Intrinsic value of Canadian Natural Resources - CNQ

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$30.55

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$30.55

 
Intrinsic value

$4.35

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of CNQ 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 34.1

 

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, %
  -14.87
  23.80
  21.92
  20.23
  18.71
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
Revenue, $m
  7,789
  9,643
  11,756
  14,135
  16,778
  19,687
  22,857
  26,283
  29,961
  33,884
  38,046
  42,442
  47,068
  51,920
  56,998
  62,299
  67,825
  73,579
  79,565
  85,789
  92,257
  98,978
  105,963
  113,223
  120,771
  128,621
  136,787
  145,288
  154,141
  163,365
  172,980
Variable operating expenses, $m
 
  7,570
  9,229
  11,096
  13,171
  15,454
  17,943
  20,632
  23,519
  26,599
  29,866
  33,317
  36,948
  40,758
  44,743
  48,905
  53,243
  57,760
  62,459
  67,344
  72,422
  77,698
  83,181
  88,880
  94,805
  100,967
  107,378
  114,051
  121,001
  128,241
  135,789
Fixed operating expenses, $m
 
  2,581
  2,645
  2,712
  2,779
  2,849
  2,920
  2,993
  3,068
  3,145
  3,223
  3,304
  3,386
  3,471
  3,558
  3,647
  3,738
  3,831
  3,927
  4,025
  4,126
  4,229
  4,335
  4,443
  4,554
  4,668
  4,785
  4,905
  5,027
  5,153
  5,282
Total operating expenses, $m
  8,575
  10,151
  11,874
  13,808
  15,950
  18,303
  20,863
  23,625
  26,587
  29,744
  33,089
  36,621
  40,334
  44,229
  48,301
  52,552
  56,981
  61,591
  66,386
  71,369
  76,548
  81,927
  87,516
  93,323
  99,359
  105,635
  112,163
  118,956
  126,028
  133,394
  141,071
Operating income, $m
  -787
  -508
  -118
  327
  828
  1,384
  1,994
  2,658
  3,374
  4,140
  4,957
  5,821
  6,733
  7,692
  8,697
  9,747
  10,844
  11,988
  13,179
  14,419
  15,709
  17,051
  18,447
  19,900
  21,411
  22,985
  24,624
  26,332
  28,113
  29,971
  31,909
EBITDA, $m
  2,809
  3,960
  5,329
  6,876
  8,602
  10,505
  12,584
  14,836
  17,256
  19,840
  22,584
  25,486
  28,541
  31,748
  35,106
  38,613
  42,270
  46,080
  50,045
  54,168
  58,455
  62,911
  67,543
  72,360
  77,369
  82,579
  88,003
  93,649
  99,532
  105,663
  112,056
Interest expense (income), $m
  457
  435
  642
  876
  1,139
  1,432
  1,755
  2,106
  2,486
  2,893
  3,328
  3,789
  4,276
  4,788
  5,326
  5,889
  6,476
  7,088
  7,726
  8,389
  9,079
  9,795
  10,540
  11,314
  12,118
  12,954
  13,824
  14,729
  15,671
  16,652
  17,674
Earnings before tax, $m
  -787
  -943
  -760
  -549
  -312
  -49
  239
  552
  888
  1,247
  1,629
  2,032
  2,457
  2,903
  3,371
  3,859
  4,369
  4,900
  5,454
  6,030
  6,631
  7,256
  7,907
  8,586
  9,293
  10,031
  10,800
  11,603
  12,442
  13,319
  14,235
Tax expense, $m
  -636
  0
  0
  0
  0
  0
  65
  149
  240
  337
  440
  549
  663
  784
  910
  1,042
  1,179
  1,323
  1,472
  1,628
  1,790
  1,959
  2,135
  2,318
  2,509
  2,708
  2,916
  3,133
  3,359
  3,596
  3,844
Net income, $m
  -151
  -943
  -760
  -549
  -312
  -49
  175
  403
  648
  911
  1,189
  1,484
  1,794
  2,119
  2,461
  2,817
  3,189
  3,577
  3,981
  4,402
  4,840
  5,297
  5,772
  6,268
  6,784
  7,322
  7,884
  8,470
  9,083
  9,723
  10,392

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  688
  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
  43,408
  52,982
  64,596
  77,663
  92,189
  108,170
  125,587
  144,414
  164,620
  186,173
  209,042
  233,197
  258,615
  285,277
  313,174
  342,301
  372,666
  404,282
  437,172
  471,366
  506,905
  543,837
  582,216
  622,105
  663,576
  706,706
  751,580
  798,288
  846,929
  897,609
  950,437
Adjusted assets (=assets-cash), $m
  42,720
  52,982
  64,596
  77,663
  92,189
  108,170
  125,587
  144,414
  164,620
  186,173
  209,042
  233,197
  258,615
  285,277
  313,174
  342,301
  372,666
  404,282
  437,172
  471,366
  506,905
  543,837
  582,216
  622,105
  663,576
  706,706
  751,580
  798,288
  846,929
  897,609
  950,437
Revenue / Adjusted assets
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
Average production assets, $m
  37,890
  46,912
  57,195
  68,765
  81,627
  95,777
  111,198
  127,868
  145,760
  164,844
  185,092
  206,480
  228,985
  252,593
  277,293
  303,084
  329,970
  357,963
  387,085
  417,362
  448,829
  481,529
  515,511
  550,831
  587,550
  625,739
  665,471
  706,828
  749,897
  794,770
  841,546
Working capital, $m
  -560
  116
  141
  170
  201
  236
  274
  315
  360
  407
  457
  509
  565
  623
  684
  748
  814
  883
  955
  1,029
  1,107
  1,188
  1,272
  1,359
  1,449
  1,543
  1,641
  1,743
  1,850
  1,960
  2,076
Total debt, $m
  12,438
  17,346
  23,676
  30,797
  38,714
  47,424
  56,916
  67,177
  78,189
  89,936
  102,399
  115,564
  129,416
  143,947
  159,151
  175,025
  191,574
  208,805
  226,730
  245,366
  264,734
  284,862
  305,778
  327,518
  350,120
  373,626
  398,082
  423,538
  450,047
  477,668
  506,459
Total liabilities, $m
  23,967
  28,875
  35,205
  42,326
  50,243
  58,953
  68,445
  78,706
  89,718
  101,465
  113,928
  127,093
  140,945
  155,476
  170,680
  186,554
  203,103
  220,334
  238,259
  256,895
  276,263
  296,391
  317,307
  339,047
  361,649
  385,155
  409,611
  435,067
  461,576
  489,197
  517,988
Total equity, $m
  19,441
  24,107
  29,391
  35,336
  41,946
  49,217
  57,142
  65,708
  74,902
  84,709
  95,114
  106,105
  117,670
  129,801
  142,494
  155,747
  169,563
  183,948
  198,913
  214,472
  230,642
  247,446
  264,908
  283,058
  301,927
  321,551
  341,969
  363,221
  385,353
  408,412
  432,449
Total liabilities and equity, $m
  43,408
  52,982
  64,596
  77,662
  92,189
  108,170
  125,587
  144,414
  164,620
  186,174
  209,042
  233,198
  258,615
  285,277
  313,174
  342,301
  372,666
  404,282
  437,172
  471,367
  506,905
  543,837
  582,215
  622,105
  663,576
  706,706
  751,580
  798,288
  846,929
  897,609
  950,437
Debt-to-equity ratio
  0.640
  0.720
  0.810
  0.870
  0.920
  0.960
  1.000
  1.020
  1.040
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
  1.120
  1.130
  1.140
  1.140
  1.140
  1.150
  1.150
  1.150
  1.160
  1.160
  1.160
  1.160
  1.170
  1.170
  1.170
  1.170
Adjusted equity ratio
  0.439
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -151
  -943
  -760
  -549
  -312
  -49
  175
  403
  648
  911
  1,189
  1,484
  1,794
  2,119
  2,461
  2,817
  3,189
  3,577
  3,981
  4,402
  4,840
  5,297
  5,772
  6,268
  6,784
  7,322
  7,884
  8,470
  9,083
  9,723
  10,392
Depreciation, amort., depletion, $m
  3,596
  4,468
  5,447
  6,549
  7,774
  9,122
  10,590
  12,178
  13,882
  15,699
  17,628
  19,665
  21,808
  24,056
  26,409
  28,865
  31,426
  34,092
  36,865
  39,749
  42,746
  45,860
  49,096
  52,460
  55,957
  59,594
  63,378
  67,317
  71,419
  75,692
  80,147
Funds from operations, $m
  2,154
  3,525
  4,688
  6,000
  7,463
  9,073
  10,765
  12,581
  14,530
  16,610
  18,817
  21,148
  23,602
  26,176
  28,869
  31,682
  34,615
  37,669
  40,846
  44,151
  47,586
  51,157
  54,869
  58,728
  62,741
  66,917
  71,262
  75,787
  80,502
  85,415
  90,539
Change in working capital, $m
  -401
  22
  25
  29
  32
  35
  38
  41
  44
  47
  50
  53
  56
  58
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  94
  98
  102
  106
  111
  115
Cash from operations, $m
  2,555
  3,294
  4,662
  5,972
  7,431
  9,038
  10,727
  12,540
  14,486
  16,563
  18,767
  21,096
  23,546
  26,118
  28,808
  31,618
  34,548
  37,600
  40,774
  44,076
  47,508
  51,076
  54,785
  58,641
  62,651
  66,822
  71,164
  75,685
  80,395
  85,304
  90,424
Maintenance CAPEX, $m
  0
  -3,609
  -4,468
  -5,447
  -6,549
  -7,774
  -9,122
  -10,590
  -12,178
  -13,882
  -15,699
  -17,628
  -19,665
  -21,808
  -24,056
  -26,409
  -28,865
  -31,426
  -34,092
  -36,865
  -39,749
  -42,746
  -45,860
  -49,096
  -52,460
  -55,957
  -59,594
  -63,378
  -67,317
  -71,419
  -75,692
New CAPEX, $m
  -2,815
  -9,022
  -10,283
  -11,569
  -12,863
  -14,150
  -15,421
  -16,670
  -17,891
  -19,084
  -20,249
  -21,388
  -22,506
  -23,608
  -24,700
  -25,791
  -26,886
  -27,994
  -29,121
  -30,277
  -31,467
  -32,700
  -33,982
  -35,320
  -36,720
  -38,188
  -39,732
  -41,357
  -43,069
  -44,873
  -46,776
Cash from investing activities, $m
  -2,821
  -12,631
  -14,751
  -17,016
  -19,412
  -21,924
  -24,543
  -27,260
  -30,069
  -32,966
  -35,948
  -39,016
  -42,171
  -45,416
  -48,756
  -52,200
  -55,751
  -59,420
  -63,213
  -67,142
  -71,216
  -75,446
  -79,842
  -84,416
  -89,180
  -94,145
  -99,326
  -104,735
  -110,386
  -116,292
  -122,468
Free cash flow, $m
  -266
  -9,337
  -10,089
  -11,045
  -11,981
  -12,886
  -13,816
  -14,720
  -15,583
  -16,403
  -17,181
  -17,920
  -18,624
  -19,298
  -19,948
  -20,581
  -21,203
  -21,820
  -22,439
  -23,066
  -23,708
  -24,370
  -25,057
  -25,775
  -26,529
  -27,323
  -28,162
  -29,050
  -29,990
  -30,987
  -32,045
Issuance/(repayment) of debt, $m
  375
  5,596
  6,329
  7,121
  7,917
  8,710
  9,492
  10,261
  11,012
  11,747
  12,463
  13,165
  13,853
  14,531
  15,204
  15,875
  16,549
  17,231
  17,925
  18,636
  19,369
  20,128
  20,917
  21,740
  22,602
  23,506
  24,456
  25,456
  26,510
  27,620
  28,792
Issuance/(repurchase) of shares, $m
  414
  8,406
  9,044
  9,869
  10,673
  11,447
  12,248
  13,026
  13,765
  14,463
  15,123
  15,746
  16,336
  16,898
  17,438
  17,959
  18,470
  18,974
  19,479
  19,989
  20,509
  21,046
  21,603
  22,185
  22,797
  23,442
  24,123
  24,846
  25,612
  26,426
  27,290
Cash from financing (excl. dividends), $m  
  788
  14,002
  15,373
  16,990
  18,590
  20,157
  21,740
  23,287
  24,777
  26,210
  27,586
  28,911
  30,189
  31,429
  32,642
  33,834
  35,019
  36,205
  37,404
  38,625
  39,878
  41,174
  42,520
  43,925
  45,399
  46,948
  48,579
  50,302
  52,122
  54,046
  56,082
Total cash flow (excl. dividends), $m
  523
  -3,740
  -3,759
  -3,924
  -4,064
  -4,176
  -4,324
  -4,460
  -4,571
  -4,656
  -4,718
  -4,755
  -4,771
  -4,767
  -4,745
  -4,706
  -4,654
  -4,589
  -4,514
  -4,430
  -4,339
  -4,242
  -4,140
  -4,035
  -3,927
  -3,817
  -3,706
  -3,594
  -3,481
  -3,367
  -3,253
Retained Cash Flow (-), $m
  825
  -4,666
  -5,284
  -5,945
  -6,610
  -7,271
  -7,925
  -8,566
  -9,194
  -9,807
  -10,405
  -10,991
  -11,565
  -12,131
  -12,693
  -13,253
  -13,816
  -14,385
  -14,965
  -15,559
  -16,170
  -16,804
  -17,462
  -18,150
  -18,869
  -19,624
  -20,417
  -21,252
  -22,132
  -23,059
  -24,037
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
 
  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
Discount rate, %
 
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for 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
Current shareholders' claim on cash, %
  100
  80.2
  66.1
  55.5
  47.4
  41.0
  35.9
  31.8
  28.4
  25.6
  23.2
  21.2
  19.5
  18.0
  16.8
  15.6
  14.6
  13.8
  13.0
  12.3
  11.6
  11.1
  10.5
  10.1
  9.6
  9.2
  8.8
  8.5
  8.2
  7.9
  7.6

Canadian Natural Resources Limited acquires, explores for, develops, produces, markets, and sells crude oil, natural gas, and natural gas liquids (NGLs). The company offers light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen, and synthetic crude oil (SCO). Its midstream assets include three crude oil pipeline systems; and a 50% working interest in an 84-megawatt cogeneration plant at Primrose. As of December 31, 2015, the company’s gross proved crude oil, bitumen, SCO, and NGLs reserves totaled 4,695 million barrels; gross proved plus probable crude oil, bitumen, SCO, and NGLs reserves totaled 7,623 million barrels; proved natural gas reserves totaled 6,106 billion cubic feet; and gross proved plus probable natural gas reserves totaled 8,508 billion cubic feet. It operates primarily in Western Canada; the United Kingdom sector of the North Sea; and Côte d’Ivoire, Gabon, and South Africa in Offshore Africa. The company was formerly known as AEX Minerals Corporation and changed its name to Canadian Natural Resources Limited in December 1975. Canadian Natural Resources Limited was founded in 1973 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Canadian Natural Resources (CNQ)

Valuation Ratios
P/E Ratio -224.8
Price to Sales 4.4
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow -130.5
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 57.1%
Total Debt to Equity 64%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 41.9%
EBITDA Margin - 3 Yr. Avg. 47.1%
Operating Margin -10.1%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 80.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio -371.5%

CNQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNQ stock intrinsic value calculation we used $7789 million for the last fiscal year's total revenue generated by Canadian Natural Resources. The default revenue input number comes from 2016 income statement of Canadian Natural Resources. 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 CNQ stock valuation model: a) initial revenue growth rate of 23.8% 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 6.6%, whose default value for CNQ is calculated based on our internal credit rating of Canadian Natural Resources, 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 Canadian Natural Resources.
    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 CNQ stock the variable cost ratio is equal to 78.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2518 million in the base year in the intrinsic value calculation for CNQ 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 3.7% for Canadian Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Canadian Natural Resources. 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 CNQ 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 CNQ are equal to 486.5%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Canadian Natural Resources 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 CNQ is equal to 1.2%. 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 - $19441 million for Canadian Natural Resources - 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 1117.72 million for Canadian Natural Resources 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 Canadian Natural Resources at the current share price and the inputted number of shares is $34.1 billion.


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COMPANY NEWS

▶ Canadian Natural Resources posts 1Q profit   [05:48AM  Associated Press]
▶ What Does The Future Hold For Canadas Oil Sands?   [Apr-19-17 07:00PM  Oilprice.com]
▶ [$$] Danish pension fund PKA dumps Canadian oil   [Apr-15-17 12:01AM  Financial Times]
▶ ConocoPhillips to Sell $13.3 Billion in Oil Sands Assets   [Apr-05-17 02:23PM  Motley Fool]
▶ 3 Stocks for an Oil Rally   [Mar-30-17 03:50PM  Barrons.com]
▶ 3 Stocks for an Oil Rally   [03:50PM  at Barrons.com]
▶ [$$] ConocoPhillips sells oil sands assets for $13.3bn   [Mar-29-17 08:42PM  at Financial Times]
▶ [$$] Plenty of Cash Lies Buried on Canada's Oil Sands   [11:23AM  at The Wall Street Journal]
▶ [$$] Shell's Oil-Sands Exit Puts It on Solid Ground   [11:54AM  at The Wall Street Journal]
▶ ExxonMobil: Its Time Has Passed?   [10:00AM  at Barrons.com]
Stock chart of CNQ Financial statements of CNQ
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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