Intrinsic value of Newfield Exploration - NFX

Previous Close

$26.80

  Intrinsic Value

$1.19

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-68%

Previous close

$26.80

 
Intrinsic value

$1.19

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-68%

*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 5.3

 

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
  46.80
  42.62
  38.86
  35.47
  32.42
  29.68
  27.21
  24.99
  22.99
  21.19
  19.57
  18.12
  16.81
  15.62
  14.56
  13.61
  12.75
  11.97
  11.27
  10.65
  10.08
  9.57
  9.12
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
Revenue, $m
  1,472
  2,161
  3,082
  4,279
  5,797
  7,677
  9,956
  12,665
  15,831
  19,471
  23,598
  28,217
  33,329
  38,930
  45,013
  51,568
  58,585
  66,052
  73,959
  82,297
  91,059
  100,239
  109,836
  119,849
  130,281
  141,139
  152,431
  164,170
  176,369
  189,045
  202,220
Variable operating expenses, $m
 
  9,186
  13,101
  18,192
  24,645
  32,636
  42,323
  53,841
  67,297
  82,771
  100,314
  119,950
  141,682
  165,493
  191,351
  219,216
  249,044
  280,786
  314,399
  349,844
  387,090
  426,116
  466,912
  509,477
  553,825
  599,982
  647,986
  697,886
  749,743
  803,632
  859,635
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
  9,186
  13,101
  18,192
  24,645
  32,636
  42,323
  53,841
  67,297
  82,771
  100,314
  119,950
  141,682
  165,493
  191,351
  219,216
  249,044
  280,786
  314,399
  349,844
  387,090
  426,116
  466,912
  509,477
  553,825
  599,982
  647,986
  697,886
  749,743
  803,632
  859,635
Operating income, $m
  -919
  -7,025
  -10,019
  -13,912
  -18,847
  -24,959
  -32,367
  -41,176
  -51,466
  -63,300
  -76,716
  -91,733
  -108,353
  -126,562
  -146,338
  -167,648
  -190,459
  -214,734
  -240,440
  -267,547
  -296,032
  -325,877
  -357,076
  -389,628
  -423,544
  -458,843
  -495,554
  -533,716
  -573,374
  -614,586
  -657,416
EBITDA, $m
  -347
  -6,489
  -9,255
  -12,852
  -17,410
  -23,056
  -29,899
  -38,036
  -47,542
  -58,474
  -70,867
  -84,738
  -100,091
  -116,912
  -135,179
  -154,864
  -175,936
  -198,360
  -222,106
  -247,146
  -273,458
  -301,028
  -329,848
  -359,918
  -391,247
  -423,855
  -457,767
  -493,018
  -529,653
  -567,722
  -607,285
Interest expense (income), $m
  97
  97
  160
  244
  354
  493
  665
  874
  1,122
  1,412
  1,745
  2,123
  2,546
  3,014
  3,527
  4,084
  4,684
  5,327
  6,010
  6,735
  7,498
  8,300
  9,141
  10,020
  10,937
  11,892
  12,886
  13,920
  14,995
  16,112
  17,273
Earnings before tax, $m
  -1,208
  -7,122
  -10,179
  -14,157
  -19,202
  -25,452
  -33,032
  -42,049
  -52,588
  -64,712
  -78,462
  -93,857
  -110,899
  -129,577
  -149,865
  -171,732
  -195,143
  -220,061
  -246,450
  -274,282
  -303,530
  -334,178
  -366,217
  -399,648
  -434,481
  -470,735
  -508,441
  -547,636
  -588,369
  -630,698
  -674,688
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
  -7,122
  -10,179
  -14,157
  -19,202
  -25,452
  -33,032
  -42,049
  -52,588
  -64,712
  -78,462
  -93,857
  -110,899
  -129,577
  -149,865
  -171,732
  -195,143
  -220,061
  -246,450
  -274,282
  -303,530
  -334,178
  -366,217
  -399,648
  -434,481
  -470,735
  -508,441
  -547,636
  -588,369
  -630,698
  -674,688

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
  5,840
  8,329
  11,566
  15,669
  20,749
  26,908
  34,231
  42,786
  52,624
  63,778
  76,262
  90,079
  105,217
  121,657
  139,374
  158,337
  178,518
  199,889
  222,424
  246,104
  270,916
  296,853
  323,915
  352,111
  381,457
  411,977
  443,702
  476,672
  510,933
  546,539
Adjusted assets (=assets-cash), $m
  3,732
  5,840
  8,329
  11,566
  15,669
  20,749
  26,908
  34,231
  42,786
  52,624
  63,778
  76,262
  90,079
  105,217
  121,657
  139,374
  158,337
  178,518
  199,889
  222,424
  246,104
  270,916
  296,853
  323,915
  352,111
  381,457
  411,977
  443,702
  476,672
  510,933
  546,539
Revenue / Adjusted assets
  0.394
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
Average production assets, $m
  3,649
  5,357
  7,640
  10,609
  14,372
  19,032
  24,681
  31,398
  39,245
  48,269
  58,499
  69,950
  82,623
  96,508
  111,588
  127,838
  145,231
  163,742
  183,344
  204,014
  225,734
  248,493
  272,283
  297,105
  322,967
  349,884
  377,877
  406,977
  437,218
  468,643
  501,302
Working capital, $m
  265
  -216
  -308
  -428
  -580
  -768
  -996
  -1,267
  -1,583
  -1,947
  -2,360
  -2,822
  -3,333
  -3,893
  -4,501
  -5,157
  -5,858
  -6,605
  -7,396
  -8,230
  -9,106
  -10,024
  -10,984
  -11,985
  -13,028
  -14,114
  -15,243
  -16,417
  -17,637
  -18,905
  -20,222
Total debt, $m
  2,431
  4,004
  6,112
  8,853
  12,328
  16,632
  21,848
  28,051
  35,297
  43,630
  53,077
  63,651
  75,354
  88,176
  102,101
  117,106
  133,168
  150,262
  168,363
  187,450
  207,507
  228,523
  250,492
  273,413
  297,295
  322,151
  348,001
  374,873
  402,798
  431,817
  461,976
Total liabilities, $m
  3,374
  4,947
  7,055
  9,796
  13,271
  17,575
  22,791
  28,994
  36,240
  44,573
  54,020
  64,594
  76,297
  89,119
  103,044
  118,049
  134,111
  151,205
  169,306
  188,393
  208,450
  229,466
  251,435
  274,356
  298,238
  323,094
  348,944
  375,816
  403,741
  432,760
  462,919
Total equity, $m
  938
  894
  1,274
  1,770
  2,397
  3,175
  4,117
  5,237
  6,546
  8,052
  9,758
  11,668
  13,782
  16,098
  18,614
  21,324
  24,226
  27,313
  30,583
  34,031
  37,654
  41,450
  45,419
  49,559
  53,873
  58,363
  63,032
  67,886
  72,931
  78,173
  83,621
Total liabilities and equity, $m
  4,312
  5,841
  8,329
  11,566
  15,668
  20,750
  26,908
  34,231
  42,786
  52,625
  63,778
  76,262
  90,079
  105,217
  121,658
  139,373
  158,337
  178,518
  199,889
  222,424
  246,104
  270,916
  296,854
  323,915
  352,111
  381,457
  411,976
  443,702
  476,672
  510,933
  546,540
Debt-to-equity ratio
  2.592
  4.480
  4.800
  5.000
  5.140
  5.240
  5.310
  5.360
  5.390
  5.420
  5.440
  5.460
  5.470
  5.480
  5.490
  5.490
  5.500
  5.500
  5.510
  5.510
  5.510
  5.510
  5.520
  5.520
  5.520
  5.520
  5.520
  5.520
  5.520
  5.520
  5.520
Adjusted equity ratio
  0.096
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,230
  -7,122
  -10,179
  -14,157
  -19,202
  -25,452
  -33,032
  -42,049
  -52,588
  -64,712
  -78,462
  -93,857
  -110,899
  -129,577
  -149,865
  -171,732
  -195,143
  -220,061
  -246,450
  -274,282
  -303,530
  -334,178
  -366,217
  -399,648
  -434,481
  -470,735
  -508,441
  -547,636
  -588,369
  -630,698
  -674,688
Depreciation, amort., depletion, $m
  572
  536
  764
  1,061
  1,437
  1,903
  2,468
  3,140
  3,924
  4,827
  5,850
  6,995
  8,262
  9,651
  11,159
  12,784
  14,523
  16,374
  18,334
  20,401
  22,573
  24,849
  27,228
  29,710
  32,297
  34,988
  37,788
  40,698
  43,722
  46,864
  50,130
Funds from operations, $m
  845
  -6,587
  -9,415
  -13,096
  -17,764
  -23,549
  -30,564
  -38,910
  -48,664
  -59,885
  -72,612
  -86,862
  -102,637
  -119,926
  -138,706
  -158,949
  -180,620
  -203,687
  -228,116
  -253,880
  -280,956
  -309,328
  -338,989
  -369,937
  -402,184
  -435,747
  -470,653
  -506,938
  -544,648
  -583,834
  -624,558
Change in working capital, $m
  19
  -69
  -92
  -120
  -152
  -188
  -228
  -271
  -317
  -364
  -413
  -462
  -511
  -560
  -608
  -656
  -702
  -747
  -791
  -834
  -876
  -918
  -960
  -1,001
  -1,043
  -1,086
  -1,129
  -1,174
  -1,220
  -1,268
  -1,317
Cash from operations, $m
  826
  -6,518
  -9,323
  -12,976
  -17,613
  -23,361
  -30,336
  -38,639
  -48,347
  -59,521
  -72,199
  -86,400
  -102,126
  -119,366
  -138,098
  -158,293
  -179,918
  -202,940
  -227,325
  -253,046
  -280,080
  -308,410
  -338,029
  -368,936
  -401,141
  -434,661
  -469,524
  -505,764
  -543,428
  -582,566
  -623,241
Maintenance CAPEX, $m
  0
  -365
  -536
  -764
  -1,061
  -1,437
  -1,903
  -2,468
  -3,140
  -3,924
  -4,827
  -5,850
  -6,995
  -8,262
  -9,651
  -11,159
  -12,784
  -14,523
  -16,374
  -18,334
  -20,401
  -22,573
  -24,849
  -27,228
  -29,710
  -32,297
  -34,988
  -37,788
  -40,698
  -43,722
  -46,864
New CAPEX, $m
  -1,371
  -1,708
  -2,283
  -2,969
  -3,763
  -4,660
  -5,649
  -6,717
  -7,847
  -9,024
  -10,230
  -11,451
  -12,673
  -13,885
  -15,079
  -16,250
  -17,394
  -18,511
  -19,602
  -20,670
  -21,720
  -22,758
  -23,790
  -24,822
  -25,862
  -26,917
  -27,994
  -29,099
  -30,241
  -31,425
  -32,659
Cash from investing activities, $m
  -991
  -2,073
  -2,819
  -3,733
  -4,824
  -6,097
  -7,552
  -9,185
  -10,987
  -12,948
  -15,057
  -17,301
  -19,668
  -22,147
  -24,730
  -27,409
  -30,178
  -33,034
  -35,976
  -39,004
  -42,121
  -45,331
  -48,639
  -52,050
  -55,572
  -59,214
  -62,982
  -66,887
  -70,939
  -75,147
  -79,523
Free cash flow, $m
  -165
  -8,590
  -12,142
  -16,709
  -22,437
  -29,458
  -37,889
  -47,824
  -59,334
  -72,470
  -87,256
  -103,701
  -121,794
  -141,513
  -162,828
  -185,702
  -210,096
  -235,974
  -263,301
  -292,051
  -322,202
  -353,742
  -386,668
  -420,986
  -456,713
  -493,874
  -532,506
  -572,651
  -614,366
  -657,713
  -702,764
Issuance/(repayment) of debt, $m
  -39
  1,573
  2,108
  2,741
  3,475
  4,303
  5,217
  6,202
  7,246
  8,333
  9,447
  10,574
  11,703
  12,822
  13,925
  15,006
  16,062
  17,093
  18,101
  19,087
  20,057
  21,016
  21,968
  22,922
  23,882
  24,856
  25,850
  26,871
  27,926
  29,019
  30,158
Issuance/(repurchase) of shares, $m
  757
  7,408
  10,560
  14,652
  19,829
  26,229
  33,975
  43,170
  53,897
  66,218
  80,168
  95,767
  113,013
  131,893
  152,380
  174,443
  198,045
  223,149
  249,720
  277,730
  307,153
  337,974
  370,185
  403,788
  438,795
  475,225
  513,110
  552,490
  593,414
  635,940
  680,136
Cash from financing (excl. dividends), $m  
  715
  8,981
  12,668
  17,393
  23,304
  30,532
  39,192
  49,372
  61,143
  74,551
  89,615
  106,341
  124,716
  144,715
  166,305
  189,449
  214,107
  240,242
  267,821
  296,817
  327,210
  358,990
  392,153
  426,710
  462,677
  500,081
  538,960
  579,361
  621,340
  664,959
  710,294
Total cash flow (excl. dividends), $m
  550
  391
  526
  685
  868
  1,075
  1,303
  1,549
  1,809
  2,081
  2,359
  2,640
  2,922
  3,202
  3,477
  3,747
  4,011
  4,268
  4,520
  4,766
  5,008
  5,248
  5,485
  5,723
  5,963
  6,206
  6,455
  6,710
  6,973
  7,246
  7,530
Retained Cash Flow (-), $m
  441
  -7,408
  -10,560
  -14,652
  -19,829
  -26,229
  -33,975
  -43,170
  -53,897
  -66,218
  -80,168
  -95,767
  -113,013
  -131,893
  -152,380
  -174,443
  -198,045
  -223,149
  -249,720
  -277,730
  -307,153
  -337,974
  -370,185
  -403,788
  -438,795
  -475,225
  -513,110
  -552,490
  -593,414
  -635,940
  -680,136
Prev. year cash balance distribution, $m
 
  330
  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
 
  -6,688
  -10,034
  -13,968
  -18,962
  -25,155
  -32,672
  -41,621
  -52,088
  -64,137
  -77,809
  -93,126
  -110,091
  -128,691
  -148,903
  -170,696
  -194,034
  -218,880
  -245,200
  -272,963
  -302,145
  -332,726
  -364,700
  -398,065
  -432,831
  -469,019
  -506,655
  -545,780
  -586,441
  -628,694
  -672,606
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
 
  -6,273
  -8,775
  -11,314
  -14,125
  -17,102
  -20,111
  -22,997
  -25,597
  -27,760
  -29,355
  -30,287
  -30,504
  -30,002
  -28,822
  -27,049
  -24,799
  -22,208
  -19,423
  -16,584
  -13,818
  -11,230
  -8,896
  -6,865
  -5,157
  -3,767
  -2,673
  -1,841
  -1,230
  -795
  -497
Current shareholders' claim on cash, %
  100
  31.6
  10.2
  3.4
  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, 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 -4.3
Price to Sales 3.6
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow -9.8
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 46.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.6%, whose default value for 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 10 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 -10%. 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 197.06 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 $5.3 billion.

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COMPANY NEWS

▶ Analyzing the US Crude Oil and Natural Gas Rig Count   [Jul-17-17 07:38AM  Market Realist]
▶ Slowing Natural Gas Inventories Could Drive Prices   [Jul-14-17 02:05PM  Market Realist]
▶ The options market says buy this oil player   [Jun-29-17 02:22PM  CNBC Videos]
▶ Weather Could Rescue Natural Gas Bulls Next Week   [Jun-23-17 01:05PM  Market Realist]
▶ Underperforming Energy Sector May Soon See M&A Wave   [Jun-22-17 07:00PM  Oilprice.com]
▶ [$$] Frackers Collide With Traditional Oil Drillers   [Jun-21-17 01:02AM  The Wall Street Journal]
▶ Newfield Exploration to Present at Upcoming Event   [Jun-20-17 04:39PM  PR Newswire]
▶ Lower US Natural Gas Inventories, Prices Reach a 2-Week High   [Jun-16-17 02:35PM  Market Realist]
▶ The Biggest Loser: Newfield Exploration Tumbles 5%   [Jun-02-17 05:59PM  Barrons.com]
▶ Natural Gas Traders Are Tracking Weather Forecasts This Week   [May-26-17 10:38AM  Market Realist]
▶ Newfield Exploration to Present at Upcoming Event   [May-16-17 10:40AM  PR Newswire]
▶ US Natural Gas Inventories by Region: Week Ending May 5   [May-15-17 07:36AM  Market Realist]
▶ Gauging Oasis Petroleums Implied Volatility Trends   [May-12-17 07:36AM  Market Realist]
▶ Newfield beats 1Q profit forecasts   [May-02-17 05:10PM  Associated Press]
▶ US Natural Gas Inventories Pressure Prices   [Apr-21-17 10:04AM  Market Realist]
▶ Short Interest Trends in Whiting Petroleum Stock   [Apr-20-17 09:07AM  Market Realist]
▶ The Rise or Fall of US Natural Gas Prices in 2Q17   [Apr-10-17 09:06AM  Market Realist]
▶ Decoding US Natural Gas Inventories: Week Ended March 31   [Apr-07-17 01:35PM  Market Realist]
▶ Weather Forecasts Could Drive Natural Gas Prices Next Week   [Mar-31-17 09:07AM  Market Realist]
▶ Newfield announces record Anadarko Basin oil well   [Mar-27-17 08:00AM  PR Newswire]
▶ Can We Predict the Price Range for Whiting Petroleum Stock?   [Mar-21-17 03:05PM  Market Realist]
▶ Analyzing US Natural Gas Inventories: Week Ending March 10   [Mar-17-17 11:06AM  Market Realist]
▶ Newfield Exploration to Present at Upcoming Event   [Feb-02-17 06:57PM  PR Newswire]
Stock chart of NFX Financial statements of NFX Annual reports 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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