Intrinsic value of Oasis Petroleum - OAS

Previous Close

$7.35

  Intrinsic Value

$3.13

stock screener

  Rating & Target

str. sell

-57%

  Value-price divergence*

-84%

Previous close

$7.35

 
Intrinsic value

$3.13

 
Up/down potential

-57%

 
Rating

str. sell

 
Value-price divergence*

-84%

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

We calculate the intrinsic value of OAS 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 1.7

 

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, %
  -10.76
  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
  705
  1,128
  1,743
  2,606
  3,782
  5,335
  7,335
  9,845
  12,928
  16,635
  21,011
  26,091
  31,899
  38,449
  45,746
  53,790
  62,570
  72,076
  82,291
  93,199
  104,783
  117,028
  129,923
  143,456
  157,622
  172,418
  187,846
  203,914
  220,631
  238,014
  256,080
Variable operating expenses, $m
 
  968
  1,495
  2,236
  3,245
  4,578
  6,293
  8,447
  11,092
  14,273
  18,028
  22,386
  27,369
  32,989
  39,250
  46,152
  53,685
  61,841
  70,605
  79,964
  89,904
  100,410
  111,474
  123,085
  135,239
  147,934
  161,172
  174,958
  189,302
  204,216
  219,717
Fixed operating expenses, $m
 
  238
  244
  250
  256
  262
  269
  276
  283
  290
  297
  304
  312
  320
  328
  336
  344
  353
  362
  371
  380
  390
  399
  409
  420
  430
  441
  452
  463
  475
  487
Total operating expenses, $m
  831
  1,206
  1,739
  2,486
  3,501
  4,840
  6,562
  8,723
  11,375
  14,563
  18,325
  22,690
  27,681
  33,309
  39,578
  46,488
  54,029
  62,194
  70,967
  80,335
  90,284
  100,800
  111,873
  123,494
  135,659
  148,364
  161,613
  175,410
  189,765
  204,691
  220,204
Operating income, $m
  -126
  -78
  4
  120
  281
  495
  772
  1,122
  1,553
  2,072
  2,687
  3,401
  4,218
  5,140
  6,168
  7,302
  8,541
  9,882
  11,323
  12,863
  14,499
  16,228
  18,050
  19,961
  21,963
  24,053
  26,233
  28,504
  30,866
  33,323
  35,877
EBITDA, $m
  350
  682
  1,178
  1,876
  2,829
  4,090
  5,714
  7,755
  10,263
  13,280
  16,842
  20,979
  25,709
  31,044
  36,989
  43,542
  50,696
  58,441
  66,765
  75,654
  85,094
  95,073
  105,582
  116,611
  128,156
  140,215
  152,790
  165,886
  179,511
  193,679
  208,405
Interest expense (income), $m
  138
  138
  256
  427
  667
  993
  1,425
  1,981
  2,678
  3,535
  4,565
  5,781
  7,193
  8,807
  10,627
  12,655
  14,890
  17,330
  19,972
  22,811
  25,842
  29,061
  32,464
  36,047
  39,808
  43,745
  47,856
  52,144
  56,609
  61,255
  66,085
Earnings before tax, $m
  -372
  -215
  -252
  -307
  -386
  -498
  -653
  -858
  -1,125
  -1,463
  -1,879
  -2,381
  -2,975
  -3,667
  -4,459
  -5,353
  -6,350
  -7,449
  -8,649
  -9,947
  -11,343
  -12,833
  -14,414
  -16,086
  -17,845
  -19,691
  -21,623
  -23,640
  -25,743
  -27,932
  -30,208
Tax expense, $m
  -129
  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
  -243
  -215
  -252
  -307
  -386
  -498
  -653
  -858
  -1,125
  -1,463
  -1,879
  -2,381
  -2,975
  -3,667
  -4,459
  -5,353
  -6,350
  -7,449
  -8,649
  -9,947
  -11,343
  -12,833
  -14,414
  -16,086
  -17,845
  -19,691
  -21,623
  -23,640
  -25,743
  -27,932
  -30,208

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  6,179
  9,895
  15,287
  22,862
  33,172
  46,801
  64,340
  86,364
  113,401
  145,919
  184,308
  228,869
  279,814
  337,270
  401,285
  471,840
  548,863
  632,244
  721,849
  817,531
  919,148
  1,026,566
  1,139,673
  1,258,384
  1,382,645
  1,512,436
  1,647,775
  1,788,719
  1,935,363
  2,087,839
  2,246,318
Adjusted assets (=assets-cash), $m
  6,168
  9,895
  15,287
  22,862
  33,172
  46,801
  64,340
  86,364
  113,401
  145,919
  184,308
  228,869
  279,814
  337,270
  401,285
  471,840
  548,863
  632,244
  721,849
  817,531
  919,148
  1,026,566
  1,139,673
  1,258,384
  1,382,645
  1,512,436
  1,647,775
  1,788,719
  1,935,363
  2,087,839
  2,246,318
Revenue / Adjusted assets
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
Average production assets, $m
  4,845
  7,752
  11,976
  17,910
  25,987
  36,664
  50,405
  67,658
  88,839
  114,314
  144,388
  179,298
  219,209
  264,220
  314,370
  369,643
  429,984
  495,305
  565,502
  640,460
  720,068
  804,220
  892,829
  985,828
  1,083,175
  1,184,854
  1,290,880
  1,401,297
  1,516,179
  1,635,630
  1,759,783
Working capital, $m
  -142
  -113
  -174
  -261
  -378
  -534
  -733
  -985
  -1,293
  -1,663
  -2,101
  -2,609
  -3,190
  -3,845
  -4,575
  -5,379
  -6,257
  -7,208
  -8,229
  -9,320
  -10,478
  -11,703
  -12,992
  -14,346
  -15,762
  -17,242
  -18,785
  -20,391
  -22,063
  -23,801
  -25,608
Total debt, $m
  2,297
  4,265
  7,113
  11,112
  16,556
  23,752
  33,013
  44,641
  58,917
  76,086
  96,356
  119,884
  146,783
  177,120
  210,919
  248,172
  288,841
  332,866
  380,177
  430,697
  484,351
  541,068
  600,788
  663,468
  729,078
  797,607
  869,066
  943,485
  1,020,913
  1,101,420
  1,185,097
Total liabilities, $m
  3,255
  5,224
  8,072
  12,071
  17,515
  24,711
  33,972
  45,600
  59,876
  77,045
  97,315
  120,843
  147,742
  178,079
  211,878
  249,131
  289,800
  333,825
  381,136
  431,656
  485,310
  542,027
  601,747
  664,427
  730,037
  798,566
  870,025
  944,444
  1,021,872
  1,102,379
  1,186,056
Total equity, $m
  2,923
  4,670
  7,216
  10,791
  15,657
  22,090
  30,369
  40,764
  53,525
  68,874
  86,993
  108,026
  132,072
  159,192
  189,406
  222,708
  259,063
  298,419
  340,713
  385,875
  433,838
  484,539
  537,926
  593,957
  652,608
  713,870
  777,750
  844,276
  913,491
  985,460
  1,060,262
Total liabilities and equity, $m
  6,178
  9,894
  15,288
  22,862
  33,172
  46,801
  64,341
  86,364
  113,401
  145,919
  184,308
  228,869
  279,814
  337,271
  401,284
  471,839
  548,863
  632,244
  721,849
  817,531
  919,148
  1,026,566
  1,139,673
  1,258,384
  1,382,645
  1,512,436
  1,647,775
  1,788,720
  1,935,363
  2,087,839
  2,246,318
Debt-to-equity ratio
  0.786
  0.910
  0.990
  1.030
  1.060
  1.080
  1.090
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
Adjusted equity ratio
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -243
  -215
  -252
  -307
  -386
  -498
  -653
  -858
  -1,125
  -1,463
  -1,879
  -2,381
  -2,975
  -3,667
  -4,459
  -5,353
  -6,350
  -7,449
  -8,649
  -9,947
  -11,343
  -12,833
  -14,414
  -16,086
  -17,845
  -19,691
  -21,623
  -23,640
  -25,743
  -27,932
  -30,208
Depreciation, amort., depletion, $m
  476
  760
  1,174
  1,756
  2,548
  3,595
  4,942
  6,633
  8,710
  11,207
  14,156
  17,578
  21,491
  25,904
  30,821
  36,240
  42,155
  48,559
  55,441
  62,790
  70,595
  78,845
  87,532
  96,650
  106,194
  116,162
  126,557
  137,382
  148,645
  160,356
  172,528
Funds from operations, $m
  206
  545
  922
  1,449
  2,162
  3,096
  4,289
  5,775
  7,584
  9,745
  12,277
  15,197
  18,516
  22,237
  26,362
  30,886
  35,806
  41,111
  46,793
  52,843
  59,252
  66,012
  73,118
  80,564
  88,348
  96,471
  104,934
  113,742
  122,902
  132,424
  142,319
Change in working capital, $m
  -22
  -42
  -61
  -86
  -118
  -155
  -200
  -251
  -308
  -371
  -438
  -508
  -581
  -655
  -730
  -804
  -878
  -951
  -1,021
  -1,091
  -1,158
  -1,225
  -1,289
  -1,353
  -1,417
  -1,480
  -1,543
  -1,607
  -1,672
  -1,738
  -1,807
Cash from operations, $m
  228
  587
  983
  1,536
  2,279
  3,252
  4,489
  6,026
  7,893
  10,115
  12,715
  15,705
  19,096
  22,892
  27,091
  31,691
  36,684
  42,061
  47,814
  53,934
  60,410
  67,237
  74,407
  81,917
  89,765
  97,950
  106,477
  115,349
  124,574
  134,162
  144,126
Maintenance CAPEX, $m
  0
  -475
  -760
  -1,174
  -1,756
  -2,548
  -3,595
  -4,942
  -6,633
  -8,710
  -11,207
  -14,156
  -17,578
  -21,491
  -25,904
  -30,821
  -36,240
  -42,155
  -48,559
  -55,441
  -62,790
  -70,595
  -78,845
  -87,532
  -96,650
  -106,194
  -116,162
  -126,557
  -137,382
  -148,645
  -160,356
New CAPEX, $m
  -1,208
  -2,907
  -4,225
  -5,934
  -8,077
  -10,677
  -13,741
  -17,253
  -21,181
  -25,475
  -30,074
  -34,909
  -39,911
  -45,011
  -50,150
  -55,273
  -60,341
  -65,321
  -70,197
  -74,958
  -79,607
  -84,152
  -88,609
  -92,999
  -97,347
  -101,679
  -106,026
  -110,417
  -114,882
  -119,451
  -124,154
Cash from investing activities, $m
  -1,071
  -3,382
  -4,985
  -7,108
  -9,833
  -13,225
  -17,336
  -22,195
  -27,814
  -34,185
  -41,281
  -49,065
  -57,489
  -66,502
  -76,054
  -86,094
  -96,581
  -107,476
  -118,756
  -130,399
  -142,397
  -154,747
  -167,454
  -180,531
  -193,997
  -207,873
  -222,188
  -236,974
  -252,264
  -268,096
  -284,510
Free cash flow, $m
  -843
  -2,795
  -4,001
  -5,573
  -7,553
  -9,973
  -12,846
  -16,169
  -19,922
  -24,070
  -28,567
  -33,360
  -38,393
  -43,611
  -48,962
  -54,403
  -59,897
  -65,416
  -70,942
  -76,466
  -81,987
  -87,510
  -93,047
  -98,614
  -104,232
  -109,923
  -115,712
  -121,625
  -127,690
  -133,933
  -140,383
Issuance/(repayment) of debt, $m
  89
  1,968
  2,847
  4,000
  5,444
  7,196
  9,261
  11,628
  14,276
  17,170
  20,269
  23,528
  26,899
  30,337
  33,800
  37,253
  40,668
  44,025
  47,311
  50,520
  53,654
  56,717
  59,721
  62,679
  65,610
  68,530
  71,459
  74,418
  77,428
  80,507
  83,677
Issuance/(repurchase) of shares, $m
  764
  1,974
  2,798
  3,882
  5,252
  6,931
  8,931
  11,253
  13,887
  16,811
  19,998
  23,413
  27,022
  30,786
  34,674
  38,655
  42,705
  46,805
  50,942
  55,109
  59,306
  63,534
  67,801
  72,118
  76,496
  80,953
  85,503
  90,166
  94,958
  99,900
  105,010
Cash from financing (excl. dividends), $m  
  844
  3,942
  5,645
  7,882
  10,696
  14,127
  18,192
  22,881
  28,163
  33,981
  40,267
  46,941
  53,921
  61,123
  68,474
  75,908
  83,373
  90,830
  98,253
  105,629
  112,960
  120,251
  127,522
  134,797
  142,106
  149,483
  156,962
  164,584
  172,386
  180,407
  188,687
Total cash flow (excl. dividends), $m
  2
  1,147
  1,644
  2,309
  3,142
  4,154
  5,346
  6,713
  8,241
  9,912
  11,701
  13,582
  15,528
  17,512
  19,511
  21,505
  23,476
  25,414
  27,311
  29,164
  30,972
  32,741
  34,475
  36,183
  37,874
  39,560
  41,251
  42,959
  44,696
  46,474
  48,304
Retained Cash Flow (-), $m
  -604
  -1,974
  -2,798
  -3,882
  -5,252
  -6,931
  -8,931
  -11,253
  -13,887
  -16,811
  -19,998
  -23,413
  -27,022
  -30,786
  -34,674
  -38,655
  -42,705
  -46,805
  -50,942
  -55,109
  -59,306
  -63,534
  -67,801
  -72,118
  -76,496
  -80,953
  -85,503
  -90,166
  -94,958
  -99,900
  -105,010
Prev. year cash balance distribution, $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
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
 
  -815
  -1,154
  -1,573
  -2,110
  -2,777
  -3,585
  -4,541
  -5,646
  -6,900
  -8,297
  -9,832
  -11,494
  -13,274
  -15,162
  -17,150
  -19,228
  -21,390
  -23,631
  -25,946
  -28,333
  -30,793
  -33,326
  -35,935
  -38,622
  -41,393
  -44,252
  -47,206
  -50,262
  -53,426
  -56,707
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -754
  -978
  -1,213
  -1,468
  -1,727
  -1,973
  -2,189
  -2,357
  -2,465
  -2,505
  -2,476
  -2,379
  -2,225
  -2,026
  -1,796
  -1,549
  -1,302
  -1,064
  -847
  -656
  -493
  -361
  -256
  -176
  -117
  -76
  -47
  -28
  -16
  -9
Current shareholders' claim on cash, %
  100
  50.8
  27.4
  15.5
  9.1
  5.6
  3.5
  2.3
  1.6
  1.1
  0.8
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Oasis Petroleum Inc., an independent exploration and production company, focuses on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. As of December 31, 2016, the company had 517,801 net leasehold acres in the Williston Basin; and approximately 305.1 million barrels of oil equivalent of estimated net proved reserves. It also operates midstream services and a well services businesses. The company sells its oil and natural gas to refiners, marketers, and other purchasers that have access to pipeline and rail facilities. Oasis Petroleum Inc. was founded in 2007 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Oasis Petroleum (OAS)

Valuation Ratios
P/E Ratio -7.1
Price to Sales 2.5
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow -1.8
Growth Rates
Sales Growth Rate -10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 42.3%
Cap. Spend. - 3 Yr. Gr. Rate -13.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 78.6%
Total Debt to Equity 78.6%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.6%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.1%
Return On Equity -9.3%
Return On Equity - 3 Yr. Avg. 6.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 69.1%
Gross Margin - 3 Yr. Avg. 71.2%
EBITDA Margin 34.3%
EBITDA Margin - 3 Yr. Avg. 68.7%
Operating Margin -17.9%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin -52.8%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin -34.5%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 0%

OAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OAS stock intrinsic value calculation we used $705 million for the last fiscal year's total revenue generated by Oasis Petroleum. The default revenue input number comes from 2016 income statement of Oasis Petroleum. 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 OAS 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 8.2%, whose default value for OAS is calculated based on our internal credit rating of Oasis Petroleum, 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 Oasis Petroleum.
    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 OAS stock the variable cost ratio is equal to 85.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $232 million in the base year in the intrinsic value calculation for OAS 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 6% for Oasis Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Oasis Petroleum. 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 OAS 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 OAS are equal to 687.2%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Oasis Petroleum 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 OAS 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 - $2923 million for Oasis Petroleum - 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 233.871 million for Oasis Petroleum 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 Oasis Petroleum at the current share price and the inputted number of shares is $1.7 billion.

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Stock chart of OAS Financial statements of OAS
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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