Intrinsic value of ConocoPhillips - COP

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$47.86

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$47.86

 
Intrinsic value

$7.09

 
Up/down potential

-85%

 
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 COP 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 59.0

 

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, %
  -18.02
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  24,147
  27,045
  30,101
  33,312
  36,678
  40,196
  43,868
  47,693
  51,674
  55,815
  60,120
  64,593
  69,242
  74,073
  79,094
  84,316
  89,746
  95,398
  101,281
  107,410
  113,796
  120,454
  127,399
  134,648
  142,215
  150,120
  158,381
  167,016
  176,047
  185,494
  195,380
Variable operating expenses, $m
 
  33,535
  37,325
  41,307
  45,481
  49,844
  54,396
  59,139
  64,076
  69,211
  74,548
  80,095
  85,860
  91,850
  98,077
  104,551
  111,286
  118,293
  125,589
  133,188
  141,107
  149,363
  157,975
  166,963
  176,347
  186,149
  196,392
  207,100
  218,298
  230,012
  242,271
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
  28,465
  33,535
  37,325
  41,307
  45,481
  49,844
  54,396
  59,139
  64,076
  69,211
  74,548
  80,095
  85,860
  91,850
  98,077
  104,551
  111,286
  118,293
  125,589
  133,188
  141,107
  149,363
  157,975
  166,963
  176,347
  186,149
  196,392
  207,100
  218,298
  230,012
  242,271
Operating income, $m
  -4,318
  -6,491
  -7,224
  -7,995
  -8,803
  -9,647
  -10,528
  -11,446
  -12,402
  -13,396
  -14,429
  -15,502
  -16,618
  -17,777
  -18,983
  -20,236
  -21,539
  -22,896
  -24,308
  -25,778
  -27,311
  -28,909
  -30,576
  -32,315
  -34,132
  -36,029
  -38,011
  -40,084
  -42,251
  -44,519
  -46,891
EBITDA, $m
  4,744
  3,637
  4,048
  4,480
  4,933
  5,406
  5,900
  6,414
  6,950
  7,507
  8,086
  8,687
  9,312
  9,962
  10,638
  11,340
  12,070
  12,830
  13,622
  14,446
  15,305
  16,200
  17,134
  18,109
  19,127
  20,190
  21,301
  22,462
  23,677
  24,948
  26,277
Interest expense (income), $m
  1,151
  1,152
  1,441
  1,741
  2,056
  2,386
  2,731
  3,091
  3,466
  3,856
  4,262
  4,684
  5,123
  5,579
  6,052
  6,545
  7,057
  7,589
  8,143
  8,720
  9,321
  9,947
  10,600
  11,281
  11,992
  12,734
  13,509
  14,319
  15,166
  16,052
  16,978
Earnings before tax, $m
  -5,530
  -7,643
  -8,665
  -9,736
  -10,858
  -12,033
  -13,259
  -14,537
  -15,867
  -17,252
  -18,691
  -20,186
  -21,741
  -23,356
  -25,035
  -26,780
  -28,596
  -30,485
  -32,451
  -34,499
  -36,632
  -38,856
  -41,176
  -43,597
  -46,124
  -48,763
  -51,521
  -54,403
  -57,417
  -60,570
  -63,869
Tax expense, $m
  -1,971
  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
  -3,615
  -7,643
  -8,665
  -9,736
  -10,858
  -12,033
  -13,259
  -14,537
  -15,867
  -17,252
  -18,691
  -20,186
  -21,741
  -23,356
  -25,035
  -26,780
  -28,596
  -30,485
  -32,451
  -34,499
  -36,632
  -38,856
  -41,176
  -43,597
  -46,124
  -48,763
  -51,521
  -54,403
  -57,417
  -60,570
  -63,869

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,660
  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
  89,772
  96,588
  107,502
  118,973
  130,993
  143,559
  156,670
  170,332
  184,552
  199,340
  214,713
  230,690
  247,291
  264,545
  282,479
  301,127
  320,523
  340,707
  361,720
  383,606
  406,414
  430,193
  454,998
  480,884
  507,912
  536,143
  565,645
  596,485
  628,738
  662,478
  697,786
Adjusted assets (=assets-cash), $m
  86,112
  96,588
  107,502
  118,973
  130,993
  143,559
  156,670
  170,332
  184,552
  199,340
  214,713
  230,690
  247,291
  264,545
  282,479
  301,127
  320,523
  340,707
  361,720
  383,606
  406,414
  430,193
  454,998
  480,884
  507,912
  536,143
  565,645
  596,485
  628,738
  662,478
  697,786
Revenue / Adjusted assets
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Average production assets, $m
  62,389
  69,883
  77,780
  86,079
  94,776
  103,867
  113,354
  123,239
  133,527
  144,227
  155,349
  166,908
  178,920
  191,404
  204,379
  217,871
  231,905
  246,508
  261,711
  277,547
  294,048
  311,253
  329,200
  347,929
  367,484
  387,910
  409,255
  431,569
  454,904
  479,316
  504,862
Working capital, $m
  1,700
  -974
  -1,084
  -1,199
  -1,320
  -1,447
  -1,579
  -1,717
  -1,860
  -2,009
  -2,164
  -2,325
  -2,493
  -2,667
  -2,847
  -3,035
  -3,231
  -3,434
  -3,646
  -3,867
  -4,097
  -4,336
  -4,586
  -4,847
  -5,120
  -5,404
  -5,702
  -6,013
  -6,338
  -6,678
  -7,034
Total debt, $m
  27,275
  32,748
  39,559
  46,716
  54,217
  62,058
  70,239
  78,764
  87,637
  96,865
  106,458
  116,427
  126,787
  137,553
  148,744
  160,380
  172,483
  185,078
  198,190
  211,847
  226,079
  240,918
  256,396
  272,549
  289,414
  307,030
  325,439
  344,684
  364,809
  385,863
  407,895
Total liabilities, $m
  54,798
  60,271
  67,082
  74,239
  81,740
  89,581
  97,762
  106,287
  115,160
  124,388
  133,981
  143,950
  154,310
  165,076
  176,267
  187,903
  200,006
  212,601
  225,713
  239,370
  253,602
  268,441
  283,919
  300,072
  316,937
  334,553
  352,962
  372,207
  392,332
  413,386
  435,418
Total equity, $m
  34,974
  36,317
  40,421
  44,734
  49,253
  53,978
  58,908
  64,045
  69,391
  74,952
  80,732
  86,739
  92,982
  99,469
  106,212
  113,224
  120,517
  128,106
  136,007
  144,236
  152,812
  161,753
  171,079
  180,812
  190,975
  201,590
  212,682
  224,278
  236,405
  249,092
  262,368
Total liabilities and equity, $m
  89,772
  96,588
  107,503
  118,973
  130,993
  143,559
  156,670
  170,332
  184,551
  199,340
  214,713
  230,689
  247,292
  264,545
  282,479
  301,127
  320,523
  340,707
  361,720
  383,606
  406,414
  430,194
  454,998
  480,884
  507,912
  536,143
  565,644
  596,485
  628,737
  662,478
  697,786
Debt-to-equity ratio
  0.780
  0.900
  0.980
  1.040
  1.100
  1.150
  1.190
  1.230
  1.260
  1.290
  1.320
  1.340
  1.360
  1.380
  1.400
  1.420
  1.430
  1.440
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.540
  1.540
  1.550
  1.550
Adjusted equity ratio
  0.364
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,615
  -7,643
  -8,665
  -9,736
  -10,858
  -12,033
  -13,259
  -14,537
  -15,867
  -17,252
  -18,691
  -20,186
  -21,741
  -23,356
  -25,035
  -26,780
  -28,596
  -30,485
  -32,451
  -34,499
  -36,632
  -38,856
  -41,176
  -43,597
  -46,124
  -48,763
  -51,521
  -54,403
  -57,417
  -60,570
  -63,869
Depreciation, amort., depletion, $m
  9,062
  10,128
  11,272
  12,475
  13,736
  15,053
  16,428
  17,861
  19,352
  20,902
  22,514
  24,190
  25,930
  27,740
  29,620
  31,576
  33,609
  35,726
  37,929
  40,224
  42,616
  45,109
  47,710
  50,425
  53,259
  56,219
  59,312
  62,546
  65,928
  69,466
  73,168
Funds from operations, $m
  3,922
  2,485
  2,607
  2,740
  2,877
  3,021
  3,169
  3,324
  3,484
  3,651
  3,824
  4,003
  4,190
  4,384
  4,585
  4,795
  5,014
  5,241
  5,478
  5,725
  5,983
  6,253
  6,534
  6,828
  7,135
  7,456
  7,792
  8,143
  8,511
  8,896
  9,299
Change in working capital, $m
  -481
  -104
  -110
  -116
  -121
  -127
  -132
  -138
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -196
  -203
  -212
  -221
  -230
  -240
  -250
  -261
  -272
  -285
  -297
  -311
  -325
  -340
  -356
Cash from operations, $m
  4,403
  -1,468
  2,717
  2,855
  2,999
  3,147
  3,302
  3,462
  3,628
  3,800
  3,979
  4,164
  4,357
  4,558
  4,766
  4,983
  5,209
  5,445
  5,690
  5,946
  6,213
  6,492
  6,784
  7,089
  7,407
  7,740
  8,089
  8,454
  8,836
  9,236
  9,655
Maintenance CAPEX, $m
  0
  -9,042
  -10,128
  -11,272
  -12,475
  -13,736
  -15,053
  -16,428
  -17,861
  -19,352
  -20,902
  -22,514
  -24,190
  -25,930
  -27,740
  -29,620
  -31,576
  -33,609
  -35,726
  -37,929
  -40,224
  -42,616
  -45,109
  -47,710
  -50,425
  -53,259
  -56,219
  -59,312
  -62,546
  -65,928
  -69,466
New CAPEX, $m
  -4,869
  -7,495
  -7,897
  -8,299
  -8,697
  -9,092
  -9,487
  -9,885
  -10,288
  -10,700
  -11,123
  -11,559
  -12,012
  -12,483
  -12,976
  -13,492
  -14,034
  -14,603
  -15,203
  -15,835
  -16,502
  -17,205
  -17,947
  -18,729
  -19,555
  -20,426
  -21,345
  -22,314
  -23,335
  -24,412
  -25,546
Cash from investing activities, $m
  -3,859
  -16,537
  -18,025
  -19,571
  -21,172
  -22,828
  -24,540
  -26,313
  -28,149
  -30,052
  -32,025
  -34,073
  -36,202
  -38,413
  -40,716
  -43,112
  -45,610
  -48,212
  -50,929
  -53,764
  -56,726
  -59,821
  -63,056
  -66,439
  -69,980
  -73,685
  -77,564
  -81,626
  -85,881
  -90,340
  -95,012
Free cash flow, $m
  544
  -18,005
  -15,307
  -16,716
  -18,173
  -19,680
  -21,238
  -22,851
  -24,521
  -26,252
  -28,047
  -29,909
  -31,844
  -33,856
  -35,949
  -38,129
  -40,400
  -42,768
  -45,239
  -47,818
  -50,513
  -53,328
  -56,272
  -59,351
  -62,572
  -65,944
  -69,475
  -73,172
  -77,045
  -81,104
  -85,357
Issuance/(repayment) of debt, $m
  2,343
  6,562
  6,811
  7,158
  7,500
  7,841
  8,182
  8,525
  8,873
  9,228
  9,593
  9,969
  10,360
  10,766
  11,191
  11,636
  12,103
  12,595
  13,112
  13,657
  14,232
  14,838
  15,478
  16,153
  16,865
  17,617
  18,409
  19,244
  20,125
  21,054
  22,032
Issuance/(repurchase) of shares, $m
  -189
  12,786
  12,601
  13,872
  15,192
  16,564
  17,987
  19,463
  20,995
  22,584
  24,234
  25,947
  27,727
  29,577
  31,502
  33,504
  35,590
  37,763
  40,028
  42,391
  44,856
  47,431
  50,120
  52,931
  55,869
  58,943
  62,158
  65,524
  69,047
  72,736
  76,601
Cash from financing (excl. dividends), $m  
  2,017
  19,348
  19,412
  21,030
  22,692
  24,405
  26,169
  27,988
  29,868
  31,812
  33,827
  35,916
  38,087
  40,343
  42,693
  45,140
  47,693
  50,358
  53,140
  56,048
  59,088
  62,269
  65,598
  69,084
  72,734
  76,560
  80,567
  84,768
  89,172
  93,790
  98,633
Total cash flow (excl. dividends), $m
  2,495
  -11,443
  -8,497
  -9,559
  -10,673
  -11,839
  -13,057
  -14,326
  -15,648
  -17,024
  -18,454
  -19,940
  -21,485
  -23,090
  -24,758
  -26,493
  -28,297
  -30,174
  -32,127
  -34,161
  -36,281
  -38,490
  -40,794
  -43,198
  -45,707
  -48,328
  -51,066
  -53,928
  -56,920
  -60,050
  -63,325
Retained Cash Flow (-), $m
  4,788
  -3,914
  -4,104
  -4,313
  -4,519
  -4,725
  -4,930
  -5,137
  -5,347
  -5,561
  -5,780
  -6,007
  -6,242
  -6,487
  -6,743
  -7,011
  -7,293
  -7,589
  -7,901
  -8,229
  -8,576
  -8,941
  -9,327
  -9,733
  -10,162
  -10,615
  -11,093
  -11,596
  -12,127
  -12,686
  -13,276
Prev. year cash balance distribution, $m
 
  2,571
  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, %
 
  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
 
  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
  81.0
  67.2
  55.9
  46.5
  38.8
  32.4
  27.1
  22.7
  19.0
  15.9
  13.4
  11.3
  9.5
  8.0
  6.7
  5.7
  4.8
  4.0
  3.4
  2.9
  2.4
  2.0
  1.7
  1.5
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. Its portfolio includes North American tight oil and oil sands assets; lower-risk conventional assets in North America, Europe, Asia, and Australia; various LNG developments; and an inventory of conventional and unconventional exploration prospects. The company was founded in 1917 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  ConocoPhillips (COP)

Valuation Ratios
P/E Ratio -16.4
Price to Sales 2.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow -127.1
Growth Rates
Sales Growth Rate -18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -51.6%
Cap. Spend. - 3 Yr. Gr. Rate -20.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 74.9%
Total Debt to Equity 78%
Interest Coverage -4
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0.9%
Return On Equity -9.7%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 21.3%
Operating Margin -17.9%
Oper. Margin - 3 Yr. Avg. -9.3%
Pre-Tax Margin -22.9%
Pre-Tax Margin - 3 Yr. Avg. -9.8%
Net Profit Margin -15%
Net Profit Margin - 3 Yr. Avg. -5.6%
Effective Tax Rate 35.6%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio -34.7%

COP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COP stock intrinsic value calculation we used $24147 million for the last fiscal year's total revenue generated by ConocoPhillips. The default revenue input number comes from 2016 income statement of ConocoPhillips. 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 COP stock valuation model: a) initial revenue growth rate of 12% 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 COP is calculated based on our internal credit rating of ConocoPhillips, 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 ConocoPhillips.
    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 COP stock the variable cost ratio is equal to 124%.

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 COP 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 4.4% for ConocoPhillips.

Corporate tax rate of 27% is the nominal tax rate for ConocoPhillips. 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 COP 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 COP are equal to 258.4%.

Life of production assets of 6.9 years is the average useful life of capital assets used in ConocoPhillips 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 COP is equal to -3.6%. 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 - $34974 million for ConocoPhillips - 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 1232.6 million for ConocoPhillips 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 ConocoPhillips at the current share price and the inputted number of shares is $59.0 billion.


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COMPANY NEWS

▶ Better Buy: Sunoco LP vs. ConocoPhillips   [Apr-27-17 11:12AM  Motley Fool]
▶ Encanas Plans for Its Montney Assets   [07:37AM  Market Realist]
▶ ConocoPhillips Ratings and Target Prices Changed Last Week   [Apr-24-17 03:35PM  Market Realist]
▶ Cenovus CEO Defends Conoco Deal   [Apr-21-17 06:46PM  Bloomberg]
▶ What Does The Future Hold For Canadas Oil Sands?   [Apr-19-17 07:00PM  Oilprice.com]
▶ Conocophillips, Partners Weigh Expansion Of Darwin LNG   [Apr-18-17 08:00PM  Rigzone.com]
▶ Why Whiting Petroleums Implied Volatility Just Spiked   [Apr-17-17 10:44AM  Market Realist]
▶ Big Oil Is Set To Disappoint Again With Q1 Results   [Apr-16-17 07:00PM  Oilprice.com]
▶ Oil Prices Rally Amid Rising Rig Count   [Apr-14-17 01:00PM  Oilprice.com]
▶ Fracking could fuel Alaskas next oil boom   [09:54AM  MarketWatch]
▶ Energy giant to sell natural gas assets in Colorado, New Mexico for $3 billion   [Apr-13-17 05:46PM  American City Business Journals]
▶ Massive energy producer sells San Juan Basin assets for $3 billion   [02:55PM  American City Business Journals]
▶ ConocoPhillips' Asset Exodus Continues   [01:07PM  Motley Fool]
▶ ConocoPhillips Sells San Juan Basin Assets For $3B   [Apr-12-17 08:00PM  Rigzone.com]
▶ Why Breakeven Prices Are Plunging Across The Oil Industry   [Apr-10-17 07:00PM  Oilprice.com]
▶ ConocoPhillipss Operating Netbacks   [10:35AM  Market Realist]
▶ Chart in Focus: ConocoPhillipss Lifting Costs   [07:35AM  Market Realist]
▶ ConocoPhillips to Sell $13.3 Billion in Oil Sands Assets   [Apr-05-17 02:23PM  Motley Fool]
▶ ConocoPhillipss Realized Price Effectiveness   [10:36AM  Market Realist]
▶ Cenovus prices $2.9 bln debt offering   [Apr-04-17 06:10PM  Reuters]
▶ ConocoPhillips Is About to Get Smoking Hot   [05:45PM  TheStreet.com]
▶ 3 Top Oil Stocks to Buy in April   [05:43PM  Motley Fool]
Stock chart of COP Financial statements of COP
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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