Intrinsic value of Newfield Exploration - NFX

Previous Close

$33.32

  Intrinsic Value

$1.16

stock screener

  Rating & Target

str. sell

-97%

Previous close

$33.32

 
Intrinsic value

$1.16

 
Up/down potential

-97%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  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
  1,472
  1,649
  1,835
  2,031
  2,236
  2,450
  2,674
  2,907
  3,150
  3,402
  3,665
  3,938
  4,221
  4,515
  4,822
  5,140
  5,471
  5,815
  6,174
  6,548
  6,937
  7,343
  7,766
  8,208
  8,669
  9,151
  9,655
  10,181
  10,732
  11,308
  11,910
Variable operating expenses, $m
 
  7,008
  7,800
  8,633
  9,505
  10,417
  11,368
  12,359
  13,391
  14,464
  15,579
  16,739
  17,943
  19,195
  20,497
  21,850
  23,257
  24,721
  26,246
  27,834
  29,489
  31,215
  33,014
  34,893
  36,854
  38,902
  41,043
  43,281
  45,621
  48,069
  50,631
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
  7,008
  7,800
  8,633
  9,505
  10,417
  11,368
  12,359
  13,391
  14,464
  15,579
  16,739
  17,943
  19,195
  20,497
  21,850
  23,257
  24,721
  26,246
  27,834
  29,489
  31,215
  33,014
  34,893
  36,854
  38,902
  41,043
  43,281
  45,621
  48,069
  50,631
Operating income, $m
  -919
  -5,360
  -5,965
  -6,602
  -7,269
  -7,966
  -8,694
  -9,452
  -10,241
  -11,062
  -11,915
  -12,801
  -13,722
  -14,680
  -15,675
  -16,710
  -17,786
  -18,906
  -20,072
  -21,287
  -22,552
  -23,872
  -25,248
  -26,685
  -28,184
  -29,751
  -31,388
  -33,099
  -34,889
  -36,761
  -38,721
EBITDA, $m
  -347
  -4,721
  -5,255
  -5,815
  -6,403
  -7,017
  -7,658
  -8,326
  -9,021
  -9,744
  -10,495
  -11,276
  -12,087
  -12,931
  -13,807
  -14,719
  -15,667
  -16,653
  -17,681
  -18,750
  -19,865
  -21,027
  -22,240
  -23,505
  -24,826
  -26,206
  -27,648
  -29,156
  -30,732
  -32,381
  -34,107
Interest expense (income), $m
  97
  97
  113
  130
  148
  167
  186
  207
  228
  250
  273
  297
  322
  348
  375
  403
  432
  462
  494
  526
  561
  596
  633
  672
  712
  754
  798
  844
  893
  943
  995
Earnings before tax, $m
  -1,208
  -5,457
  -6,078
  -6,732
  -7,417
  -8,133
  -8,880
  -9,658
  -10,469
  -11,312
  -12,188
  -13,098
  -14,044
  -15,028
  -16,050
  -17,113
  -18,218
  -19,368
  -20,566
  -21,813
  -23,113
  -24,468
  -25,881
  -27,356
  -28,897
  -30,505
  -32,186
  -33,944
  -35,782
  -37,704
  -39,716
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
  -5,457
  -6,078
  -6,732
  -7,417
  -8,133
  -8,880
  -9,658
  -10,469
  -11,312
  -12,188
  -13,098
  -14,044
  -15,028
  -16,050
  -17,113
  -18,218
  -19,368
  -20,566
  -21,813
  -23,113
  -24,468
  -25,881
  -27,356
  -28,897
  -30,505
  -32,186
  -33,944
  -35,782
  -37,704
  -39,716

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
  4,184
  4,657
  5,154
  5,675
  6,219
  6,787
  7,379
  7,995
  8,636
  9,302
  9,994
  10,713
  11,461
  12,238
  13,045
  13,886
  14,760
  15,670
  16,619
  17,607
  18,637
  19,711
  20,833
  22,004
  23,227
  24,505
  25,841
  27,238
  28,700
  30,229
Adjusted assets (=assets-cash), $m
  3,732
  4,184
  4,657
  5,154
  5,675
  6,219
  6,787
  7,379
  7,995
  8,636
  9,302
  9,994
  10,713
  11,461
  12,238
  13,045
  13,886
  14,760
  15,670
  16,619
  17,607
  18,637
  19,711
  20,833
  22,004
  23,227
  24,505
  25,841
  27,238
  28,700
  30,229
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
  4,087
  4,549
  5,034
  5,543
  6,074
  6,629
  7,207
  7,809
  8,435
  9,085
  9,761
  10,464
  11,194
  11,953
  12,742
  13,562
  14,417
  15,306
  16,232
  17,197
  18,203
  19,253
  20,348
  21,492
  22,686
  23,934
  25,239
  26,604
  28,032
  29,526
Working capital, $m
  265
  -353
  -393
  -435
  -478
  -524
  -572
  -622
  -674
  -728
  -784
  -843
  -903
  -966
  -1,032
  -1,100
  -1,171
  -1,245
  -1,321
  -1,401
  -1,485
  -1,571
  -1,662
  -1,757
  -1,855
  -1,958
  -2,066
  -2,179
  -2,297
  -2,420
  -2,549
Total debt, $m
  2,431
  2,823
  3,248
  3,696
  4,164
  4,654
  5,166
  5,698
  6,253
  6,829
  7,429
  8,051
  8,699
  9,372
  10,071
  10,798
  11,554
  12,341
  13,160
  14,014
  14,903
  15,830
  16,797
  17,806
  18,860
  19,961
  21,111
  22,314
  23,571
  24,887
  26,263
Total liabilities, $m
  3,374
  3,766
  4,191
  4,639
  5,107
  5,597
  6,109
  6,641
  7,196
  7,772
  8,372
  8,994
  9,642
  10,315
  11,014
  11,741
  12,497
  13,284
  14,103
  14,957
  15,846
  16,773
  17,740
  18,749
  19,803
  20,904
  22,054
  23,257
  24,514
  25,830
  27,206
Total equity, $m
  938
  418
  466
  515
  567
  622
  679
  738
  800
  864
  930
  999
  1,071
  1,146
  1,224
  1,305
  1,389
  1,476
  1,567
  1,662
  1,761
  1,864
  1,971
  2,083
  2,200
  2,323
  2,450
  2,584
  2,724
  2,870
  3,023
Total liabilities and equity, $m
  4,312
  4,184
  4,657
  5,154
  5,674
  6,219
  6,788
  7,379
  7,996
  8,636
  9,302
  9,993
  10,713
  11,461
  12,238
  13,046
  13,886
  14,760
  15,670
  16,619
  17,607
  18,637
  19,711
  20,832
  22,003
  23,227
  24,504
  25,841
  27,238
  28,700
  30,229
Debt-to-equity ratio
  2.592
  6.750
  6.980
  7.170
  7.340
  7.480
  7.610
  7.720
  7.820
  7.910
  7.990
  8.060
  8.120
  8.180
  8.230
  8.280
  8.320
  8.360
  8.400
  8.430
  8.460
  8.490
  8.520
  8.550
  8.570
  8.590
  8.620
  8.640
  8.650
  8.670
  8.690
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
  -5,457
  -6,078
  -6,732
  -7,417
  -8,133
  -8,880
  -9,658
  -10,469
  -11,312
  -12,188
  -13,098
  -14,044
  -15,028
  -16,050
  -17,113
  -18,218
  -19,368
  -20,566
  -21,813
  -23,113
  -24,468
  -25,881
  -27,356
  -28,897
  -30,505
  -32,186
  -33,944
  -35,782
  -37,704
  -39,716
Depreciation, amort., depletion, $m
  572
  639
  711
  787
  866
  949
  1,036
  1,126
  1,220
  1,318
  1,420
  1,525
  1,635
  1,749
  1,868
  1,991
  2,119
  2,253
  2,392
  2,536
  2,687
  2,844
  3,008
  3,179
  3,358
  3,545
  3,740
  3,944
  4,157
  4,380
  4,613
Funds from operations, $m
  842
  -4,818
  -5,368
  -5,945
  -6,551
  -7,184
  -7,844
  -8,532
  -9,249
  -9,994
  -10,768
  -11,573
  -12,409
  -13,279
  -14,182
  -15,122
  -16,099
  -17,116
  -18,174
  -19,277
  -20,426
  -21,624
  -22,873
  -24,177
  -25,539
  -26,961
  -28,447
  -30,000
  -31,625
  -33,324
  -35,103
Change in working capital, $m
  16
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -129
Cash from operations, $m
  826
  -4,781
  -5,328
  -5,903
  -6,507
  -7,138
  -7,796
  -8,482
  -9,197
  -9,940
  -10,712
  -11,515
  -12,349
  -13,216
  -14,117
  -15,054
  -16,028
  -17,042
  -18,097
  -19,197
  -20,342
  -21,537
  -22,782
  -24,083
  -25,440
  -26,858
  -28,339
  -29,887
  -31,507
  -33,201
  -34,974
Maintenance CAPEX, $m
  0
  -570
  -639
  -711
  -787
  -866
  -949
  -1,036
  -1,126
  -1,220
  -1,318
  -1,420
  -1,525
  -1,635
  -1,749
  -1,868
  -1,991
  -2,119
  -2,253
  -2,392
  -2,536
  -2,687
  -2,844
  -3,008
  -3,179
  -3,358
  -3,545
  -3,740
  -3,944
  -4,157
  -4,380
New CAPEX, $m
  -1,371
  -438
  -462
  -485
  -509
  -532
  -555
  -578
  -602
  -626
  -650
  -676
  -702
  -730
  -759
  -789
  -821
  -854
  -889
  -926
  -965
  -1,006
  -1,050
  -1,095
  -1,144
  -1,195
  -1,248
  -1,305
  -1,365
  -1,428
  -1,494
Cash from investing activities, $m
  -991
  -1,008
  -1,101
  -1,196
  -1,296
  -1,398
  -1,504
  -1,614
  -1,728
  -1,846
  -1,968
  -2,096
  -2,227
  -2,365
  -2,508
  -2,657
  -2,812
  -2,973
  -3,142
  -3,318
  -3,501
  -3,693
  -3,894
  -4,103
  -4,323
  -4,553
  -4,793
  -5,045
  -5,309
  -5,585
  -5,874
Free cash flow, $m
  -165
  -5,789
  -6,428
  -7,099
  -7,802
  -8,535
  -9,300
  -10,096
  -10,925
  -11,786
  -12,680
  -13,610
  -14,577
  -15,581
  -16,625
  -17,710
  -18,840
  -20,015
  -21,239
  -22,514
  -23,844
  -25,230
  -26,676
  -28,186
  -29,763
  -31,410
  -33,132
  -34,932
  -36,815
  -38,786
  -40,848
Issuance/(repayment) of debt, $m
  -39
  392
  426
  447
  469
  490
  511
  533
  554
  577
  599
  623
  647
  673
  699
  727
  756
  787
  819
  853
  889
  927
  967
  1,009
  1,054
  1,101
  1,150
  1,202
  1,258
  1,316
  1,377
Issuance/(repurchase) of shares, $m
  757
  5,517
  6,126
  6,782
  7,469
  8,187
  8,937
  9,718
  10,530
  11,376
  12,254
  13,167
  14,116
  15,102
  16,128
  17,193
  18,302
  19,456
  20,657
  21,908
  23,212
  24,571
  25,989
  27,469
  29,014
  30,628
  32,314
  34,077
  35,921
  37,850
  39,869
Cash from financing (excl. dividends), $m  
  715
  5,909
  6,552
  7,229
  7,938
  8,677
  9,448
  10,251
  11,084
  11,953
  12,853
  13,790
  14,763
  15,775
  16,827
  17,920
  19,058
  20,243
  21,476
  22,761
  24,101
  25,498
  26,956
  28,478
  30,068
  31,729
  33,464
  35,279
  37,179
  39,166
  41,246
Total cash flow (excl. dividends), $m
  550
  121
  123
  129
  135
  142
  148
  154
  160
  167
  173
  180
  187
  194
  202
  210
  219
  228
  237
  247
  257
  268
  280
  292
  305
  318
  333
  348
  364
  380
  398
Retained Cash Flow (-), $m
  441
  -5,517
  -6,126
  -6,782
  -7,469
  -8,187
  -8,937
  -9,718
  -10,530
  -11,376
  -12,254
  -13,167
  -14,116
  -15,102
  -16,128
  -17,193
  -18,302
  -19,456
  -20,657
  -21,908
  -23,212
  -24,571
  -25,989
  -27,469
  -29,014
  -30,628
  -32,314
  -34,077
  -35,921
  -37,850
  -39,869
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
 
  -4,817
  -6,003
  -6,652
  -7,333
  -8,046
  -8,789
  -9,564
  -10,370
  -11,209
  -12,081
  -12,987
  -13,929
  -14,908
  -15,925
  -16,983
  -18,083
  -19,228
  -20,420
  -21,661
  -22,954
  -24,303
  -25,709
  -27,177
  -28,709
  -30,309
  -31,982
  -33,730
  -35,558
  -37,470
  -39,471
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
 
  -4,519
  -5,250
  -5,388
  -5,463
  -5,470
  -5,410
  -5,284
  -5,096
  -4,852
  -4,558
  -4,224
  -3,860
  -3,475
  -3,083
  -2,691
  -2,311
  -1,951
  -1,617
  -1,316
  -1,050
  -820
  -627
  -469
  -342
  -243
  -169
  -114
  -75
  -47
  -29
Current shareholders' claim on cash, %
  100
  31.8
  10.5
  3.5
  1.1
  0.4
  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
  0.0

Newfield Exploration Company is an independent exploration and production company. It is engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. Its operating segments are the United States and China. Its the United States operations are onshore and focus primarily on large scale, liquids resource plays. Its principal areas of operation are the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota and the Uinta Basin of Utah. It has oil producing assets offshore China. As of December 31, 2016, its proved reserves of 513 million barrels of oil equivalents (MMBOE) consisted of 304 MMBOE proved developed producing, 10 MMBOE proved developed non-producing and 199 MMBOE proved undeveloped reserves. As of December 31, 2016, its proved liquids reserves were 285 million barrels of crude oil or other liquid hydrocarbons. As of December 31, 2016, 67% of its proved liquids reserves were crude oil or condensate.

FINANCIAL RATIOS  of  Newfield Exploration (NFX)

Valuation Ratios
P/E Ratio -5.4
Price to Sales 4.5
Price to Book 7.1
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow -12.2
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 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 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 202.347 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 $6.7 billion.

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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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