Intrinsic value of Kosmos Energy - KOS

Previous Close

$7.53

  Intrinsic Value

$0.70

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-96%

Previous close

$7.53

 
Intrinsic value

$0.70

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-96%

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

We calculate the intrinsic value of KOS 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 2.9

 

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, %
  -30.65
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  310
  496
  766
  1,146
  1,663
  2,346
  3,225
  4,329
  5,685
  7,315
  9,239
  11,473
  14,026
  16,907
  20,115
  23,652
  27,513
  31,693
  36,185
  40,981
  46,075
  51,459
  57,129
  63,080
  69,309
  75,815
  82,599
  89,664
  97,015
  104,658
  112,603
Variable operating expenses, $m
 
  621
  959
  1,435
  2,082
  2,937
  4,038
  5,420
  7,117
  9,158
  11,567
  14,364
  17,561
  21,167
  25,185
  29,613
  34,447
  39,680
  45,303
  51,308
  57,686
  64,427
  71,526
  78,976
  86,775
  94,920
  103,414
  112,260
  121,463
  131,032
  140,979
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
  587
  621
  959
  1,435
  2,082
  2,937
  4,038
  5,420
  7,117
  9,158
  11,567
  14,364
  17,561
  21,167
  25,185
  29,613
  34,447
  39,680
  45,303
  51,308
  57,686
  64,427
  71,526
  78,976
  86,775
  94,920
  103,414
  112,260
  121,463
  131,032
  140,979
Operating income, $m
  -277
  -125
  -193
  -289
  -419
  -591
  -813
  -1,091
  -1,433
  -1,843
  -2,328
  -2,891
  -3,535
  -4,260
  -5,069
  -5,960
  -6,933
  -7,987
  -9,119
  -10,327
  -11,611
  -12,968
  -14,397
  -15,896
  -17,466
  -19,105
  -20,815
  -22,595
  -24,448
  -26,374
  -28,376
EBITDA, $m
  -126
  116
  179
  268
  389
  549
  754
  1,013
  1,330
  1,711
  2,161
  2,684
  3,281
  3,955
  4,706
  5,533
  6,436
  7,414
  8,465
  9,587
  10,778
  12,038
  13,364
  14,756
  16,213
  17,735
  19,322
  20,975
  22,695
  24,483
  26,341
Interest expense (income), $m
  28
  46
  93
  162
  258
  389
  563
  786
  1,066
  1,410
  1,824
  2,312
  2,879
  3,528
  4,259
  5,073
  5,971
  6,951
  8,012
  9,152
  10,370
  11,663
  13,030
  14,469
  15,979
  17,560
  19,212
  20,934
  22,727
  24,593
  26,534
Earnings before tax, $m
  -295
  -171
  -286
  -450
  -677
  -980
  -1,375
  -1,877
  -2,499
  -3,253
  -4,152
  -5,203
  -6,414
  -7,788
  -9,328
  -11,034
  -12,904
  -14,938
  -17,131
  -19,479
  -21,981
  -24,630
  -27,426
  -30,365
  -33,445
  -36,666
  -40,027
  -43,529
  -47,175
  -50,967
  -54,909
Tax expense, $m
  -11
  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
  -284
  -171
  -286
  -450
  -677
  -980
  -1,375
  -1,877
  -2,499
  -3,253
  -4,152
  -5,203
  -6,414
  -7,788
  -9,328
  -11,034
  -12,904
  -14,938
  -17,131
  -19,479
  -21,981
  -24,630
  -27,426
  -30,365
  -33,445
  -36,666
  -40,027
  -43,529
  -47,175
  -50,967
  -54,909

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  194
  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
  3,341
  5,010
  7,741
  11,576
  16,796
  23,697
  32,578
  43,729
  57,419
  73,885
  93,323
  115,885
  141,681
  170,773
  203,187
  238,911
  277,911
  320,130
  365,501
  413,949
  465,401
  519,791
  577,062
  637,170
  700,088
  765,807
  834,335
  905,700
  979,952
  1,057,156
  1,137,400
Adjusted assets (=assets-cash), $m
  3,147
  5,010
  7,741
  11,576
  16,796
  23,697
  32,578
  43,729
  57,419
  73,885
  93,323
  115,885
  141,681
  170,773
  203,187
  238,911
  277,911
  320,130
  365,501
  413,949
  465,401
  519,791
  577,062
  637,170
  700,088
  765,807
  834,335
  905,700
  979,952
  1,057,156
  1,137,400
Revenue / Adjusted assets
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
Average production assets, $m
  2,516
  4,025
  6,219
  9,300
  13,494
  19,038
  26,173
  35,132
  46,130
  59,358
  74,974
  93,101
  113,824
  137,197
  163,237
  191,938
  223,270
  257,188
  293,638
  332,560
  373,896
  417,593
  463,603
  511,893
  562,441
  615,238
  670,292
  727,626
  787,278
  849,303
  913,770
Working capital, $m
  105
  -142
  -220
  -329
  -477
  -673
  -926
  -1,242
  -1,631
  -2,099
  -2,652
  -3,293
  -4,026
  -4,852
  -5,773
  -6,788
  -7,896
  -9,096
  -10,385
  -11,762
  -13,223
  -14,769
  -16,396
  -18,104
  -19,892
  -21,759
  -23,706
  -25,734
  -27,843
  -30,037
  -32,317
Total debt, $m
  1,322
  2,659
  4,620
  7,374
  11,122
  16,077
  22,453
  30,460
  40,289
  52,111
  66,068
  82,268
  100,789
  121,677
  144,950
  170,600
  198,602
  228,916
  261,492
  296,277
  333,220
  372,272
  413,393
  456,550
  501,726
  548,911
  598,114
  649,355
  702,667
  758,100
  815,716
Total liabilities, $m
  2,260
  3,597
  5,558
  8,312
  12,060
  17,015
  23,391
  31,398
  41,227
  53,049
  67,006
  83,206
  101,727
  122,615
  145,888
  171,538
  199,540
  229,854
  262,430
  297,215
  334,158
  373,210
  414,331
  457,488
  502,664
  549,849
  599,052
  650,293
  703,605
  759,038
  816,654
Total equity, $m
  1,081
  1,413
  2,183
  3,264
  4,737
  6,683
  9,187
  12,332
  16,192
  20,836
  26,317
  32,680
  39,954
  48,158
  57,299
  67,373
  78,371
  90,277
  103,071
  116,734
  131,243
  146,581
  162,732
  179,682
  197,425
  215,958
  235,282
  255,407
  276,346
  298,118
  320,747
Total liabilities and equity, $m
  3,341
  5,010
  7,741
  11,576
  16,797
  23,698
  32,578
  43,730
  57,419
  73,885
  93,323
  115,886
  141,681
  170,773
  203,187
  238,911
  277,911
  320,131
  365,501
  413,949
  465,401
  519,791
  577,063
  637,170
  700,089
  765,807
  834,334
  905,700
  979,951
  1,057,156
  1,137,401
Debt-to-equity ratio
  1.223
  1.880
  2.120
  2.260
  2.350
  2.410
  2.440
  2.470
  2.490
  2.500
  2.510
  2.520
  2.520
  2.530
  2.530
  2.530
  2.530
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
  2.540
Adjusted equity ratio
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -284
  -171
  -286
  -450
  -677
  -980
  -1,375
  -1,877
  -2,499
  -3,253
  -4,152
  -5,203
  -6,414
  -7,788
  -9,328
  -11,034
  -12,904
  -14,938
  -17,131
  -19,479
  -21,981
  -24,630
  -27,426
  -30,365
  -33,445
  -36,666
  -40,027
  -43,529
  -47,175
  -50,967
  -54,909
Depreciation, amort., depletion, $m
  151
  241
  372
  557
  808
  1,140
  1,567
  2,104
  2,762
  3,554
  4,489
  5,575
  6,816
  8,215
  9,775
  11,493
  13,369
  15,400
  17,583
  19,914
  22,389
  25,006
  27,761
  30,652
  33,679
  36,841
  40,137
  43,570
  47,142
  50,856
  54,717
Funds from operations, $m
  -34
  70
  86
  106
  131
  160
  192
  227
  264
  301
  337
  371
  402
  427
  447
  460
  465
  463
  453
  434
  408
  375
  335
  287
  234
  175
  110
  41
  -33
  -111
  -193
Change in working capital, $m
  -86
  -53
  -78
  -109
  -148
  -196
  -252
  -317
  -389
  -468
  -552
  -641
  -733
  -827
  -921
  -1,015
  -1,108
  -1,200
  -1,289
  -1,377
  -1,462
  -1,545
  -1,627
  -1,708
  -1,788
  -1,867
  -1,947
  -2,028
  -2,110
  -2,194
  -2,280
Cash from operations, $m
  52
  123
  164
  215
  279
  356
  444
  544
  653
  769
  890
  1,012
  1,135
  1,254
  1,368
  1,475
  1,573
  1,662
  1,742
  1,811
  1,870
  1,920
  1,962
  1,995
  2,022
  2,042
  2,057
  2,069
  2,077
  2,083
  2,087
Maintenance CAPEX, $m
  0
  -151
  -241
  -372
  -557
  -808
  -1,140
  -1,567
  -2,104
  -2,762
  -3,554
  -4,489
  -5,575
  -6,816
  -8,215
  -9,775
  -11,493
  -13,369
  -15,400
  -17,583
  -19,914
  -22,389
  -25,006
  -27,761
  -30,652
  -33,679
  -36,841
  -40,137
  -43,570
  -47,142
  -50,856
New CAPEX, $m
  -538
  -1,510
  -2,194
  -3,081
  -4,194
  -5,544
  -7,135
  -8,959
  -10,998
  -13,228
  -15,616
  -18,127
  -20,724
  -23,372
  -26,040
  -28,701
  -31,332
  -33,918
  -36,450
  -38,922
  -41,336
  -43,696
  -46,011
  -48,290
  -50,547
  -52,797
  -55,054
  -57,334
  -59,652
  -62,025
  -64,467
Cash from investing activities, $m
  -538
  -1,661
  -2,435
  -3,453
  -4,751
  -6,352
  -8,275
  -10,526
  -13,102
  -15,990
  -19,170
  -22,616
  -26,299
  -30,188
  -34,255
  -38,476
  -42,825
  -47,287
  -51,850
  -56,505
  -61,250
  -66,085
  -71,017
  -76,051
  -81,199
  -86,476
  -91,895
  -97,471
  -103,222
  -109,167
  -115,323
Free cash flow, $m
  -486
  -1,537
  -2,271
  -3,238
  -4,472
  -5,996
  -7,831
  -9,982
  -12,449
  -15,222
  -18,281
  -21,604
  -25,164
  -28,934
  -32,888
  -37,001
  -41,252
  -45,625
  -50,109
  -54,694
  -59,380
  -64,165
  -69,054
  -74,055
  -79,178
  -84,434
  -89,837
  -95,403
  -101,146
  -107,085
  -113,236
Issuance/(repayment) of debt, $m
  450
  1,337
  1,961
  2,754
  3,748
  4,955
  6,377
  8,007
  9,829
  11,822
  13,956
  16,200
  18,521
  20,888
  23,273
  25,650
  28,002
  30,313
  32,576
  34,786
  36,943
  39,052
  41,120
  43,158
  45,175
  47,186
  49,203
  51,241
  53,313
  55,433
  57,615
Issuance/(repurchase) of shares, $m
  -2
  697
  1,056
  1,532
  2,149
  2,926
  3,880
  5,021
  6,359
  7,897
  9,634
  11,566
  13,688
  15,992
  18,468
  21,108
  23,902
  26,844
  29,925
  33,142
  36,490
  39,968
  43,576
  47,315
  51,188
  55,198
  59,352
  63,655
  68,114
  72,739
  77,538
Cash from financing (excl. dividends), $m  
  448
  2,034
  3,017
  4,286
  5,897
  7,881
  10,257
  13,028
  16,188
  19,719
  23,590
  27,766
  32,209
  36,880
  41,741
  46,758
  51,904
  57,157
  62,501
  67,928
  73,433
  79,020
  84,696
  90,473
  96,363
  102,384
  108,555
  114,896
  121,427
  128,172
  135,153
Total cash flow (excl. dividends), $m
  -38
  497
  746
  1,048
  1,426
  1,885
  2,426
  3,046
  3,739
  4,497
  5,309
  6,163
  7,046
  7,946
  8,853
  9,758
  10,652
  11,532
  12,392
  13,233
  14,053
  14,856
  15,643
  16,418
  17,185
  17,950
  18,717
  19,492
  20,281
  21,087
  21,917
Retained Cash Flow (-), $m
  245
  -697
  -1,056
  -1,532
  -2,149
  -2,926
  -3,880
  -5,021
  -6,359
  -7,897
  -9,634
  -11,566
  -13,688
  -15,992
  -18,468
  -21,108
  -23,902
  -26,844
  -29,925
  -33,142
  -36,490
  -39,968
  -43,576
  -47,315
  -51,188
  -55,198
  -59,352
  -63,655
  -68,114
  -72,739
  -77,538
Prev. year cash balance distribution, $m
 
  194
  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
 
  -6
  -310
  -484
  -723
  -1,042
  -1,454
  -1,976
  -2,620
  -3,399
  -4,324
  -5,404
  -6,643
  -8,046
  -9,615
  -11,350
  -13,250
  -15,312
  -17,533
  -19,909
  -22,437
  -25,113
  -27,934
  -30,898
  -34,003
  -37,248
  -40,634
  -44,162
  -47,833
  -51,652
  -55,621
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  -5
  -262
  -371
  -499
  -641
  -789
  -936
  -1,072
  -1,186
  -1,270
  -1,318
  -1,327
  -1,295
  -1,227
  -1,129
  -1,009
  -875
  -737
  -602
  -478
  -367
  -274
  -197
  -138
  -93
  -61
  -38
  -23
  -13
  -8
Current shareholders' claim on cash, %
  100
  77.5
  60.7
  48.2
  38.8
  31.6
  26.0
  21.6
  18.2
  15.4
  13.2
  11.3
  9.8
  8.5
  7.5
  6.6
  5.8
  5.2
  4.6
  4.1
  3.7
  3.3
  3.0
  2.7
  2.4
  2.2
  2.0
  1.8
  1.7
  1.5
  1.4

Kosmos Energy Ltd. (Kosmos) is an independent oil and gas exploration and production company. The Company is focused on the emerging areas along the Atlantic Margins. Its assets include existing production and development projects offshore Ghana, discoveries and further exploration potential offshore Mauritania and Senegal, as well as exploration licenses with hydrocarbon potential offshore Sao Tome and Principe, Suriname, Morocco and Western Sahara. The Company has operations in Africa and South America. The West Cape Three Points (WCTP) Block and Deepwater Tano (DT) Block are located within the Tano Basin, offshore Ghana. The Tano Basin represents the eastern extension of the Deep Ivorian Basin, which resulted from the development of an extensional sedimentary basin caused by tensional forces associated with opening of the Atlantic Ocean, as South America separated from Africa in the Mid-Cretaceous period.

FINANCIAL RATIOS  of  Kosmos Energy (KOS)

Valuation Ratios
P/E Ratio -10.3
Price to Sales 9.4
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 56
Price to Free Cash Flow -6
Growth Rates
Sales Growth Rate -30.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.8%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 122.3%
Total Debt to Equity 122.3%
Interest Coverage -10
Management Effectiveness
Return On Assets -7.9%
Ret/ On Assets - 3 Yr. Avg. -0%
Return On Total Capital -12.4%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity -23.6%
Return On Equity - 3 Yr. Avg. -1.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 61.6%
Gross Margin - 3 Yr. Avg. 75.4%
EBITDA Margin -37.4%
EBITDA Margin - 3 Yr. Avg. 40.2%
Operating Margin -89.4%
Oper. Margin - 3 Yr. Avg. -25.9%
Pre-Tax Margin -95.2%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin -91.6%
Net Profit Margin - 3 Yr. Avg. -24.9%
Effective Tax Rate 3.7%
Eff/ Tax Rate - 3 Yr. Avg. 79.3%
Payout Ratio 0%

KOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KOS stock intrinsic value calculation we used $310 million for the last fiscal year's total revenue generated by Kosmos Energy. The default revenue input number comes from 2016 income statement of Kosmos Energy. 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 KOS stock valuation model: a) initial revenue growth rate of 60% 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 8.4%, whose default value for KOS is calculated based on our internal credit rating of Kosmos Energy, 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 Kosmos Energy.
    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 KOS stock the variable cost ratio is equal to 125.2%.

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 KOS 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 Kosmos Energy.

Corporate tax rate of 27% is the nominal tax rate for Kosmos Energy. 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 KOS 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 KOS are equal to 811.5%.

Life of production assets of 16.7 years is the average useful life of capital assets used in Kosmos Energy 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 KOS is equal to -28.7%. 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 - $1081 million for Kosmos Energy - 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 388.728 million for Kosmos Energy 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 Kosmos Energy at the current share price and the inputted number of shares is $2.9 billion.

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COMPANY NEWS

▶ Upstream Losers: JONE, TELL, KOS, LPI, and ERF   [Oct-04-17 01:35PM  Market Realist]
▶ Which Oil-Weighted Stocks Rose despite Oils Fall Last Week?   [Oct-03-17 02:52PM  Market Realist]
▶ Why W&T Offshores Revenues Are Trending Upward   [Sep-20-17 05:36PM  Market Realist]
▶ Can Kosmos Energy Ltd (KOS) Improve Your Portfolio Returns?   [Sep-12-17 04:49PM  Simply Wall St.]
▶ Publication of Prospectus   [Aug-16-17 09:25AM  Business Wire]
▶ Analyzing Cobalt International Energys Implied Volatility   [Aug-14-17 09:05AM  Market Realist]
▶ Oil Stuck At $50 As OPEC Output Jumps   [Aug-08-17 03:00PM  Oilprice.com]
▶ Kosmos Energy reports 2Q loss   [Aug-07-17 11:58PM  Associated Press]
▶ Analyzing Short Interest in Occidental Petroleum Stock   [Aug-02-17 09:06AM  Market Realist]
▶ ETFs with exposure to Kosmos Energy Ltd. : June 15, 2017   [Jun-15-17 02:22PM  Capital Cube]
▶ Why Cobalt International Energys Stock Fell Last Week   [May-30-17 03:03PM  Market Realist]
▶ What Are Analysts Saying about Kosmos Energy?   [10:36AM  Market Realist]
▶ Analyzing Kosmos Energys Debt Situation   [07:37AM  Market Realist]
▶ Kosmos Energys Losses Rose by More Than 193% in 1Q17   [May-26-17 06:06PM  Market Realist]
▶ A Survivor in the Search for New Crude   [May-21-17 10:06PM  The Wall Street Journal]
▶ ETFs with exposure to Kosmos Energy Ltd. : May 11, 2017   [May-11-17 05:01PM  Capital Cube]
▶ [$$] BP and Kosmos strike gas again off Senegal   [11:34AM  Financial Times]
▶ Kosmos Energy reports 1Q loss   [06:56AM  Associated Press]
▶ BP, Kosmos Make Major Gas Find Off Coast Of Senegal   [May-07-17 08:00PM  Rigzone.com]
▶ Senegal president dismisses energy minister   [May-02-17 08:33AM  Reuters]
▶ Is Oil Outperforming Oil-Weighted Stocks?   [Apr-11-17 12:57PM  Market Realist]
▶ US Natural Gas Consumption Fell: Is It Bearish for Prices?   [Mar-31-17 07:37AM  Market Realist]
▶ Weekly US Natural Gas Consumption Rose, Impacted Prices   [Mar-20-17 07:36AM  Market Realist]
▶ Why Did Weekly US Natural Gas Consumption Rise?   [Mar-13-17 09:06AM  Market Realist]
▶ What Makes Kosmos Energy (KOS) a Strong Sell?   [Mar-10-17 08:48AM  Zacks]
▶ Analyzing US Natural Gas Consumption: Why It Fell Last Week   [Feb-28-17 07:37AM  Market Realist]
Financial statements of KOS
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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