Intrinsic value of Newfield Exploration - NFX

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$35.04

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$35.04

 
Intrinsic value

$1.17

 
Up/down potential

-97%

 
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 NFX 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 7.0

 

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, %
  -5.46
  14.60
  13.64
  12.78
  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
Revenue, $m
  1,472
  1,687
  1,917
  2,162
  2,421
  2,695
  2,982
  3,284
  3,599
  3,927
  4,270
  4,626
  4,997
  5,382
  5,783
  6,199
  6,631
  7,081
  7,548
  8,034
  8,540
  9,067
  9,615
  10,187
  10,783
  11,405
  12,054
  12,731
  13,439
  14,178
  14,951
Variable operating expenses, $m
 
  7,171
  8,149
  9,190
  10,293
  11,456
  12,678
  13,959
  15,298
  16,695
  18,151
  19,666
  21,241
  22,879
  24,582
  26,351
  28,189
  30,100
  32,087
  34,153
  36,304
  38,543
  40,875
  43,305
  45,839
  48,482
  51,240
  54,120
  57,128
  60,271
  63,557
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
  2,391
  7,171
  8,149
  9,190
  10,293
  11,456
  12,678
  13,959
  15,298
  16,695
  18,151
  19,666
  21,241
  22,879
  24,582
  26,351
  28,189
  30,100
  32,087
  34,153
  36,304
  38,543
  40,875
  43,305
  45,839
  48,482
  51,240
  54,120
  57,128
  60,271
  63,557
Operating income, $m
  -919
  -5,484
  -6,232
  -7,028
  -7,872
  -8,761
  -9,696
  -10,675
  -11,699
  -12,768
  -13,881
  -15,040
  -16,245
  -17,497
  -18,799
  -20,152
  -21,558
  -23,019
  -24,539
  -26,119
  -27,764
  -29,476
  -31,260
  -33,118
  -35,056
  -37,077
  -39,186
  -41,389
  -43,689
  -46,093
  -48,606
EBITDA, $m
  -347
  -4,831
  -5,490
  -6,191
  -6,934
  -7,717
  -8,541
  -9,403
  -10,305
  -11,246
  -12,227
  -13,248
  -14,309
  -15,413
  -16,559
  -17,751
  -18,989
  -20,277
  -21,615
  -23,007
  -24,456
  -25,964
  -27,535
  -29,172
  -30,879
  -32,659
  -34,517
  -36,457
  -38,484
  -40,601
  -42,815
Interest expense (income), $m
  97
  97
  116
  137
  160
  184
  209
  235
  262
  291
  321
  352
  385
  419
  454
  491
  529
  568
  609
  652
  696
  743
  791
  841
  893
  948
  1,004
  1,064
  1,126
  1,190
  1,258
Earnings before tax, $m
  -1,208
  -5,581
  -6,349
  -7,166
  -8,032
  -8,945
  -9,904
  -10,910
  -11,961
  -13,059
  -14,202
  -15,392
  -16,630
  -17,916
  -19,253
  -20,643
  -22,086
  -23,587
  -25,148
  -26,771
  -28,460
  -30,219
  -32,050
  -33,959
  -35,949
  -38,024
  -40,191
  -42,452
  -44,815
  -47,283
  -49,864
Tax expense, $m
  22
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,230
  -5,581
  -6,349
  -7,166
  -8,032
  -8,945
  -9,904
  -10,910
  -11,961
  -13,059
  -14,202
  -15,392
  -16,630
  -17,916
  -19,253
  -20,643
  -22,086
  -23,587
  -25,148
  -26,771
  -28,460
  -30,219
  -32,050
  -33,959
  -35,949
  -38,024
  -40,191
  -42,452
  -44,815
  -47,283
  -49,864

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  580
  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
  4,312
  4,282
  4,865
  5,487
  6,145
  6,840
  7,570
  8,334
  9,134
  9,968
  10,837
  11,741
  12,682
  13,660
  14,677
  15,733
  16,830
  17,971
  19,157
  20,391
  21,675
  23,012
  24,404
  25,855
  27,368
  28,946
  30,593
  32,312
  34,108
  35,985
  37,947
Adjusted assets (=assets-cash), $m
  3,732
  4,282
  4,865
  5,487
  6,145
  6,840
  7,570
  8,334
  9,134
  9,968
  10,837
  11,741
  12,682
  13,660
  14,677
  15,733
  16,830
  17,971
  19,157
  20,391
  21,675
  23,012
  24,404
  25,855
  27,368
  28,946
  30,593
  32,312
  34,108
  35,985
  37,947
Revenue / Adjusted assets
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
Average production assets, $m
  3,649
  4,182
  4,752
  5,359
  6,002
  6,681
  7,393
  8,140
  8,921
  9,736
  10,585
  11,468
  12,387
  13,342
  14,335
  15,367
  16,439
  17,553
  18,712
  19,917
  21,171
  22,477
  23,836
  25,254
  26,731
  28,272
  29,881
  31,560
  33,315
  35,148
  37,064
Working capital, $m
  265
  -361
  -410
  -463
  -518
  -577
  -638
  -703
  -770
  -840
  -914
  -990
  -1,069
  -1,152
  -1,237
  -1,327
  -1,419
  -1,515
  -1,615
  -1,719
  -1,828
  -1,940
  -2,058
  -2,180
  -2,308
  -2,441
  -2,579
  -2,724
  -2,876
  -3,034
  -3,200
Total debt, $m
  2,431
  2,910
  3,436
  3,995
  4,588
  5,213
  5,870
  6,558
  7,277
  8,028
  8,810
  9,624
  10,471
  11,351
  12,266
  13,216
  14,204
  15,231
  16,299
  17,409
  18,565
  19,768
  21,021
  22,327
  23,688
  25,109
  26,591
  28,138
  29,755
  31,444
  33,209
Total liabilities, $m
  3,374
  3,853
  4,379
  4,938
  5,531
  6,156
  6,813
  7,501
  8,220
  8,971
  9,753
  10,567
  11,414
  12,294
  13,209
  14,159
  15,147
  16,174
  17,242
  18,352
  19,508
  20,711
  21,964
  23,270
  24,631
  26,052
  27,534
  29,081
  30,698
  32,387
  34,152
Total equity, $m
  938
  428
  487
  549
  615
  684
  757
  833
  913
  997
  1,084
  1,174
  1,268
  1,366
  1,468
  1,573
  1,683
  1,797
  1,916
  2,039
  2,168
  2,301
  2,440
  2,586
  2,737
  2,895
  3,059
  3,231
  3,411
  3,599
  3,795
Total liabilities and equity, $m
  4,312
  4,281
  4,866
  5,487
  6,146
  6,840
  7,570
  8,334
  9,133
  9,968
  10,837
  11,741
  12,682
  13,660
  14,677
  15,732
  16,830
  17,971
  19,158
  20,391
  21,676
  23,012
  24,404
  25,856
  27,368
  28,947
  30,593
  32,312
  34,109
  35,986
  37,947
Debt-to-equity ratio
  2.592
  6.800
  7.060
  7.280
  7.470
  7.620
  7.750
  7.870
  7.970
  8.050
  8.130
  8.200
  8.260
  8.310
  8.360
  8.400
  8.440
  8.480
  8.510
  8.540
  8.560
  8.590
  8.610
  8.640
  8.660
  8.670
  8.690
  8.710
  8.720
  8.740
  8.750
Adjusted equity ratio
  0.096
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,230
  -5,581
  -6,349
  -7,166
  -8,032
  -8,945
  -9,904
  -10,910
  -11,961
  -13,059
  -14,202
  -15,392
  -16,630
  -17,916
  -19,253
  -20,643
  -22,086
  -23,587
  -25,148
  -26,771
  -28,460
  -30,219
  -32,050
  -33,959
  -35,949
  -38,024
  -40,191
  -42,452
  -44,815
  -47,283
  -49,864
Depreciation, amort., depletion, $m
  572
  653
  743
  837
  938
  1,044
  1,155
  1,272
  1,394
  1,521
  1,654
  1,792
  1,935
  2,085
  2,240
  2,401
  2,569
  2,743
  2,924
  3,112
  3,308
  3,512
  3,724
  3,946
  4,177
  4,418
  4,669
  4,931
  5,205
  5,492
  5,791
Funds from operations, $m
  845
  -4,928
  -5,606
  -6,328
  -7,094
  -7,901
  -8,749
  -9,638
  -10,568
  -11,537
  -12,548
  -13,600
  -14,694
  -15,831
  -17,013
  -18,242
  -19,518
  -20,845
  -22,224
  -23,659
  -25,152
  -26,707
  -28,326
  -30,013
  -31,772
  -33,607
  -35,522
  -37,521
  -39,609
  -41,792
  -44,073
Change in working capital, $m
  19
  -46
  -49
  -52
  -56
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -128
  -133
  -139
  -145
  -151
  -158
  -165
Cash from operations, $m
  826
  -5,224
  -5,557
  -6,276
  -7,038
  -7,842
  -8,688
  -9,574
  -10,500
  -11,467
  -12,475
  -13,524
  -14,615
  -15,749
  -16,928
  -18,152
  -19,425
  -20,749
  -22,124
  -23,555
  -25,044
  -26,594
  -28,208
  -29,891
  -31,644
  -33,474
  -35,383
  -37,376
  -39,458
  -41,633
  -43,907
Maintenance CAPEX, $m
  0
  -570
  -653
  -743
  -837
  -938
  -1,044
  -1,155
  -1,272
  -1,394
  -1,521
  -1,654
  -1,792
  -1,935
  -2,085
  -2,240
  -2,401
  -2,569
  -2,743
  -2,924
  -3,112
  -3,308
  -3,512
  -3,724
  -3,946
  -4,177
  -4,418
  -4,669
  -4,931
  -5,205
  -5,492
New CAPEX, $m
  -1,371
  -533
  -570
  -607
  -643
  -678
  -713
  -747
  -781
  -815
  -849
  -884
  -919
  -955
  -993
  -1,032
  -1,072
  -1,114
  -1,159
  -1,205
  -1,254
  -1,306
  -1,360
  -1,417
  -1,478
  -1,541
  -1,608
  -1,679
  -1,754
  -1,833
  -1,916
Cash from investing activities, $m
  -991
  -1,103
  -1,223
  -1,350
  -1,480
  -1,616
  -1,757
  -1,902
  -2,053
  -2,209
  -2,370
  -2,538
  -2,711
  -2,890
  -3,078
  -3,272
  -3,473
  -3,683
  -3,902
  -4,129
  -4,366
  -4,614
  -4,872
  -5,141
  -5,424
  -5,718
  -6,026
  -6,348
  -6,685
  -7,038
  -7,408
Free cash flow, $m
  -165
  -6,327
  -6,781
  -7,626
  -8,519
  -9,458
  -10,444
  -11,476
  -12,553
  -13,676
  -14,845
  -16,061
  -17,326
  -18,640
  -20,005
  -21,424
  -22,898
  -24,431
  -26,026
  -27,684
  -29,410
  -31,208
  -33,080
  -35,032
  -37,068
  -39,192
  -41,409
  -43,724
  -46,143
  -48,672
  -51,315
Issuance/(repayment) of debt, $m
  -39
  479
  526
  559
  593
  625
  657
  688
  719
  751
  782
  814
  847
  880
  915
  951
  988
  1,027
  1,068
  1,111
  1,156
  1,203
  1,253
  1,306
  1,361
  1,420
  1,482
  1,547
  1,616
  1,689
  1,766
Issuance/(repurchase) of shares, $m
  757
  5,338
  6,313
  7,128
  7,992
  8,903
  9,860
  10,864
  11,913
  13,008
  14,150
  15,337
  16,573
  17,857
  19,192
  20,579
  22,020
  23,519
  25,077
  26,697
  28,383
  30,138
  31,966
  33,872
  35,858
  37,929
  40,092
  42,349
  44,707
  47,170
  49,746
Cash from financing (excl. dividends), $m  
  715
  5,817
  6,839
  7,687
  8,585
  9,528
  10,517
  11,552
  12,632
  13,759
  14,932
  16,151
  17,420
  18,737
  20,107
  21,530
  23,008
  24,546
  26,145
  27,808
  29,539
  31,341
  33,219
  35,178
  37,219
  39,349
  41,574
  43,896
  46,323
  48,859
  51,512
Total cash flow (excl. dividends), $m
  550
  -5,848
  -6,255
  -7,066
  -7,926
  -8,833
  -9,787
  -10,788
  -11,833
  -12,925
  -14,063
  -15,247
  -16,479
  -17,759
  -19,090
  -20,473
  -21,911
  -23,405
  -24,958
  -26,573
  -28,255
  -30,005
  -31,827
  -33,726
  -35,706
  -37,772
  -39,927
  -42,177
  -44,527
  -46,983
  -49,550
Retained Cash Flow (-), $m
  441
  -70
  -58
  -62
  -66
  -69
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -134
  -139
  -145
  -151
  -158
  -165
  -172
  -180
  -188
  -196
Prev. year cash balance distribution, $m
 
  580
  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
  33.4
  11.2
  3.8
  1.3
  0.4
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Newfield Exploration Company, an independent energy company, engages in the exploration, development, and production of crude oil, natural gas, and natural gas liquids in the United States. Its principal areas of operation include the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota, the Uinta Basin of Utah, and the Maverick and Gulf Coast basins of Texas. The company also holds offshore oil producing assets in China. As of December 31, 2016, it had proved reserves of approximately 513 million barrels of oil equivalent. The company was founded in 1988 and is headquartered in The Woodlands, Texas.

FINANCIAL RATIOS  of  Newfield Exploration (NFX)

Valuation Ratios
P/E Ratio -5.7
Price to Sales 4.7
Price to Book 7.4
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow -12.8
Growth Rates
Sales Growth Rate -5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.4%
Cap. Spend. - 3 Yr. Gr. Rate -8.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 259.2%
Total Debt to Equity 259.2%
Interest Coverage -11
Management Effectiveness
Return On Assets -24.9%
Ret/ On Assets - 3 Yr. Avg. -20.1%
Return On Total Capital -34.1%
Ret/ On T. Cap. - 3 Yr. Avg. -28%
Return On Equity -106.2%
Return On Equity - 3 Yr. Avg. -69.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 80.6%
Gross Margin - 3 Yr. Avg. 80.1%
EBITDA Margin -36.6%
EBITDA Margin - 3 Yr. Avg. -65.6%
Operating Margin -62.4%
Oper. Margin - 3 Yr. Avg. -120.8%
Pre-Tax Margin -82.1%
Pre-Tax Margin - 3 Yr. Avg. -118.2%
Net Profit Margin -83.6%
Net Profit Margin - 3 Yr. Avg. -86.7%
Effective Tax Rate -1.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.4%
Payout Ratio 0%

NFX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NFX stock intrinsic value calculation we used $1472 million for the last fiscal year's total revenue generated by Newfield Exploration. The default revenue input number comes from 2016 income statement of Newfield Exploration. 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 NFX stock valuation model: a) initial revenue growth rate of 14.6% 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 NFX is calculated based on our internal credit rating of Newfield Exploration, 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 Newfield Exploration.
    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 NFX stock the variable cost ratio is equal to 425.1%.

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 NFX 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% for Newfield Exploration.

Corporate tax rate of 27% is the nominal tax rate for Newfield Exploration. 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 NFX 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 NFX are equal to 247.9%.

Life of production assets of 6.4 years is the average useful life of capital assets used in Newfield Exploration 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 NFX is equal to -21.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $938 million for Newfield Exploration - 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 199.946 million for Newfield Exploration 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 Newfield Exploration at the current share price and the inputted number of shares is $7.0 billion.


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Stock chart of NFX Financial statements of NFX
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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