Intrinsic value of Apache - APA

Previous Close

$42.17

  Intrinsic Value

$4.87

stock screener

  Rating & Target

str. sell

-88%

Previous close

$42.17

 
Intrinsic value

$4.87

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of APA 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 2017), $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 16.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  6,458
  7,054
  7,675
  8,322
  8,995
  9,694
  10,421
  11,176
  11,961
  12,777
  13,625
  14,508
  15,426
  16,381
  17,376
  18,413
  19,494
  20,622
  21,799
  23,027
  24,310
  25,650
  27,052
  28,517
  30,050
  31,653
  33,332
  35,090
  36,931
  38,859
Variable operating expenses, $m
  7,963
  8,698
  9,464
  10,261
  11,091
  11,953
  12,849
  13,781
  14,748
  15,754
  16,800
  17,888
  19,020
  20,198
  21,425
  22,704
  24,037
  25,427
  26,878
  28,392
  29,974
  31,627
  33,355
  35,161
  37,051
  39,029
  41,099
  43,266
  45,536
  47,913
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
  7,963
  8,698
  9,464
  10,261
  11,091
  11,953
  12,849
  13,781
  14,748
  15,754
  16,800
  17,888
  19,020
  20,198
  21,425
  22,704
  24,037
  25,427
  26,878
  28,392
  29,974
  31,627
  33,355
  35,161
  37,051
  39,029
  41,099
  43,266
  45,536
  47,913
Operating income, $m
  -1,505
  -1,644
  -1,788
  -1,939
  -2,096
  -2,259
  -2,428
  -2,604
  -2,787
  -2,977
  -3,175
  -3,380
  -3,594
  -3,817
  -4,049
  -4,290
  -4,542
  -4,805
  -5,079
  -5,365
  -5,664
  -5,977
  -6,303
  -6,644
  -7,002
  -7,375
  -7,766
  -8,176
  -8,605
  -9,054
EBITDA, $m
  504
  551
  599
  650
  702
  757
  814
  873
  934
  998
  1,064
  1,133
  1,205
  1,279
  1,357
  1,438
  1,523
  1,611
  1,702
  1,798
  1,899
  2,003
  2,113
  2,227
  2,347
  2,472
  2,603
  2,741
  2,884
  3,035
Interest expense (income), $m
  413
  458
  533
  612
  695
  781
  870
  963
  1,060
  1,160
  1,264
  1,373
  1,486
  1,603
  1,725
  1,852
  1,984
  2,122
  2,265
  2,415
  2,572
  2,735
  2,905
  3,084
  3,270
  3,464
  3,668
  3,881
  4,104
  4,338
  4,583
Earnings before tax, $m
  -1,963
  -2,177
  -2,401
  -2,634
  -2,877
  -3,129
  -3,391
  -3,664
  -3,947
  -4,241
  -4,548
  -4,866
  -5,197
  -5,542
  -5,900
  -6,274
  -6,664
  -7,070
  -7,494
  -7,937
  -8,399
  -8,882
  -9,387
  -9,914
  -10,466
  -11,043
  -11,648
  -12,280
  -12,943
  -13,637
Tax expense, $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
Net income, $m
  -1,963
  -2,177
  -2,401
  -2,634
  -2,877
  -3,129
  -3,391
  -3,664
  -3,947
  -4,241
  -4,548
  -4,866
  -5,197
  -5,542
  -5,900
  -6,274
  -6,664
  -7,070
  -7,494
  -7,937
  -8,399
  -8,882
  -9,387
  -9,914
  -10,466
  -11,043
  -11,648
  -12,280
  -12,943
  -13,637

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  24,008
  26,223
  28,533
  30,937
  33,438
  36,038
  38,740
  41,548
  44,466
  47,499
  50,652
  53,932
  57,344
  60,897
  64,596
  68,451
  72,470
  76,662
  81,035
  85,602
  90,371
  95,354
  100,563
  106,010
  111,708
  117,671
  123,911
  130,446
  137,289
  144,457
Adjusted assets (=assets-cash), $m
  24,008
  26,223
  28,533
  30,937
  33,438
  36,038
  38,740
  41,548
  44,466
  47,499
  50,652
  53,932
  57,344
  60,897
  64,596
  68,451
  72,470
  76,662
  81,035
  85,602
  90,371
  95,354
  100,563
  106,010
  111,708
  117,671
  123,911
  130,446
  137,289
  144,457
Revenue / Adjusted assets
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
Average production assets, $m
  20,091
  21,945
  23,878
  25,890
  27,983
  30,159
  32,420
  34,770
  37,212
  39,750
  42,389
  45,133
  47,989
  50,962
  54,058
  57,284
  60,647
  64,155
  67,815
  71,637
  75,628
  79,798
  84,157
  88,716
  93,484
  98,474
  103,696
  109,165
  114,891
  120,890
Working capital, $m
  -297
  -324
  -353
  -383
  -414
  -446
  -479
  -514
  -550
  -588
  -627
  -667
  -710
  -754
  -799
  -847
  -897
  -949
  -1,003
  -1,059
  -1,118
  -1,180
  -1,244
  -1,312
  -1,382
  -1,456
  -1,533
  -1,614
  -1,699
  -1,788
Total debt, $m
  9,871
  11,338
  12,867
  14,458
  16,114
  17,835
  19,624
  21,483
  23,414
  25,422
  27,510
  29,681
  31,940
  34,292
  36,741
  39,293
  41,953
  44,728
  47,623
  50,646
  53,804
  57,102
  60,551
  64,157
  67,929
  71,876
  76,007
  80,333
  84,863
  89,609
Total liabilities, $m
  15,893
  17,360
  18,889
  20,480
  22,136
  23,857
  25,646
  27,505
  29,436
  31,444
  33,532
  35,703
  37,962
  40,314
  42,763
  45,315
  47,975
  50,750
  53,645
  56,668
  59,826
  63,124
  66,573
  70,179
  73,951
  77,898
  82,029
  86,355
  90,885
  95,631
Total equity, $m
  8,115
  8,864
  9,644
  10,457
  11,302
  12,181
  13,094
  14,043
  15,029
  16,055
  17,120
  18,229
  19,382
  20,583
  21,834
  23,137
  24,495
  25,912
  27,390
  28,933
  30,545
  32,230
  33,990
  35,831
  37,757
  39,773
  41,882
  44,091
  46,404
  48,827
Total liabilities and equity, $m
  24,008
  26,224
  28,533
  30,937
  33,438
  36,038
  38,740
  41,548
  44,465
  47,499
  50,652
  53,932
  57,344
  60,897
  64,597
  68,452
  72,470
  76,662
  81,035
  85,601
  90,371
  95,354
  100,563
  106,010
  111,708
  117,671
  123,911
  130,446
  137,289
  144,458
Debt-to-equity ratio
  1.220
  1.280
  1.330
  1.380
  1.430
  1.460
  1.500
  1.530
  1.560
  1.580
  1.610
  1.630
  1.650
  1.670
  1.680
  1.700
  1.710
  1.730
  1.740
  1.750
  1.760
  1.770
  1.780
  1.790
  1.800
  1.810
  1.810
  1.820
  1.830
  1.840
Adjusted equity ratio
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,963
  -2,177
  -2,401
  -2,634
  -2,877
  -3,129
  -3,391
  -3,664
  -3,947
  -4,241
  -4,548
  -4,866
  -5,197
  -5,542
  -5,900
  -6,274
  -6,664
  -7,070
  -7,494
  -7,937
  -8,399
  -8,882
  -9,387
  -9,914
  -10,466
  -11,043
  -11,648
  -12,280
  -12,943
  -13,637
Depreciation, amort., depletion, $m
  2,009
  2,195
  2,388
  2,589
  2,798
  3,016
  3,242
  3,477
  3,721
  3,975
  4,239
  4,513
  4,799
  5,096
  5,406
  5,728
  6,065
  6,415
  6,782
  7,164
  7,563
  7,980
  8,416
  8,872
  9,348
  9,847
  10,370
  10,916
  11,489
  12,089
Funds from operations, $m
  46
  18
  -13
  -45
  -78
  -113
  -149
  -187
  -226
  -266
  -309
  -352
  -398
  -445
  -495
  -546
  -599
  -655
  -713
  -773
  -836
  -902
  -971
  -1,043
  -1,118
  -1,196
  -1,278
  -1,364
  -1,454
  -1,548
Change in working capital, $m
  -26
  -27
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
Cash from operations, $m
  73
  45
  16
  -15
  -47
  -81
  -116
  -152
  -190
  -229
  -270
  -312
  -356
  -401
  -449
  -498
  -550
  -603
  -659
  -717
  -777
  -840
  -906
  -975
  -1,047
  -1,122
  -1,201
  -1,283
  -1,369
  -1,459
Maintenance CAPEX, $m
  -1,831
  -2,009
  -2,195
  -2,388
  -2,589
  -2,798
  -3,016
  -3,242
  -3,477
  -3,721
  -3,975
  -4,239
  -4,513
  -4,799
  -5,096
  -5,406
  -5,728
  -6,065
  -6,415
  -6,782
  -7,164
  -7,563
  -7,980
  -8,416
  -8,872
  -9,348
  -9,847
  -10,370
  -10,916
  -11,489
New CAPEX, $m
  -1,778
  -1,854
  -1,933
  -2,012
  -2,093
  -2,176
  -2,261
  -2,350
  -2,442
  -2,538
  -2,639
  -2,745
  -2,856
  -2,973
  -3,096
  -3,226
  -3,363
  -3,508
  -3,660
  -3,821
  -3,991
  -4,170
  -4,359
  -4,558
  -4,768
  -4,990
  -5,223
  -5,468
  -5,727
  -5,999
Cash from investing activities, $m
  -3,609
  -3,863
  -4,128
  -4,400
  -4,682
  -4,974
  -5,277
  -5,592
  -5,919
  -6,259
  -6,614
  -6,984
  -7,369
  -7,772
  -8,192
  -8,632
  -9,091
  -9,573
  -10,075
  -10,603
  -11,155
  -11,733
  -12,339
  -12,974
  -13,640
  -14,338
  -15,070
  -15,838
  -16,643
  -17,488
Free cash flow, $m
  -3,537
  -3,818
  -4,111
  -4,415
  -4,729
  -5,055
  -5,393
  -5,744
  -6,109
  -6,488
  -6,884
  -7,295
  -7,725
  -8,173
  -8,641
  -9,130
  -9,641
  -10,175
  -10,735
  -11,320
  -11,932
  -12,574
  -13,245
  -13,949
  -14,687
  -15,460
  -16,271
  -17,121
  -18,012
  -18,947
Issuance/(repayment) of debt, $m
  1,387
  1,467
  1,529
  1,592
  1,656
  1,721
  1,789
  1,859
  1,932
  2,008
  2,088
  2,171
  2,259
  2,352
  2,449
  2,552
  2,660
  2,775
  2,896
  3,023
  3,157
  3,299
  3,448
  3,606
  3,772
  3,947
  4,131
  4,326
  4,530
  4,745
Issuance/(repurchase) of shares, $m
  2,661
  2,926
  3,181
  3,447
  3,722
  4,008
  4,305
  4,613
  4,933
  5,267
  5,613
  5,974
  6,350
  6,742
  7,151
  7,577
  8,022
  8,487
  8,973
  9,480
  10,011
  10,566
  11,147
  11,755
  12,392
  13,059
  13,757
  14,489
  15,256
  16,060
Cash from financing (excl. dividends), $m  
  4,048
  4,393
  4,710
  5,039
  5,378
  5,729
  6,094
  6,472
  6,865
  7,275
  7,701
  8,145
  8,609
  9,094
  9,600
  10,129
  10,682
  11,262
  11,869
  12,503
  13,168
  13,865
  14,595
  15,361
  16,164
  17,006
  17,888
  18,815
  19,786
  20,805
Total cash flow (excl. dividends), $m
  512
  574
  599
  623
  648
  674
  700
  728
  756
  786
  817
  850
  885
  921
  959
  999
  1,042
  1,086
  1,134
  1,184
  1,236
  1,292
  1,350
  1,412
  1,477
  1,545
  1,618
  1,694
  1,774
  1,858
Retained Cash Flow (-), $m
  -2,661
  -2,926
  -3,181
  -3,447
  -3,722
  -4,008
  -4,305
  -4,613
  -4,933
  -5,267
  -5,613
  -5,974
  -6,350
  -6,742
  -7,151
  -7,577
  -8,022
  -8,487
  -8,973
  -9,480
  -10,011
  -10,566
  -11,147
  -11,755
  -12,392
  -13,059
  -13,757
  -14,489
  -15,256
  -16,060
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
  -2,150
  -2,351
  -2,583
  -2,823
  -3,074
  -3,334
  -3,604
  -3,885
  -4,177
  -4,480
  -4,796
  -5,124
  -5,466
  -5,822
  -6,192
  -6,578
  -6,981
  -7,401
  -7,839
  -8,297
  -8,775
  -9,275
  -9,797
  -10,343
  -10,915
  -11,513
  -12,139
  -12,795
  -13,482
  -14,202
Discount rate, %
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
  -2,030
  -2,085
  -2,138
  -2,168
  -2,174
  -2,157
  -2,116
  -2,053
  -1,969
  -1,866
  -1,748
  -1,617
  -1,476
  -1,329
  -1,181
  -1,033
  -890
  -755
  -629
  -515
  -414
  -326
  -252
  -190
  -140
  -101
  -71
  -49
  -32
  -21
Current shareholders' claim on cash, %
  85.8
  73.5
  63.1
  54.2
  46.5
  40.0
  34.4
  29.6
  25.4
  21.9
  18.9
  16.2
  14.0
  12.1
  10.4
  9.0
  7.7
  6.7
  5.7
  4.9
  4.3
  3.7
  3.2
  2.7
  2.4
  2.0
  1.8
  1.5
  1.3
  1.1

Apache Corporation is an independent energy company. The Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company’s production segments include: the United States, Egypt and the United Kingdom North Sea. It also pursues exploration interests in Suriname. In North America, the Company has three onshore regions: The Permian region, The Midcontinent/Gulf Coast region. The Permian region located in West Texas and New Mexico includes the Permian sub-basins, the Midland Basin, Central Basin Platform/Northwest Shelf and Delaware Basin. The Midcontinent/Gulf Coast region includes the Granite Wash, Tonkawa, Canyon Lime, Marmaton, and Cleveland formations of the West Anadarko Basin, the Woodford-SCOOP and Stack plays located in Central Oklahoma, and the Eagle Ford shale in South East Texas.

FINANCIAL RATIOS  of  Apache (APA)

Valuation Ratios
P/E Ratio -11.4
Price to Sales 3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 6.6
Price to Free Cash Flow 24.2
Growth Rates
Sales Growth Rate -19.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.2%
Cap. Spend. - 3 Yr. Gr. Rate -28%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 137%
Total Debt to Equity 137%
Interest Coverage -3
Management Effectiveness
Return On Assets -4.6%
Ret/ On Assets - 3 Yr. Avg. -12.6%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -20.3%
Return On Equity -19.9%
Return On Equity - 3 Yr. Avg. -33.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72%
Gross Margin - 3 Yr. Avg. 75.5%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. -15.6%
Operating Margin -31.5%
Oper. Margin - 3 Yr. Avg. -79.2%
Pre-Tax Margin -31.5%
Pre-Tax Margin - 3 Yr. Avg. -79.2%
Net Profit Margin -26.3%
Net Profit Margin - 3 Yr. Avg. -75.1%
Effective Tax Rate 26.3%
Eff/ Tax Rate - 3 Yr. Avg. 3.7%
Payout Ratio -27%

APA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APA stock intrinsic value calculation we used $5887 million for the last fiscal year's total revenue generated by Apache. The default revenue input number comes from 2017 income statement of Apache. 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 APA stock valuation model: a) initial revenue growth rate of 9.7% 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 5.9%, whose default value for APA is calculated based on our internal credit rating of Apache, 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 Apache.
    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 APA stock the variable cost ratio is equal to 123.3%.

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 APA 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 5.4% for Apache.

Corporate tax rate of 27% is the nominal tax rate for Apache. 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 APA 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 APA are equal to 311.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Apache 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 APA is equal to -4.6%. 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 - $7416 million for Apache - 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 381 million for Apache 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 Apache at the current share price and the inputted number of shares is $16.1 billion.

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COMPANY NEWS

▶ Apache Prices $1.0 Billion Notes Offering   [Aug-14-18 05:28PM  GlobeNewswire]
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▶ [$$] Apache to Form Midstream Business in Deal With 'Blank-Check' Company   [Aug-08-18 09:10PM  The Wall Street Journal]
▶ Apache Corp reports 66-percent drop in Q2 profit   [Aug-01-18 09:20PM  Reuters]
▶ Apache: 2Q Earnings Snapshot   [07:45PM  Associated Press]
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▶ SA company adds partner on Permian-to-Corpus pipeline   [Jul-27-18 03:25PM  American City Business Journals]
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▶ Moving Average Crossover Alert: Apache (APA)   [Jun-22-18 09:06AM  Zacks]
▶ Should Apache (APA) Be On Your Radar Now?   [Jun-20-18 08:40AM  Zacks]
▶ Zimmer Biomet and Clorox fall; Apache and JD.com climb   [Jun-18-18 04:24PM  Associated Press]
▶ Apache Opens Application for 2018-2019 Tree Grant Program   [Jun-13-18 04:16PM  GlobeNewswire]
▶ 3 Incredibly Cheap Oil and Gas Stocks   [07:19AM  Motley Fool]
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▶ Apache CEO on Oil Prices, Extra Capital, Volatility   [May-31-18 01:57AM  Bloomberg Video]
▶ This Oil Stock Is Quietly Creating Hidden Value   [May-29-18 07:16PM  Motley Fool]
▶ Apache Declares Cash Dividend on Common Shares   [May-24-18 04:15PM  GlobeNewswire]
▶ 3 Top Oil Stocks to Buy Now   [06:31AM  Motley Fool]
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▶ Apache: 1Q Earnings Snapshot   [05:16PM  Associated Press]
▶ Boom time comes early to West Texas oil patch   [May-01-18 01:10AM  Reuters]
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