,227
  10,474
  12,943
  15,645
  18,590
  21,790
  25,257
  29,004
  33,045
  37,395
  42,070
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  212,760
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  11
  329
  595
  804
  954
  1,045
  1,083
  1,074
  1,025
  947
  848
  737
  623
  511
  408
  317
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  99.6
  98.9
  98.0
  97.0
  96.0
  95.0
  94.0
  93.1
  92.3
  91.7
  91.2
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0

CNOOC Limited, an investment holding company, explores for, develops, produces, and sells crude oil, natural gas, and other petroleum products. The company operates through Exploration and Production, and Trading Business. It produces offshore crude oil and natural gas primarily in Bohai, Western South China Sea, Eastern South China Sea, and East China Sea in offshore China; and Asia, Africa, North America, South America, Oceania, and Europe. As of December 31, 2015, CNOOC Limited had net proved reserves of approximately 4.32 billion barrels-of-oil equivalent. It is also involved in the issuance of bonds. The company was incorporated in 1999 and is based in Central, Hong Kong. CNOOC Limited is considered a Red Chip company due to its listing on the Hong Kong Stock Exchange. CNOOC Limited is a subsidiary of China National Offshore Oil Corporation.

FINANCIAL RATIOS  of  CNOOC ADR (CEO)

Valuation Ratios
P/E Ratio 53081.9
Price to Sales 230.4
Price to Book 88.3
Price to Tangible Book
Price to Cash Flow 463.3
Price to Free Cash Flow 1568.8
Growth Rates
Sales Growth Rate -14.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.1%
Cap. Spend. - 3 Yr. Gr. Rate -10%
Financial Strength
Quick Ratio 2
Current Ratio 0.9
LT Debt to Equity 34.2%
Total Debt to Equity 39.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 0.2%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 71.2%
Gross Margin - 3 Yr. Avg. 69.1%
EBITDA Margin 46.9%
EBITDA Margin - 3 Yr. Avg. 51.9%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. 12.7%
Pre-Tax Margin -3.6%
Pre-Tax Margin - 3 Yr. Avg. 12.1%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 11.4%
Effective Tax Rate 112.1%
Eff/ Tax Rate - 3 Yr. Avg. 40.3%
Payout Ratio 2226.1%

CEO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CEO stock intrinsic value calculation we used $171437 million for the last fiscal year's total revenue generated by CNOOC ADR. The default revenue input number comes from 2016 income statement of CNOOC ADR. 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 CEO stock valuation model: a) initial revenue growth rate of 2% 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 4.3%, whose default value for CEO is calculated based on our internal credit rating of CNOOC ADR, 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 CNOOC ADR.
    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 CEO stock the variable cost ratio is equal to 38.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $90165 million in the base year in the intrinsic value calculation for CEO 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 3.5% for CNOOC ADR.

Corporate tax rate of 27% is the nominal tax rate for CNOOC ADR. 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 CEO 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 CEO are equal to 138%.

Life of production assets of 3.3 years is the average useful life of capital assets used in CNOOC ADR 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 CEO is equal to 34.7%. 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 - $386041 million for CNOOC ADR - 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 441.624 million for CNOOC ADR 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 CNOOC ADR at the current share price and the inputted number of shares is $48.3 billion.


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COMPANY NEWS

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▶ 3 Experts On OPEC, Oil, Saudis & Aramco As Trump Travels   [May-19-17 07:04PM  Barrons.com]
▶ Asias LNG Buyers Club Is Shaking Up The Market   [May-15-17 03:00PM  Oilprice.com]
▶ ETFs with exposure to CNOOC Ltd. : May 11, 2017   [May-11-17 04:20PM  Capital Cube]
▶ OPEC Oil Cuts? Saudis, Russia, Iran & Even China Agree   [May-08-17 02:58PM  Barrons.com]
▶ ETFs with exposure to CNOOC Ltd. : April 27, 2017   [Apr-27-17 03:50PM  Capital Cube]
▶ Mexico Looks Overseas For New Oil Export Destinations   [Apr-25-17 05:00PM  Oilprice.com]
▶ China Offers Contested South China Sea Oil And Gas Blocks   [Apr-24-17 07:00PM  Oilprice.com]
▶ CNOOC Limited Filed 2016 Annual Report on Form 20-F   [Apr-21-17 07:25AM  PR Newswire]
▶ China's CNOOC Tenders 10 Coal Bed Methane Blocks   [Apr-20-17 08:00PM  Rigzone.com]
▶ [$$] Cnooc Shakes Up Management   [Apr-18-17 07:19AM  The Wall Street Journal]
▶ CNOOC Signs PSC With Husky   [Apr-13-17 08:05PM  PR Newswire]
▶ CNOOC Signs PSC With Husky   [08:00PM  PR Newswire]
▶ PetroChina Downgraded to Underperform   [Apr-10-17 02:25AM  Barrons.com]
▶ ConocoPhillips, Nexen Cut Canadian Synthetic Crude Output   [Apr-07-17 11:11AM  TheStreet.com]
▶ Fear Not: Oil Sell-off Is Done, Says Citi   [Mar-28-17 01:02AM  Barrons.com]
▶ 3 Reasons To Buy CNOOC   [Mar-23-17 11:07PM  Barrons.com]
▶ [$$] Cnooc Manages to Book Annual Profit Amid Cost Cutting   [12:01PM  The Wall Street Journal]
▶ CNOOC (CEO): Moving Average Crossover Alert   [Mar-13-17 06:39AM  Zacks]
▶ Dividends? 4 Cash Cow Oil Companies   [Feb-07-17 08:55PM  at Barrons.com]
▶ Oil Investors Await 2017 Investment Plans   [Jan-23-17 08:15AM  at Investopedia]
▶ CNOOC Sees Oil At $51, Raises Capex, Promises Dividends   [Jan-19-17 08:24PM  at Barrons.com]
▶ Enping 23-1 Oilfields Commences Production   [Jan-17-17 03:45AM  PR Newswire]
▶ PetroChina Has 37% Upside: Morgan Stanley   [Jan-10-17 09:50PM  at Barrons.com]
▶ 7 Energy Stocks With Up To 30% Upside   [Jan-03-17 08:28PM  at Barrons.com]
▶ Should You Avoid CNOOC Ltd (ADR) (CEO)?   [Dec-12-16 12:32PM  at Insider Monkey]
▶ Heres Why Hess Corp.'s Stock Jumped 17% Last Month   [Dec-09-16 01:12PM  at Motley Fool]
▶ A.M. Best Affirms Credit Ratings of ICM Assurance Ltd   [Dec-07-16 04:01PM  Business Wire]
▶ CNOOC Grabs a Stake in Mexican Offshore Oil   [Dec-06-16 12:09PM  at TheStreet]
▶ Nikkei Leads Asia Rally After OPEC Deal   [Nov-30-16 09:04PM  at Barrons.com]
▶ OPEC Talks Cuts Thursday In Doha, Oil Weakens   [Nov-16-16 06:09PM  at Barrons.com]
▶ Big Oils Shrinking Act Has More to Go in China   [Oct-30-16 12:00PM  at Bloomberg]
▶ Sanford C. Bernstein: Positive on Where Oil Is Heading   [Oct-27-16 02:03AM  at Bloomberg]
▶ [$$] China's Cnooc Trims Its Exposure in Canadian North   [02:45PM  at The Wall Street Journal]
▶ OPEC Oil Deal: Not As Good As It Sounds   [Sep-28-16 10:15PM  at Barrons.com]
▶ Can China's Teapots Continue To Support Oil Markets?   [Sep-25-16 11:04PM  at Barrons.com]
▶ Will China's Strategic Petroleum Reserve Save Oil Markets?   [Sep-22-16 10:22PM  at Barrons.com]
▶ Enping 18-1 Oilfield Commences Production   [Sep-21-16 04:45AM  PR Newswire]
▶ Billionaire Michael Platts BlueCrest Grows More Bullish on Energy   [Sep-16-16 08:54AM  at Insider Monkey]
▶ How Resilient Is China's Oil Demand Really?   [Sep-01-16 03:26AM  at Barrons.com]
▶ Is PotashCorp's Recovery Near At Hand?   [Aug-30-16 02:51PM  at Investopedia]
Stock chart of CEO Financial statements of CEO Annual reports of CEO
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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