Intrinsic value of Anadarko Petroleum - APC

Previous Close

$58.20

  Intrinsic Value

$5.57

stock screener

  Rating & Target

str. sell

-90%

Previous close

$58.20

 
Intrinsic value

$5.57

 
Up/down potential

-90%

 
Rating

str. sell

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

We calculate the intrinsic value of APC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

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

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -10.95
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  8,447
  9,790
  11,240
  12,794
  14,451
  16,207
  18,060
  20,009
  22,053
  24,190
  26,421
  28,747
  31,167
  33,685
  36,303
  39,023
  41,850
  44,788
  47,841
  51,016
  54,318
  57,754
  61,330
  65,055
  68,936
  72,983
  77,203
  81,607
  86,204
  91,006
  96,024
Variable operating expenses, $m
 
  18,885
  21,682
  24,680
  27,875
  31,263
  34,838
  38,598
  42,540
  46,663
  50,967
  55,452
  60,122
  64,979
  70,028
  75,275
  80,729
  86,396
  92,286
  98,410
  104,780
  111,407
  118,306
  125,491
  132,978
  140,783
  148,924
  157,419
  166,288
  175,551
  185,230
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
  11,201
  18,885
  21,682
  24,680
  27,875
  31,263
  34,838
  38,598
  42,540
  46,663
  50,967
  55,452
  60,122
  64,979
  70,028
  75,275
  80,729
  86,396
  92,286
  98,410
  104,780
  111,407
  118,306
  125,491
  132,978
  140,783
  148,924
  157,419
  166,288
  175,551
  185,230
Operating income, $m
  -2,754
  -9,095
  -10,442
  -11,886
  -13,425
  -15,056
  -16,778
  -18,589
  -20,487
  -22,473
  -24,546
  -26,706
  -28,954
  -31,294
  -33,725
  -36,252
  -38,879
  -41,608
  -44,445
  -47,394
  -50,461
  -53,653
  -56,976
  -60,436
  -64,042
  -67,801
  -71,721
  -75,813
  -80,084
  -84,545
  -89,206
EBITDA, $m
  1,547
  -4,118
  -4,728
  -5,382
  -6,079
  -6,817
  -7,597
  -8,417
  -9,277
  -10,176
  -11,114
  -12,092
  -13,110
  -14,170
  -15,271
  -16,415
  -17,604
  -18,840
  -20,124
  -21,460
  -22,849
  -24,294
  -25,798
  -27,365
  -28,998
  -30,700
  -32,475
  -34,328
  -36,262
  -38,282
  -40,392
Interest expense (income), $m
  856
  840
  1,135
  1,450
  1,788
  2,148
  2,529
  2,932
  3,355
  3,799
  4,263
  4,748
  5,253
  5,779
  6,326
  6,895
  7,486
  8,100
  8,738
  9,401
  10,091
  10,808
  11,555
  12,332
  13,141
  13,984
  14,863
  15,780
  16,736
  17,735
  18,778
Earnings before tax, $m
  -3,829
  -9,935
  -11,577
  -13,336
  -15,213
  -17,204
  -19,307
  -21,520
  -23,842
  -26,272
  -28,809
  -31,454
  -34,208
  -37,073
  -40,051
  -43,147
  -46,364
  -49,708
  -53,182
  -56,795
  -60,552
  -64,461
  -68,530
  -72,768
  -77,183
  -81,785
  -86,584
  -91,592
  -96,820
  -102,280
  -107,984
Tax expense, $m
  -1,021
  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
  -3,071
  -9,935
  -11,577
  -13,336
  -15,213
  -17,204
  -19,307
  -21,520
  -23,842
  -26,272
  -28,809
  -31,454
  -34,208
  -37,073
  -40,051
  -43,147
  -46,364
  -49,708
  -53,182
  -56,795
  -60,552
  -64,461
  -68,530
  -72,768
  -77,183
  -81,785
  -86,584
  -91,592
  -96,820
  -102,280
  -107,984

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,184
  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
  45,564
  49,196
  56,482
  64,293
  72,617
  81,441
  90,755
  100,549
  110,819
  121,560
  132,771
  144,456
  156,620
  169,272
  182,426
  196,096
  210,301
  225,064
  240,409
  256,362
  272,955
  290,220
  308,192
  326,910
  346,414
  366,746
  387,953
  410,083
  433,187
  457,317
  482,531
Adjusted assets (=assets-cash), $m
  42,380
  49,196
  56,482
  64,293
  72,617
  81,441
  90,755
  100,549
  110,819
  121,560
  132,771
  144,456
  156,620
  169,272
  182,426
  196,096
  210,301
  225,064
  240,409
  256,362
  272,955
  290,220
  308,192
  326,910
  346,414
  366,746
  387,953
  410,083
  433,187
  457,317
  482,531
Revenue / Adjusted assets
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
Average production assets, $m
  39,077
  45,289
  51,996
  59,187
  66,849
  74,972
  83,546
  92,563
  102,017
  111,905
  122,226
  132,982
  144,180
  155,827
  167,936
  180,521
  193,598
  207,188
  221,314
  236,000
  251,275
  267,169
  283,714
  300,945
  318,899
  337,617
  357,140
  377,512
  398,780
  420,994
  444,205
Working capital, $m
  1,938
  -1,400
  -1,607
  -1,830
  -2,066
  -2,318
  -2,583
  -2,861
  -3,154
  -3,459
  -3,778
  -4,111
  -4,457
  -4,817
  -5,191
  -5,580
  -5,985
  -6,405
  -6,841
  -7,295
  -7,767
  -8,259
  -8,770
  -9,303
  -9,858
  -10,436
  -11,040
  -11,670
  -12,327
  -13,014
  -13,731
Total debt, $m
  15,323
  20,639
  26,366
  32,506
  39,048
  45,983
  53,304
  61,003
  69,075
  77,517
  86,329
  95,513
  105,074
  115,019
  125,358
  136,102
  147,268
  158,871
  170,932
  183,472
  196,514
  210,084
  224,210
  238,922
  254,252
  270,234
  286,902
  304,296
  322,456
  341,422
  361,240
Total liabilities, $m
  33,352
  38,668
  44,395
  50,535
  57,077
  64,012
  71,333
  79,032
  87,104
  95,546
  104,358
  113,542
  123,103
  133,048
  143,387
  154,131
  165,297
  176,900
  188,961
  201,501
  214,543
  228,113
  242,239
  256,951
  272,281
  288,263
  304,931
  322,325
  340,485
  359,451
  379,269
Total equity, $m
  12,212
  10,528
  12,087
  13,759
  15,540
  17,428
  19,421
  21,518
  23,715
  26,014
  28,413
  30,914
  33,517
  36,224
  39,039
  41,964
  45,004
  48,164
  51,447
  54,861
  58,412
  62,107
  65,953
  69,959
  74,133
  78,484
  83,022
  87,758
  92,702
  97,866
  103,262
Total liabilities and equity, $m
  45,564
  49,196
  56,482
  64,294
  72,617
  81,440
  90,754
  100,550
  110,819
  121,560
  132,771
  144,456
  156,620
  169,272
  182,426
  196,095
  210,301
  225,064
  240,408
  256,362
  272,955
  290,220
  308,192
  326,910
  346,414
  366,747
  387,953
  410,083
  433,187
  457,317
  482,531
Debt-to-equity ratio
  1.255
  1.960
  2.180
  2.360
  2.510
  2.640
  2.740
  2.840
  2.910
  2.980
  3.040
  3.090
  3.130
  3.180
  3.210
  3.240
  3.270
  3.300
  3.320
  3.340
  3.360
  3.380
  3.400
  3.420
  3.430
  3.440
  3.460
  3.470
  3.480
  3.490
  3.500
Adjusted equity ratio
  0.213
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,071
  -9,935
  -11,577
  -13,336
  -15,213
  -17,204
  -19,307
  -21,520
  -23,842
  -26,272
  -28,809
  -31,454
  -34,208
  -37,073
  -40,051
  -43,147
  -46,364
  -49,708
  -53,182
  -56,795
  -60,552
  -64,461
  -68,530
  -72,768
  -77,183
  -81,785
  -86,584
  -91,592
  -96,820
  -102,280
  -107,984
Depreciation, amort., depletion, $m
  4,301
  4,977
  5,714
  6,504
  7,346
  8,239
  9,181
  10,172
  11,211
  12,297
  13,431
  14,613
  15,844
  17,124
  18,455
  19,837
  21,275
  22,768
  24,320
  25,934
  27,613
  29,359
  31,177
  33,071
  35,044
  37,101
  39,246
  41,485
  43,822
  46,263
  48,814
Funds from operations, $m
  3,092
  -4,959
  -5,863
  -6,832
  -7,866
  -8,965
  -10,126
  -11,349
  -12,632
  -13,975
  -15,378
  -16,840
  -18,364
  -19,949
  -21,597
  -23,310
  -25,090
  -26,940
  -28,862
  -30,861
  -32,940
  -35,102
  -37,353
  -39,697
  -42,139
  -44,684
  -47,338
  -50,107
  -52,998
  -56,017
  -59,170
Change in working capital, $m
  92
  -192
  -207
  -222
  -237
  -251
  -265
  -279
  -292
  -306
  -319
  -333
  -346
  -360
  -374
  -389
  -404
  -420
  -437
  -454
  -472
  -491
  -511
  -533
  -555
  -579
  -603
  -630
  -657
  -687
  -718
Cash from operations, $m
  3,000
  -4,767
  -5,656
  -6,610
  -7,630
  -8,714
  -9,861
  -11,070
  -12,339
  -13,669
  -15,059
  -16,508
  -18,018
  -19,589
  -21,222
  -22,921
  -24,686
  -26,520
  -28,426
  -30,407
  -32,468
  -34,611
  -36,842
  -39,164
  -41,584
  -44,105
  -46,735
  -49,478
  -52,340
  -55,330
  -58,453
Maintenance CAPEX, $m
  0
  -4,294
  -4,977
  -5,714
  -6,504
  -7,346
  -8,239
  -9,181
  -10,172
  -11,211
  -12,297
  -13,431
  -14,613
  -15,844
  -17,124
  -18,455
  -19,837
  -21,275
  -22,768
  -24,320
  -25,934
  -27,613
  -29,359
  -31,177
  -33,071
  -35,044
  -37,101
  -39,246
  -41,485
  -43,822
  -46,263
New CAPEX, $m
  -3,505
  -6,212
  -6,707
  -7,191
  -7,662
  -8,123
  -8,574
  -9,017
  -9,454
  -9,888
  -10,321
  -10,757
  -11,198
  -11,648
  -12,109
  -12,584
  -13,077
  -13,590
  -14,126
  -14,686
  -15,275
  -15,894
  -16,545
  -17,231
  -17,955
  -18,718
  -19,523
  -20,372
  -21,268
  -22,214
  -23,211
Cash from investing activities, $m
  -2,762
  -10,506
  -11,684
  -12,905
  -14,166
  -15,469
  -16,813
  -18,198
  -19,626
  -21,099
  -22,618
  -24,188
  -25,811
  -27,492
  -29,233
  -31,039
  -32,914
  -34,865
  -36,894
  -39,006
  -41,209
  -43,507
  -45,904
  -48,408
  -51,026
  -53,762
  -56,624
  -59,618
  -62,753
  -66,036
  -69,474
Free cash flow, $m
  238
  -15,273
  -17,340
  -19,514
  -21,796
  -24,183
  -26,674
  -29,268
  -31,965
  -34,767
  -37,677
  -40,696
  -43,829
  -47,080
  -50,455
  -53,960
  -57,600
  -61,384
  -65,319
  -69,414
  -73,677
  -78,117
  -82,746
  -87,573
  -92,609
  -97,867
  -103,358
  -109,096
  -115,094
  -121,366
  -127,927
Issuance/(repayment) of debt, $m
  -790
  5,358
  5,727
  6,139
  6,542
  6,936
  7,321
  7,699
  8,072
  8,442
  8,812
  9,184
  9,561
  9,945
  10,339
  10,745
  11,166
  11,603
  12,061
  12,540
  13,042
  13,570
  14,126
  14,712
  15,330
  15,981
  16,669
  17,394
  18,159
  18,967
  19,818
Issuance/(repurchase) of shares, $m
  2,150
  11,393
  13,136
  15,008
  16,994
  19,092
  21,300
  23,617
  26,040
  28,570
  31,208
  33,954
  36,811
  39,780
  42,866
  46,073
  49,404
  52,867
  56,466
  60,209
  64,103
  68,156
  72,377
  76,773
  81,356
  86,136
  91,123
  96,328
  101,764
  107,444
  113,380
Cash from financing (excl. dividends), $m  
  2,113
  16,751
  18,863
  21,147
  23,536
  26,028
  28,621
  31,316
  34,112
  37,012
  40,020
  43,138
  46,372
  49,725
  53,205
  56,818
  60,570
  64,470
  68,527
  72,749
  77,145
  81,726
  86,503
  91,485
  96,686
  102,117
  107,792
  113,722
  119,923
  126,411
  133,198
Total cash flow (excl. dividends), $m
  2,350
  1,479
  1,523
  1,633
  1,740
  1,845
  1,947
  2,048
  2,147
  2,245
  2,344
  2,443
  2,543
  2,645
  2,750
  2,858
  2,970
  3,086
  3,208
  3,335
  3,469
  3,609
  3,757
  3,913
  4,077
  4,250
  4,433
  4,626
  4,830
  5,044
  5,271
Retained Cash Flow (-), $m
  607
  -11,393
  -13,136
  -15,008
  -16,994
  -19,092
  -21,300
  -23,617
  -26,040
  -28,570
  -31,208
  -33,954
  -36,811
  -39,780
  -42,866
  -46,073
  -49,404
  -52,867
  -56,466
  -60,209
  -64,103
  -68,156
  -72,377
  -76,773
  -81,356
  -86,136
  -91,123
  -96,328
  -101,764
  -107,444
  -113,380
Prev. year cash balance distribution, $m
 
  3,142
  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
 
  -6,772
  -11,613
  -13,375
  -15,254
  -17,247
  -19,353
  -21,569
  -23,893
  -26,325
  -28,864
  -31,512
  -34,268
  -37,135
  -40,116
  -43,215
  -46,435
  -49,781
  -53,259
  -56,874
  -60,635
  -64,547
  -68,619
  -72,860
  -77,279
  -81,885
  -86,689
  -91,702
  -96,934
  -102,399
  -108,109
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  -6,317
  -10,038
  -10,636
  -11,074
  -11,338
  -11,420
  -11,319
  -11,041
  -10,598
  -10,012
  -9,304
  -8,505
  -7,643
  -6,750
  -5,854
  -4,984
  -4,162
  -3,407
  -2,731
  -2,142
  -1,642
  -1,230
  -898
  -639
  -443
  -298
  -195
  -123
  -76
  -45
Current shareholders' claim on cash, %
  100
  67.5
  45.7
  31.0
  21.0
  14.3
  9.8
  6.7
  4.6
  3.1
  2.1
  1.5
  1.0
  0.7
  0.5
  0.3
  0.2
  0.2
  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

Anadarko Petroleum Corporation (Anadarko) is an independent exploration and production company. The Company is engaged in developing, acquiring, and exploring for oil and natural-gas resources. The Company's segments include Oil and Gas Exploration and Production; Midstream, and Marketing. The Company's geographical segments include the United States and International. The Oil and Gas Exploration and Production segment explores for and produces oil, condensate, natural gas and natural gas liquids (NGLs), and focuses on the development and operation of the Company's liquefied natural gas (LNG) project in Mozambique. The Midstream segment engages in gathering, processing, treating and transporting Anadarko and third-party oil, natural-gas and NGLs production. The Marketing segment sells Anadarko's oil, natural-gas and NGLs production, as well as third-party purchased volumes. As of December 31, 2016, the Company had approximately 1.7 billion barrels of oil equivalent (BOE).

FINANCIAL RATIOS  of  Anadarko Petroleum (APC)

Valuation Ratios
P/E Ratio -10.4
Price to Sales 3.8
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow -63.5
Growth Rates
Sales Growth Rate -11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.2%
Cap. Spend. - 3 Yr. Gr. Rate -14.6%
Financial Strength
Quick Ratio 76
Current Ratio 0
LT Debt to Equity 125.1%
Total Debt to Equity 125.5%
Interest Coverage -3
Management Effectiveness
Return On Assets -5.3%
Ret/ On Assets - 3 Yr. Avg. -17.4%
Return On Total Capital -11%
Ret/ On T. Cap. - 3 Yr. Avg. -12.4%
Return On Equity -24.5%
Return On Equity - 3 Yr. Avg. -24.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 78.5%
Gross Margin - 3 Yr. Avg. 80.6%
EBITDA Margin 15.7%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin -32.6%
Oper. Margin - 3 Yr. Avg. -30.8%
Pre-Tax Margin -45.3%
Pre-Tax Margin - 3 Yr. Avg. -49%
Net Profit Margin -36.4%
Net Profit Margin - 3 Yr. Avg. -39.2%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 1016.9%
Payout Ratio -3.4%

APC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APC stock intrinsic value calculation we used $8447 million for the last fiscal year's total revenue generated by Anadarko Petroleum. The default revenue input number comes from 2016 income statement of Anadarko 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 APC stock valuation model: a) initial revenue growth rate of 15.9% 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 7.2%, whose default value for APC is calculated based on our internal credit rating of Anadarko 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 Anadarko 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 APC stock the variable cost ratio is equal to 192.9%.

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 APC 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 5.5% for Anadarko Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Anadarko 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 APC 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 APC are equal to 462.6%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Anadarko 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 APC is equal to -14.3%. 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 - $12212 million for Anadarko 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 548.471 million for Anadarko 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 Anadarko Petroleum at the current share price and the inputted number of shares is $31.9 billion.

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Financial statements of APC
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