Intrinsic value of Anadarko Petroleum - APC

Previous Close

$62.05

  Intrinsic Value

$366.49

stock screener

  Rating & Target

str. buy

+491%

Previous close

$62.05

 
Intrinsic value

$366.49

 
Up/down potential

+491%

 
Rating

str. buy

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

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 34.0

 

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, %
  51.30
  46.67
  42.50
  38.75
  35.38
  32.34
  29.61
  27.15
  24.93
  22.94
  21.14
  19.53
  18.08
  16.77
  15.59
  14.53
  13.58
  12.72
  11.95
  11.25
  10.63
  10.07
  9.56
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
Revenue, $m
  18,017
  26,425
  37,657
  52,250
  70,734
  93,610
  121,324
  154,257
  192,714
  236,918
  287,012
  343,063
  405,077
  473,004
  546,755
  626,213
  711,250
  801,732
  897,533
  998,546
  1,104,681
  1,215,880
  1,332,112
  1,453,381
  1,579,726
  1,711,220
  1,847,972
  1,990,124
  2,137,853
  2,291,368
Variable operating expenses, $m
  9,132
  13,130
  18,470
  25,408
  34,197
  45,073
  58,250
  73,908
  92,193
  113,209
  136,460
  163,110
  192,595
  224,891
  259,956
  297,734
  338,165
  381,185
  426,734
  474,761
  525,223
  578,093
  633,355
  691,013
  751,084
  813,603
  878,622
  946,209
  1,016,447
  1,089,436
Fixed operating expenses, $m
  6,636
  6,782
  6,931
  7,084
  7,239
  7,399
  7,561
  7,728
  7,898
  8,072
  8,249
  8,431
  8,616
  8,806
  8,999
  9,197
  9,400
  9,606
  9,818
  10,034
  10,254
  10,480
  10,711
  10,946
  11,187
  11,433
  11,685
  11,942
  12,205
  12,473
Total operating expenses, $m
  15,768
  19,912
  25,401
  32,492
  41,436
  52,472
  65,811
  81,636
  100,091
  121,281
  144,709
  171,541
  201,211
  233,697
  268,955
  306,931
  347,565
  390,791
  436,552
  484,795
  535,477
  588,573
  644,066
  701,959
  762,271
  825,036
  890,307
  958,151
  1,028,652
  1,101,909
Operating income, $m
  2,249
  6,513
  12,256
  19,758
  29,298
  41,138
  55,512
  72,621
  92,624
  115,637
  142,302
  171,523
  203,866
  239,308
  277,800
  319,281
  363,685
  410,940
  460,982
  513,751
  569,204
  627,307
  688,046
  751,422
  817,455
  886,184
  957,665
  1,031,974
  1,109,202
  1,189,459
EBITDA, $m
  8,200
  14,978
  24,077
  35,941
  51,007
  69,684
  92,342
  119,295
  150,792
  187,018
  228,090
  274,064
  324,944
  380,689
  441,225
  506,457
  576,277
  650,578
  729,254
  812,217
  899,393
  990,733
  1,086,214
  1,185,837
  1,289,635
  1,397,667
  1,510,024
  1,626,822
  1,748,206
  1,874,349
Interest expense (income), $m
  856
  933
  1,898
  3,223
  4,994
  7,294
  10,208
  13,814
  18,182
  23,374
  29,436
  36,404
  44,300
  53,135
  62,911
  73,618
  85,243
  97,768
  111,173
  125,435
  140,537
  156,459
  173,190
  190,718
  209,040
  228,155
  248,071
  268,799
  290,355
  312,763
  336,049
Earnings before tax, $m
  1,316
  4,615
  9,032
  14,764
  22,004
  30,930
  41,699
  54,439
  69,250
  86,202
  105,899
  127,223
  150,731
  176,397
  204,182
  234,038
  265,917
  299,767
  335,546
  373,215
  412,744
  454,117
  497,328
  542,382
  589,299
  638,113
  688,866
  741,619
  796,439
  853,410
Tax expense, $m
  355
  1,246
  2,439
  3,986
  5,941
  8,351
  11,259
  14,699
  18,698
  23,274
  28,593
  34,350
  40,697
  47,627
  55,129
  63,190
  71,797
  80,937
  90,597
  100,768
  111,441
  122,612
  134,278
  146,443
  159,111
  172,290
  185,994
  200,237
  215,039
  230,421
Net income, $m
  961
  3,369
  6,593
  10,778
  16,063
  22,579
  30,440
  39,740
  50,553
  62,927
  77,306
  92,873
  110,034
  128,770
  149,053
  170,848
  194,119
  218,830
  244,949
  272,447
  301,303
  331,506
  363,049
  395,939
  430,189
  465,822
  502,872
  541,382
  581,401
  622,989

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
  62,776
  92,074
  131,208
  182,055
  246,461
  326,166
  422,730
  537,481
  671,478
  825,499
  1,000,041
  1,195,343
  1,411,419
  1,648,098
  1,905,068
  2,181,927
  2,478,222
  2,793,490
  3,127,294
  3,479,254
  3,849,064
  4,236,514
  4,641,504
  5,064,045
  5,504,272
  5,962,440
  6,438,927
  6,934,231
  7,448,966
  7,983,860
Adjusted assets (=assets-cash), $m
  62,776
  92,074
  131,208
  182,055
  246,461
  326,166
  422,730
  537,481
  671,478
  825,499
  1,000,041
  1,195,343
  1,411,419
  1,648,098
  1,905,068
  2,181,927
  2,478,222
  2,793,490
  3,127,294
  3,479,254
  3,849,064
  4,236,514
  4,641,504
  5,064,045
  5,504,272
  5,962,440
  6,438,927
  6,934,231
  7,448,966
  7,983,860
Revenue / Adjusted assets
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
  0.287
Average production assets, $m
  53,852
  78,985
  112,556
  156,175
  211,425
  279,799
  362,636
  461,074
  576,023
  708,148
  857,878
  1,025,417
  1,210,776
  1,413,809
  1,634,250
  1,871,751
  2,125,925
  2,396,376
  2,682,728
  2,984,654
  3,301,892
  3,634,264
  3,981,681
  4,344,155
  4,721,801
  5,114,837
  5,523,588
  5,948,481
  6,390,043
  6,848,899
Working capital, $m
  -2,865
  -4,202
  -5,987
  -8,308
  -11,247
  -14,884
  -19,290
  -24,527
  -30,642
  -37,670
  -45,635
  -54,547
  -64,407
  -75,208
  -86,934
  -99,568
  -113,089
  -127,475
  -142,708
  -158,769
  -175,644
  -193,325
  -211,806
  -231,088
  -251,176
  -272,084
  -293,828
  -316,430
  -339,919
  -364,327
Total debt, $m
  31,632
  53,723
  83,230
  121,568
  170,131
  230,228
  303,037
  389,559
  490,593
  606,725
  738,330
  885,588
  1,048,509
  1,226,965
  1,420,721
  1,629,472
  1,852,878
  2,090,590
  2,342,279
  2,607,656
  2,886,493
  3,178,631
  3,483,993
  3,802,589
  4,134,520
  4,479,979
  4,839,250
  5,212,709
  5,600,819
  6,004,130
Total liabilities, $m
  47,333
  69,424
  98,931
  137,269
  185,832
  245,929
  318,738
  405,260
  506,294
  622,426
  754,031
  901,289
  1,064,210
  1,242,666
  1,436,422
  1,645,173
  1,868,579
  2,106,291
  2,357,980
  2,623,357
  2,902,194
  3,194,332
  3,499,694
  3,818,290
  4,150,221
  4,495,680
  4,854,951
  5,228,410
  5,616,520
  6,019,831
Total equity, $m
  15,443
  22,650
  32,277
  44,786
  60,629
  80,237
  103,992
  132,220
  165,184
  203,073
  246,010
  294,054
  347,209
  405,432
  468,647
  536,754
  609,643
  687,198
  769,314
  855,896
  946,870
  1,042,183
  1,141,810
  1,245,755
  1,354,051
  1,466,760
  1,583,976
  1,705,821
  1,832,446
  1,964,030
Total liabilities and equity, $m
  62,776
  92,074
  131,208
  182,055
  246,461
  326,166
  422,730
  537,480
  671,478
  825,499
  1,000,041
  1,195,343
  1,411,419
  1,648,098
  1,905,069
  2,181,927
  2,478,222
  2,793,489
  3,127,294
  3,479,253
  3,849,064
  4,236,515
  4,641,504
  5,064,045
  5,504,272
  5,962,440
  6,438,927
  6,934,231
  7,448,966
  7,983,861
Debt-to-equity ratio
  2.050
  2.370
  2.580
  2.710
  2.810
  2.870
  2.910
  2.950
  2.970
  2.990
  3.000
  3.010
  3.020
  3.030
  3.030
  3.040
  3.040
  3.040
  3.040
  3.050
  3.050
  3.050
  3.050
  3.050
  3.050
  3.050
  3.060
  3.060
  3.060
  3.060
Adjusted equity ratio
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246
  0.246

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  961
  3,369
  6,593
  10,778
  16,063
  22,579
  30,440
  39,740
  50,553
  62,927
  77,306
  92,873
  110,034
  128,770
  149,053
  170,848
  194,119
  218,830
  244,949
  272,447
  301,303
  331,506
  363,049
  395,939
  430,189
  465,822
  502,872
  541,382
  581,401
  622,989
Depreciation, amort., depletion, $m
  5,951
  8,465
  11,822
  16,184
  21,709
  28,546
  36,830
  46,674
  58,168
  71,381
  85,788
  102,542
  121,078
  141,381
  163,425
  187,175
  212,593
  239,638
  268,273
  298,465
  330,189
  363,426
  398,168
  434,416
  472,180
  511,484
  552,359
  594,848
  639,004
  684,890
Funds from operations, $m
  6,912
  11,834
  18,415
  26,961
  37,772
  51,125
  67,270
  86,414
  108,721
  134,308
  163,094
  195,414
  231,111
  270,151
  312,478
  358,023
  406,712
  458,468
  513,221
  570,912
  631,493
  694,932
  761,217
  830,354
  902,369
  977,306
  1,055,231
  1,136,230
  1,220,405
  1,307,879
Change in working capital, $m
  -971
  -1,337
  -1,786
  -2,320
  -2,939
  -3,637
  -4,406
  -5,236
  -6,115
  -7,028
  -7,965
  -8,912
  -9,860
  -10,800
  -11,726
  -12,634
  -13,521
  -14,387
  -15,233
  -16,061
  -16,876
  -17,681
  -18,481
  -19,282
  -20,089
  -20,908
  -21,744
  -22,602
  -23,489
  -24,409
Cash from operations, $m
  7,883
  13,171
  20,201
  29,282
  40,711
  54,762
  71,676
  91,650
  114,836
  141,337
  171,059
  204,327
  240,972
  280,951
  324,204
  370,657
  420,232
  472,854
  528,454
  586,973
  648,368
  712,613
  779,698
  849,636
  922,458
  998,213
  1,076,975
  1,158,832
  1,243,894
  1,332,288
Maintenance CAPEX, $m
  -3,559
  -5,385
  -7,899
  -11,256
  -15,617
  -21,143
  -27,980
  -36,264
  -46,107
  -57,602
  -70,815
  -85,788
  -102,542
  -121,078
  -141,381
  -163,425
  -187,175
  -212,593
  -239,638
  -268,273
  -298,465
  -330,189
  -363,426
  -398,168
  -434,416
  -472,180
  -511,484
  -552,359
  -594,848
  -639,004
New CAPEX, $m
  -18,260
  -25,133
  -33,571
  -43,619
  -55,251
  -68,374
  -82,837
  -98,438
  -114,949
  -132,126
  -149,730
  -167,539
  -185,359
  -203,033
  -220,440
  -237,502
  -254,174
  -270,450
  -286,352
  -301,926
  -317,239
  -332,372
  -347,417
  -362,474
  -377,646
  -393,036
  -408,751
  -424,893
  -441,562
  -458,856
Cash from investing activities, $m
  -21,819
  -30,518
  -41,470
  -54,875
  -70,868
  -89,517
  -110,817
  -134,702
  -161,056
  -189,728
  -220,545
  -253,327
  -287,901
  -324,111
  -361,821
  -400,927
  -441,349
  -483,043
  -525,990
  -570,199
  -615,704
  -662,561
  -710,843
  -760,642
  -812,062
  -865,216
  -920,235
  -977,252
  -1,036,410
  -1,097,860
Free cash flow, $m
  -13,936
  -17,347
  -21,268
  -25,592
  -30,157
  -34,754
  -39,140
  -43,051
  -46,220
  -48,391
  -49,486
  -49,000
  -46,929
  -43,160
  -37,617
  -30,270
  -21,117
  -10,188
  2,464
  16,774
  32,664
  50,052
  68,855
  88,994
  110,396
  132,997
  156,740
  181,580
  207,484
  234,428
Issuance/(repayment) of debt, $m
  16,085
  22,090
  29,507
  38,338
  48,562
  60,097
  72,809
  86,522
  101,034
  116,132
  131,605
  147,258
  162,921
  178,456
  193,756
  208,752
  223,406
  237,712
  251,689
  265,378
  278,837
  292,138
  305,362
  318,596
  331,931
  345,459
  359,271
  373,459
  388,110
  403,310
Issuance/(repurchase) of shares, $m
  4,291
  3,838
  3,034
  1,731
  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 from financing (excl. dividends), $m  
  20,376
  25,928
  32,541
  40,069
  48,562
  60,097
  72,809
  86,522
  101,034
  116,132
  131,605
  147,258
  162,921
  178,456
  193,756
  208,752
  223,406
  237,712
  251,689
  265,378
  278,837
  292,138
  305,362
  318,596
  331,931
  345,459
  359,271
  373,459
  388,110
  403,310
Total cash flow (excl. dividends), $m
  6,441
  8,581
  11,272
  14,477
  18,405
  25,343
  33,669
  43,471
  54,814
  67,740
  82,119
  98,258
  115,992
  135,296
  156,138
  178,482
  202,289
  227,524
  254,153
  282,152
  311,501
  342,189
  374,217
  407,590
  442,328
  478,456
  516,011
  555,039
  595,594
  637,739
Retained Cash Flow (-), $m
  -5,252
  -7,207
  -9,627
  -12,508
  -15,844
  -19,607
  -23,755
  -28,229
  -32,963
  -37,889
  -42,937
  -48,044
  -53,155
  -58,223
  -63,215
  -68,107
  -72,888
  -77,556
  -82,116
  -86,582
  -90,973
  -95,313
  -99,627
  -103,945
  -108,296
  -112,709
  -117,216
  -121,845
  -126,625
  -131,584
Prev. year cash balance distribution, $m
  505
  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
  1,694
  1,374
  1,645
  1,968
  2,561
  5,736
  9,914
  15,242
  21,850
  29,851
  39,182
  50,214
  62,837
  77,073
  92,924
  110,375
  129,401
  149,968
  172,037
  195,570
  220,527
  246,877
  274,589
  303,645
  334,032
  365,746
  398,795
  433,195
  468,969
  506,155
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  1,601
  1,221
  1,366
  1,518
  1,822
  3,737
  5,871
  8,137
  10,426
  12,612
  14,515
  16,140
  17,330
  18,024
  18,195
  17,857
  17,053
  15,860
  14,370
  12,687
  10,914
  9,149
  7,469
  5,937
  4,592
  3,454
  2,524
  1,791
  1,233
  822
Current shareholders' claim on cash, %
  88.3
  81.9
  78.6
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3
  77.3

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 -11.1
Price to Sales 4
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow -67.7
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 $11908 million for the last fiscal year's total revenue generated by Anadarko Petroleum. The default revenue input number comes from 2017 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 51.3% 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 5.8%, 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 52.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6493 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 6% 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 298.9%.

Life of production assets of 10 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 -15.9%. 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 - $10696 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 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 $34.0 billion.

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COMPANY NEWS

▶ Anadarko Declares Dividend   [Aug-14-18 04:15PM  PR Newswire]
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▶ Anadarko Petroleum Selloff Is Overdone   [Aug-07-18 01:28PM  TheStreet.com]
▶ Locked Into Hedges, Shale Misses Out On Oil Price Rally   [Aug-05-18 07:00PM  Oilprice.com]
▶ Anadarko shifts Colorado drilling as opportunity grows in Texas   [09:48AM  American City Business Journals]
▶ Anadarko increases spending expectations for 2018   [09:27AM  American City Business Journals]
▶ Anadarko Petroleum: 2Q Earnings Snapshot   [04:22PM  Associated Press]
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▶ Anadarko and MiMedx fall; Perry Ellis and Dell jump   [Jul-02-18 04:26PM  Associated Press]
▶ Oil Prices: Next Stop, $90 a Barrel?   [10:20AM  Motley Fool]
▶ Anadarko Petroleum investor lawsuit tossed out for now?   [01:29PM  American City Business Journals]
▶ This High-Yield Stock Is About to Hit the Accelerator   [Jun-25-18 05:36PM  Motley Fool]
▶ EIA: Gulf Of Mexico Oil And Gas Production Remains Strong   [Jun-23-18 11:00AM  Oilprice.com]
▶ Here's Why You Should Buy Northern Oil Stock   [Jun-22-18 04:58PM  Zacks]
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