Intrinsic value of Statoil ADR - STO

Previous Close

$19.94

  Intrinsic Value

$16.08

stock screener

  Rating & Target

hold

-19%

Previous close

$19.94

 
Intrinsic value

$16.08

 
Up/down potential

-19%

 
Rating

hold

We calculate the intrinsic value of STO 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 66.4

 

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, %
  -21.09
  37.40
  34.16
  31.24
  28.62
  26.26
  24.13
  22.22
  20.50
  18.95
  17.55
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.00
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
  6.53
Revenue, $m
  45,688
  62,775
  84,219
  110,533
  142,167
  179,497
  222,812
  272,319
  328,135
  390,307
  458,816
  533,590
  614,522
  701,481
  794,327
  892,919
  997,131
  1,106,853
  1,222,003
  1,342,530
  1,468,416
  1,599,679
  1,736,374
  1,878,594
  2,026,470
  2,180,166
  2,339,885
  2,505,862
  2,678,367
  2,857,701
  3,044,197
Variable operating expenses, $m
 
  56,172
  75,349
  98,880
  127,170
  160,553
  199,290
  243,562
  293,478
  349,078
  410,344
  477,180
  549,556
  627,322
  710,352
  798,522
  891,716
  989,838
  1,092,815
  1,200,600
  1,313,178
  1,430,564
  1,552,808
  1,679,993
  1,812,236
  1,949,683
  2,092,517
  2,240,947
  2,395,215
  2,555,591
  2,722,370
Fixed operating expenses, $m
 
  4,970
  5,094
  5,222
  5,352
  5,486
  5,623
  5,764
  5,908
  6,056
  6,207
  6,362
  6,521
  6,684
  6,852
  7,023
  7,198
  7,378
  7,563
  7,752
  7,946
  8,144
  8,348
  8,557
  8,771
  8,990
  9,215
  9,445
  9,681
  9,923
  10,171
Total operating expenses, $m
  45,608
  61,142
  80,443
  104,102
  132,522
  166,039
  204,913
  249,326
  299,386
  355,134
  416,551
  483,542
  556,077
  634,006
  717,204
  805,545
  898,914
  997,216
  1,100,378
  1,208,352
  1,321,124
  1,438,708
  1,561,156
  1,688,550
  1,821,007
  1,958,673
  2,101,732
  2,250,392
  2,404,896
  2,565,514
  2,732,541
Operating income, $m
  80
  1,633
  3,776
  6,431
  9,644
  13,457
  17,899
  22,992
  28,749
  35,174
  42,265
  50,048
  58,445
  67,475
  77,123
  87,375
  98,216
  109,636
  121,625
  134,178
  147,292
  160,970
  175,218
  190,044
  205,464
  221,493
  238,153
  255,470
  273,470
  292,187
  311,655
EBITDA, $m
  11,630
  17,391
  24,905
  34,151
  45,289
  58,452
  73,745
  91,239
  110,977
  132,976
  157,227
  183,708
  212,377
  243,190
  276,095
  311,044
  347,989
  386,893
  427,727
  470,470
  515,118
  561,677
  610,165
  660,617
  713,078
  767,607
  824,275
  883,167
  944,379
  1,008,018
  1,074,201
Interest expense (income), $m
  548
  980
  1,841
  2,921
  4,247
  5,842
  7,723
  9,905
  12,400
  15,213
  18,346
  21,798
  25,566
  29,644
  34,026
  38,705
  43,673
  48,924
  54,454
  60,256
  66,330
  72,673
  79,288
  86,176
  93,343
  100,795
  108,540
  116,588
  124,952
  133,645
  142,682
Earnings before tax, $m
  -178
  653
  1,935
  3,509
  5,397
  7,615
  10,176
  13,087
  16,349
  19,961
  23,919
  28,250
  32,879
  37,830
  43,097
  48,670
  54,543
  60,711
  67,171
  73,921
  80,962
  88,297
  95,930
  103,868
  112,121
  120,698
  129,614
  138,882
  148,519
  158,543
  168,973
Tax expense, $m
  2,724
  176
  523
  947
  1,457
  2,056
  2,748
  3,533
  4,414
  5,390
  6,458
  7,627
  8,877
  10,214
  11,636
  13,141
  14,727
  16,392
  18,136
  19,959
  21,860
  23,840
  25,901
  28,044
  30,273
  32,589
  34,996
  37,498
  40,100
  42,806
  45,623
Net income, $m
  -2,922
  477
  1,413
  2,562
  3,940
  5,559
  7,429
  9,553
  11,935
  14,572
  17,461
  20,622
  24,001
  27,616
  31,461
  35,529
  39,816
  44,319
  49,035
  53,963
  59,103
  64,457
  70,029
  75,824
  81,848
  88,110
  94,618
  101,384
  108,419
  115,736
  123,351

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12,766
  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
  104,530
  126,055
  169,115
  221,954
  285,476
  360,435
  447,415
  546,824
  658,906
  783,750
  921,317
  1,071,465
  1,233,980
  1,408,597
  1,595,033
  1,793,010
  2,002,270
  2,222,596
  2,453,821
  2,695,843
  2,948,626
  3,212,206
  3,486,695
  3,772,278
  4,069,216
  4,377,843
  4,698,564
  5,031,851
  5,378,246
  5,738,355
  6,112,845
Adjusted assets (=assets-cash), $m
  91,764
  126,055
  169,115
  221,954
  285,476
  360,435
  447,415
  546,824
  658,906
  783,750
  921,317
  1,071,465
  1,233,980
  1,408,597
  1,595,033
  1,793,010
  2,002,270
  2,222,596
  2,453,821
  2,695,843
  2,948,626
  3,212,206
  3,486,695
  3,772,278
  4,069,216
  4,377,843
  4,698,564
  5,031,851
  5,378,246
  5,738,355
  6,112,845
Revenue / Adjusted assets
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
Average production assets, $m
  69,803
  95,921
  128,687
  168,894
  217,231
  274,271
  340,457
  416,103
  501,390
  596,390
  701,070
  815,325
  938,989
  1,071,863
  1,213,731
  1,364,380
  1,523,615
  1,691,271
  1,867,221
  2,051,386
  2,243,739
  2,444,309
  2,653,180
  2,870,492
  3,096,446
  3,331,294
  3,575,344
  3,828,957
  4,092,544
  4,366,567
  4,651,532
Working capital, $m
  8,115
  -1,318
  -1,769
  -2,321
  -2,986
  -3,769
  -4,679
  -5,719
  -6,891
  -8,196
  -9,635
  -11,205
  -12,905
  -14,731
  -16,681
  -18,751
  -20,940
  -23,244
  -25,662
  -28,193
  -30,837
  -33,593
  -36,464
  -39,450
  -42,556
  -45,783
  -49,138
  -52,623
  -56,246
  -60,012
  -63,928
Total debt, $m
  31,673
  52,596
  83,471
  121,356
  166,901
  220,647
  283,011
  354,288
  434,651
  524,164
  622,799
  730,456
  846,978
  972,179
  1,105,854
  1,247,803
  1,397,843
  1,555,816
  1,721,605
  1,895,135
  2,076,380
  2,265,367
  2,462,175
  2,666,938
  2,879,843
  3,101,129
  3,331,085
  3,570,052
  3,818,418
  4,076,615
  4,345,125
Total liabilities, $m
  69,458
  90,381
  121,256
  159,141
  204,686
  258,432
  320,796
  392,073
  472,436
  561,949
  660,584
  768,241
  884,763
  1,009,964
  1,143,639
  1,285,588
  1,435,628
  1,593,601
  1,759,390
  1,932,920
  2,114,165
  2,303,152
  2,499,960
  2,704,723
  2,917,628
  3,138,914
  3,368,870
  3,607,837
  3,856,203
  4,114,400
  4,382,910
Total equity, $m
  35,072
  35,674
  47,860
  62,813
  80,790
  102,003
  126,618
  154,751
  186,470
  221,801
  260,733
  303,225
  349,216
  398,633
  451,394
  507,422
  566,642
  628,995
  694,431
  762,924
  834,461
  909,054
  986,735
  1,067,555
  1,151,588
  1,238,930
  1,329,694
  1,424,014
  1,522,044
  1,623,954
  1,729,935
Total liabilities and equity, $m
  104,530
  126,055
  169,116
  221,954
  285,476
  360,435
  447,414
  546,824
  658,906
  783,750
  921,317
  1,071,466
  1,233,979
  1,408,597
  1,595,033
  1,793,010
  2,002,270
  2,222,596
  2,453,821
  2,695,844
  2,948,626
  3,212,206
  3,486,695
  3,772,278
  4,069,216
  4,377,844
  4,698,564
  5,031,851
  5,378,247
  5,738,354
  6,112,845
Debt-to-equity ratio
  0.903
  1.470
  1.740
  1.930
  2.070
  2.160
  2.240
  2.290
  2.330
  2.360
  2.390
  2.410
  2.430
  2.440
  2.450
  2.460
  2.470
  2.470
  2.480
  2.480
  2.490
  2.490
  2.500
  2.500
  2.500
  2.500
  2.510
  2.510
  2.510
  2.510
  2.510
Adjusted equity ratio
  0.255
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,922
  477
  1,413
  2,562
  3,940
  5,559
  7,429
  9,553
  11,935
  14,572
  17,461
  20,622
  24,001
  27,616
  31,461
  35,529
  39,816
  44,319
  49,035
  53,963
  59,103
  64,457
  70,029
  75,824
  81,848
  88,110
  94,618
  101,384
  108,419
  115,736
  123,351
Depreciation, amort., depletion, $m
  11,550
  15,758
  21,129
  27,720
  35,644
  44,995
  55,846
  68,246
  82,228
  97,802
  114,962
  133,660
  153,933
  175,715
  198,972
  223,669
  249,773
  277,258
  306,102
  336,293
  367,826
  400,706
  434,947
  470,573
  507,614
  546,114
  586,122
  627,698
  670,909
  715,831
  762,546
Funds from operations, $m
  2,760
  16,235
  22,542
  30,282
  39,584
  50,555
  63,274
  77,800
  94,163
  112,373
  132,424
  154,282
  177,934
  203,331
  230,433
  259,198
  289,589
  321,577
  355,137
  390,255
  426,929
  465,163
  504,976
  546,396
  589,462
  634,223
  680,740
  729,081
  779,327
  831,567
  885,897
Change in working capital, $m
  -6,274
  -359
  -450
  -553
  -664
  -784
  -910
  -1,040
  -1,172
  -1,306
  -1,439
  -1,570
  -1,700
  -1,826
  -1,950
  -2,070
  -2,188
  -2,304
  -2,418
  -2,531
  -2,644
  -2,757
  -2,871
  -2,987
  -3,105
  -3,228
  -3,354
  -3,486
  -3,623
  -3,766
  -3,916
Cash from operations, $m
  9,034
  16,593
  22,992
  30,835
  40,249
  51,338
  64,184
  78,839
  95,335
  113,679
  133,862
  155,852
  179,634
  205,158
  232,383
  261,268
  291,778
  323,881
  357,555
  392,786
  429,572
  467,920
  507,847
  549,383
  592,568
  637,451
  684,094
  732,567
  782,950
  835,333
  889,813
Maintenance CAPEX, $m
  0
  -11,443
  -15,725
  -21,096
  -27,688
  -35,612
  -44,962
  -55,813
  -68,214
  -82,195
  -97,769
  -114,930
  -133,660
  -153,933
  -175,715
  -198,972
  -223,669
  -249,773
  -277,258
  -306,102
  -336,293
  -367,826
  -400,706
  -434,947
  -470,573
  -507,614
  -546,114
  -586,122
  -627,698
  -670,909
  -715,831
New CAPEX, $m
  -12,191
  -26,118
  -32,767
  -40,207
  -48,337
  -57,040
  -66,187
  -75,645
  -85,288
  -94,999
  -104,681
  -114,255
  -123,664
  -132,874
  -141,868
  -150,649
  -159,235
  -167,655
  -175,950
  -184,165
  -192,354
  -200,570
  -208,870
  -217,313
  -225,953
  -234,848
  -244,050
  -253,613
  -263,587
  -274,022
  -284,966
Cash from investing activities, $m
  -10,446
  -37,561
  -48,492
  -61,303
  -76,025
  -92,652
  -111,149
  -131,458
  -153,502
  -177,194
  -202,450
  -229,185
  -257,324
  -286,807
  -317,583
  -349,621
  -382,904
  -417,428
  -453,208
  -490,267
  -528,647
  -568,396
  -609,576
  -652,260
  -696,526
  -742,462
  -790,164
  -839,735
  -891,285
  -944,931
  -1,000,797
Free cash flow, $m
  -1,412
  -20,967
  -25,499
  -30,469
  -35,776
  -41,313
  -46,965
  -52,619
  -58,167
  -63,515
  -68,587
  -73,332
  -77,690
  -81,649
  -85,201
  -88,353
  -91,126
  -93,547
  -95,652
  -97,480
  -99,074
  -100,476
  -101,730
  -102,877
  -103,958
  -105,011
  -106,070
  -107,168
  -108,335
  -109,599
  -110,983
Issuance/(repayment) of debt, $m
  -83
  24,597
  30,874
  37,885
  45,545
  53,746
  62,364
  71,277
  80,362
  89,513
  98,636
  107,657
  116,523
  125,200
  133,675
  141,949
  150,039
  157,973
  165,789
  173,530
  181,245
  188,987
  196,808
  204,763
  212,905
  221,286
  229,956
  238,967
  248,365
  258,198
  268,509
Issuance/(repurchase) of shares, $m
  0
  9,216
  10,773
  12,392
  14,037
  15,654
  17,186
  18,580
  19,784
  20,759
  21,470
  21,870
  21,990
  21,800
  21,301
  20,498
  19,404
  18,033
  16,402
  14,530
  12,435
  10,136
  7,651
  4,996
  2,185
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -83
  33,813
  41,647
  50,277
  59,582
  69,400
  79,550
  89,857
  100,146
  110,272
  120,106
  129,527
  138,513
  147,000
  154,976
  162,447
  169,443
  176,006
  182,191
  188,060
  193,680
  199,123
  204,459
  209,759
  215,090
  221,286
  229,956
  238,967
  248,365
  258,198
  268,509
Total cash flow (excl. dividends), $m
  -1,647
  12,846
  16,149
  19,808
  23,807
  28,087
  32,586
  37,238
  41,980
  46,757
  51,519
  56,194
  60,822
  65,352
  69,776
  74,095
  78,317
  82,459
  86,538
  90,579
  94,606
  98,647
  102,730
  106,882
  111,132
  116,275
  123,887
  131,799
  140,030
  148,599
  157,526
Retained Cash Flow (-), $m
  5,199
  -9,694
  -12,186
  -14,953
  -17,977
  -21,213
  -24,615
  -28,133
  -31,719
  -35,331
  -38,931
  -42,492
  -45,991
  -49,417
  -52,762
  -56,027
  -59,221
  -62,352
  -65,437
  -68,492
  -71,538
  -74,593
  -77,680
  -80,820
  -84,034
  -87,341
  -90,764
  -94,320
  -98,030
  -101,911
  -105,981
Prev. year cash balance distribution, $m
 
  9,092
  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
 
  12,245
  3,962
  4,855
  5,830
  6,873
  7,970
  9,105
  10,261
  11,426
  12,587
  13,702
  14,831
  15,935
  17,014
  18,067
  19,097
  20,107
  21,101
  22,087
  23,069
  24,054
  25,050
  26,062
  27,098
  28,933
  33,123
  37,479
  42,000
  46,688
  51,546
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  11,740
  3,627
  4,225
  4,800
  5,328
  5,784
  6,151
  6,414
  6,564
  6,599
  6,507
  6,329
  6,059
  5,712
  5,304
  4,853
  4,375
  3,886
  3,401
  2,931
  2,488
  2,078
  1,708
  1,380
  1,126
  966
  804
  650
  510
  388
Current shareholders' claim on cash, %
  100
  84.2
  72.6
  63.9
  57.1
  51.8
  47.6
  44.2
  41.4
  39.1
  37.2
  35.6
  34.3
  33.2
  32.3
  31.5
  30.9
  30.4
  30.0
  29.6
  29.4
  29.2
  29.1
  29.0
  29.0
  29.0
  29.0
  29.0
  29.0
  29.0
  29.0

Statoil ASA (Statoil) is an energy company. The Company is engaged in oil and gas exploration and production activities. The Company's segments include Development and Production Norway (DPN), Development and Production International (DPI), Marketing, Midstream and Processing (MMP) and Other. DPN segment manages the Company's upstream activities on the Norwegian continental shelf (NCS) and explores for and extracts crude oil, natural gas and natural gas liquids. DPI segment manages the Company's upstream activities that are not included in the DPN and Development and Production USA (DPUSA) business areas. MMP segment manages its marketing and trading activities related to oil products and natural gas, transportation, processing and manufacturing, and the development of oil and gas. Other segment includes activities in New Energy Solutions (NES), Technology, Projects and Drilling (TPD), Global Strategy and Business Development (GSB), and Corporate staffs and support functions.

FINANCIAL RATIOS  of  Statoil ADR (STO)

Valuation Ratios
P/E Ratio -22.1
Price to Sales 1.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow -20.4
Growth Rates
Sales Growth Rate -21.1%
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 -1.3%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 79.8%
Total Debt to Equity 90.3%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. -10.1%
Return On Total Capital -4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -7.8%
Return On Equity - 3 Yr. Avg. -4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 52.9%
Gross Margin - 3 Yr. Avg. 52.7%
EBITDA Margin 26.1%
EBITDA Margin - 3 Yr. Avg. 30.5%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin -6.4%
Net Profit Margin - 3 Yr. Avg. -3.8%
Effective Tax Rate -1530.3%
Eff/ Tax Rate - 3 Yr. Avg. 2682.6%
Payout Ratio -64.2%

STO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STO stock intrinsic value calculation we used $45688 million for the last fiscal year's total revenue generated by Statoil ADR. The default revenue input number comes from 2016 income statement of Statoil ADR. 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 STO stock valuation model: a) initial revenue growth rate of 37.4% 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 4.3%, whose default value for STO is calculated based on our internal credit rating of Statoil ADR, 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 Statoil ADR.
    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 STO stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4849 million in the base year in the intrinsic value calculation for STO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Statoil ADR.

Corporate tax rate of 27% is the nominal tax rate for Statoil ADR. 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 STO 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 STO are equal to 152.8%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Statoil ADR 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 STO is equal to -2.1%. 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 - $35072 million for Statoil ADR - 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 3328.44 million for Statoil ADR 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 Statoil ADR at the current share price and the inputted number of shares is $66.4 billion.

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PBR Petroleo Brasi 10.14 3.04  str.sell

COMPANY NEWS

▶ Norway's Move on Energy Stocks Gets an Overreaction   [Nov-18-17 08:00AM  TheStreet.com]
▶ Statoil ASA: Statoil's share saving plan allocates shares   [Nov-17-17 01:50AM  GlobeNewswire]
▶ Santos Is Seen Attracting New Bids   [Nov-16-17 06:48PM  Bloomberg Video]
▶ Statoil ASA: Notifiable trading   [01:33AM  GlobeNewswire]
▶ Sembcorp Marine wins $490m FPSO building contract   [Nov-10-17 03:42AM  Singapore Business Review]
▶ Oil Rally Halts As Saudi Purge Continues   [Nov-07-17 03:00PM  Oilprice.com]
▶ Norways Oil Sector Faces Existential Crisis   [Nov-04-17 04:00PM  Oilprice.com]
▶ Statoil ASA: Notifiable trading   [Nov-02-17 05:10AM  GlobeNewswire]
▶ ETFs with exposure to Statoil ASA : November 1, 2017   [Nov-01-17 12:42PM  Capital Cube]
▶ Are Higher Oil Prices Here To Stay?   [Oct-31-17 04:00PM  Oilprice.com]
▶ Statoil Sees IBD RS Rating Rise To 77   [03:00AM  Investor's Business Daily]
▶ [$$] Statoil will not give up on exploration in Arctic   [Oct-30-17 01:00AM  Financial Times]
▶ Statoil's Earnings Slip on Writedowns, Tax Bills   [Oct-26-17 03:33PM  Motley Fool]
▶ Statoil reports 3Q loss   [06:36AM  Associated Press]
▶ Norway Unfazed By Peak Oil Concerns   [Oct-23-17 07:00PM  Oilprice.com]
▶ [$$] Companies Leave Bean Counting to the Robots   [12:03AM  The Wall Street Journal]
▶ Will Demand For Offshore Rigs Ever Recover?   [Oct-22-17 01:00PM  Oilprice.com]
▶ Whats the Forecast for Chevrons Stock Price?   [Oct-20-17 09:10AM  Market Realist]
▶ [$$] Companies Leave Bean Counting to the Robots   [06:00AM  The Wall Street Journal]
▶ Big Oil Refuses To Give Up On The Barents Sea   [Oct-18-17 06:00PM  Oilprice.com]
▶ Statoil ASA: Notifiable trading   [01:30AM  GlobeNewswire]
▶ Oil Prices Spike On Middle East Tensions   [Oct-13-17 03:30PM  Oilprice.com]
▶ Can Deep Water Wind Farms Power The World?   [Oct-11-17 06:00PM  Oilprice.com]
▶ Statoil Stock Ranks 2nd in the Top 10 Integrated Stocks   [Sep-27-17 10:39AM  Market Realist]
▶ Statoil Vies for a Stake in Abu Dhabi's Offshore Oil   [Sep-25-17 03:31AM  Bloomberg]
▶ Statoil ASA: Statoil's share saving plan allocates shares   [Sep-20-17 01:04AM  GlobeNewswire]
▶ Drilling Permit Roundup: Statoil doubles down in DeWitt County   [Sep-18-17 03:25PM  American City Business Journals]
▶ Statoil ASA: Notifiable trading   [02:18AM  GlobeNewswire]
▶ Soaring Demand Drives Oil Market Recovery   [Sep-15-17 03:00PM  Oilprice.com]
▶ Statoil Will Continue to Trend Higher   [Sep-14-17 01:03PM  GuruFocus.com]
▶ Why Statoils Dividend Yield Places It in the Top 10   [Sep-07-17 10:37AM  Market Realist]
▶ Ranking Integrated Energy by Dividend Yield: The Top 10   [Sep-06-17 12:15PM  Market Realist]
▶ Can Russia Develop Its Shale Reserves?   [Sep-05-17 06:00PM  Oilprice.com]
▶ Will Statoil Bail On Its Barents Sea Project?   [Sep-03-17 12:59AM  Oilprice.com]
▶ 5 Stocks Top International Managers Have Been Buying   [Aug-31-17 06:00AM  Morningstar]
▶ Statoil Sees RS Rating Rise To 73   [03:00AM  Investor's Business Daily]
Financial statements of STO
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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