Intrinsic value of Anadarko Petroleum Corporation - APC

Previous Close

$61.78

  Intrinsic Value

$1.43

stock screener

  Rating & Target

str. sell

-98%

Previous close

$61.78

 
Intrinsic value

$1.43

 
Up/down potential

-98%

 
Rating

str. sell

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 0001), $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 30.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  15,296
  17,341
  19,514
  21,813
  24,234
  26,777
  29,439
  32,220
  35,121
  38,143
  41,287
  44,556
  47,954
  51,486
  55,155
  58,969
  62,934
  67,057
  71,345
  75,809
  80,457
  85,298
  90,344
  95,606
  101,096
  106,825
  112,809
  119,059
  125,592
  132,421
Variable operating expenses, $m
  15,934
  17,989
  20,173
  22,483
  24,917
  27,472
  30,147
  32,942
  35,857
  38,894
  41,490
  44,776
  48,191
  51,739
  55,427
  59,260
  63,244
  67,387
  71,697
  76,183
  80,853
  85,719
  90,790
  96,077
  101,594
  107,352
  113,365
  119,646
  126,211
  133,074
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
  15,934
  17,989
  20,173
  22,483
  24,917
  27,472
  30,147
  32,942
  35,857
  38,894
  41,490
  44,776
  48,191
  51,739
  55,427
  59,260
  63,244
  67,387
  71,697
  76,183
  80,853
  85,719
  90,790
  96,077
  101,594
  107,352
  113,365
  119,646
  126,211
  133,074
Operating income, $m
  -638
  -648
  -659
  -671
  -682
  -695
  -708
  -722
  -736
  -751
  -203
  -220
  -236
  -254
  -272
  -291
  -310
  -330
  -352
  -374
  -397
  -420
  -445
  -471
  -498
  -526
  -556
  -587
  -619
  -653
EBITDA, $m
  4,389
  4,976
  5,600
  6,260
  6,954
  7,684
  8,448
  9,246
  10,079
  10,946
  11,848
  12,786
  13,761
  14,775
  15,828
  16,922
  18,060
  19,243
  20,474
  21,755
  23,089
  24,478
  25,926
  27,436
  29,011
  30,656
  32,373
  34,166
  36,041
  38,001
Interest expense (income), $m
  856
  969
  1,242
  1,530
  1,836
  2,159
  2,500
  2,858
  3,233
  3,625
  4,033
  4,459
  4,902
  5,362
  5,840
  6,338
  6,854
  7,391
  7,950
  8,530
  9,134
  9,763
  10,417
  11,099
  11,810
  12,551
  13,324
  14,130
  14,973
  15,853
  16,773
Earnings before tax, $m
  -1,607
  -1,890
  -2,189
  -2,506
  -2,842
  -3,195
  -3,566
  -3,955
  -4,361
  -4,784
  -4,662
  -5,121
  -5,598
  -6,094
  -6,610
  -7,145
  -7,702
  -8,280
  -8,882
  -9,508
  -10,159
  -10,838
  -11,544
  -12,281
  -13,049
  -13,850
  -14,686
  -15,560
  -16,472
  -17,426
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
  -1,607
  -1,890
  -2,189
  -2,506
  -2,842
  -3,195
  -3,566
  -3,955
  -4,361
  -4,784
  -4,662
  -5,121
  -5,598
  -6,094
  -6,610
  -7,145
  -7,702
  -8,280
  -8,882
  -9,508
  -10,159
  -10,838
  -11,544
  -12,281
  -13,049
  -13,850
  -14,686
  -15,560
  -16,472
  -17,426

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
  46,210
  52,389
  58,955
  65,899
  73,215
  80,897
  88,940
  97,343
  106,107
  115,235
  124,734
  134,611
  144,877
  155,546
  166,632
  178,154
  190,132
  202,588
  215,545
  229,030
  243,071
  257,698
  272,943
  288,840
  305,425
  322,736
  340,812
  359,695
  379,431
  400,064
Adjusted assets (=assets-cash), $m
  46,210
  52,389
  58,955
  65,899
  73,215
  80,897
  88,940
  97,343
  106,107
  115,235
  124,734
  134,611
  144,877
  155,546
  166,632
  178,154
  190,132
  202,588
  215,545
  229,030
  243,071
  257,698
  272,943
  288,840
  305,425
  322,736
  340,812
  359,695
  379,431
  400,064
Revenue / Adjusted assets
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
Average production assets, $m
  35,272
  39,988
  44,999
  50,300
  55,884
  61,747
  67,886
  74,300
  80,990
  87,957
  95,208
  102,747
  110,583
  118,726
  127,188
  135,983
  145,125
  154,633
  164,523
  174,816
  185,533
  196,698
  208,334
  220,468
  233,127
  246,340
  260,137
  274,550
  289,614
  305,363
Working capital, $m
  -1,377
  -1,561
  -1,756
  -1,963
  -2,181
  -2,410
  -2,650
  -2,900
  -3,161
  -3,433
  -3,716
  -4,010
  -4,316
  -4,634
  -4,964
  -5,307
  -5,664
  -6,035
  -6,421
  -6,823
  -7,241
  -7,677
  -8,131
  -8,605
  -9,099
  -9,614
  -10,153
  -10,715
  -11,303
  -11,918
Total debt, $m
  21,043
  25,924
  31,111
  36,597
  42,377
  48,445
  54,799
  61,438
  68,361
  75,573
  83,077
  90,880
  98,990
  107,418
  116,176
  125,279
  134,742
  144,581
  154,818
  165,471
  176,563
  188,119
  200,162
  212,721
  225,823
  239,498
  253,778
  268,696
  284,287
  300,588
Total liabilities, $m
  36,506
  41,387
  46,574
  52,060
  57,840
  63,908
  70,262
  76,901
  83,824
  91,036
  98,540
  106,343
  114,453
  122,881
  131,639
  140,742
  150,205
  160,044
  170,281
  180,934
  192,026
  203,582
  215,625
  228,184
  241,286
  254,961
  269,241
  284,159
  299,750
  316,051
Total equity, $m
  9,704
  11,002
  12,380
  13,839
  15,375
  16,988
  18,677
  20,442
  22,282
  24,199
  26,194
  28,268
  30,424
  32,665
  34,993
  37,412
  39,928
  42,543
  45,264
  48,096
  51,045
  54,117
  57,318
  60,656
  64,139
  67,774
  71,570
  75,536
  79,680
  84,013
Total liabilities and equity, $m
  46,210
  52,389
  58,954
  65,899
  73,215
  80,896
  88,939
  97,343
  106,106
  115,235
  124,734
  134,611
  144,877
  155,546
  166,632
  178,154
  190,133
  202,587
  215,545
  229,030
  243,071
  257,699
  272,943
  288,840
  305,425
  322,735
  340,811
  359,695
  379,430
  400,064
Debt-to-equity ratio
  2.170
  2.360
  2.510
  2.640
  2.760
  2.850
  2.930
  3.010
  3.070
  3.120
  3.170
  3.210
  3.250
  3.290
  3.320
  3.350
  3.370
  3.400
  3.420
  3.440
  3.460
  3.480
  3.490
  3.510
  3.520
  3.530
  3.550
  3.560
  3.570
  3.580
Adjusted equity ratio
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,607
  -1,890
  -2,189
  -2,506
  -2,842
  -3,195
  -3,566
  -3,955
  -4,361
  -4,784
  -4,662
  -5,121
  -5,598
  -6,094
  -6,610
  -7,145
  -7,702
  -8,280
  -8,882
  -9,508
  -10,159
  -10,838
  -11,544
  -12,281
  -13,049
  -13,850
  -14,686
  -15,560
  -16,472
  -17,426
Depreciation, amort., depletion, $m
  5,028
  5,625
  6,259
  6,930
  7,637
  8,379
  9,156
  9,968
  10,815
  11,697
  12,052
  13,006
  13,998
  15,029
  16,100
  17,213
  18,370
  19,574
  20,826
  22,129
  23,485
  24,898
  26,371
  27,907
  29,510
  31,182
  32,929
  34,753
  36,660
  38,654
Funds from operations, $m
  3,421
  3,735
  4,070
  4,424
  4,795
  5,184
  5,590
  6,013
  6,454
  6,913
  7,389
  7,885
  8,400
  8,934
  9,490
  10,068
  10,669
  11,293
  11,944
  12,621
  13,326
  14,061
  14,827
  15,627
  16,461
  17,332
  18,242
  19,194
  20,188
  21,228
Change in working capital, $m
  -172
  -184
  -196
  -207
  -218
  -229
  -240
  -250
  -261
  -272
  -283
  -294
  -306
  -318
  -330
  -343
  -357
  -371
  -386
  -402
  -418
  -436
  -454
  -474
  -494
  -516
  -538
  -563
  -588
  -615
Cash from operations, $m
  3,593
  3,919
  4,266
  4,631
  5,013
  5,413
  5,829
  6,263
  6,715
  7,184
  7,672
  8,179
  8,705
  9,252
  9,821
  10,411
  11,025
  11,665
  12,330
  13,022
  13,744
  14,497
  15,281
  16,100
  16,955
  17,848
  18,781
  19,756
  20,776
  21,843
Maintenance CAPEX, $m
  -3,906
  -4,465
  -5,062
  -5,696
  -6,367
  -7,074
  -7,816
  -8,593
  -9,405
  -10,252
  -11,134
  -12,052
  -13,006
  -13,998
  -15,029
  -16,100
  -17,213
  -18,370
  -19,574
  -20,826
  -22,129
  -23,485
  -24,898
  -26,371
  -27,907
  -29,510
  -31,182
  -32,929
  -34,753
  -36,660
New CAPEX, $m
  -4,416
  -4,716
  -5,012
  -5,301
  -5,584
  -5,863
  -6,139
  -6,414
  -6,690
  -6,968
  -7,250
  -7,539
  -7,836
  -8,143
  -8,462
  -8,795
  -9,143
  -9,507
  -9,890
  -10,293
  -10,717
  -11,165
  -11,636
  -12,134
  -12,659
  -13,213
  -13,797
  -14,414
  -15,064
  -15,749
Cash from investing activities, $m
  -8,322
  -9,181
  -10,074
  -10,997
  -11,951
  -12,937
  -13,955
  -15,007
  -16,095
  -17,220
  -18,384
  -19,591
  -20,842
  -22,141
  -23,491
  -24,895
  -26,356
  -27,877
  -29,464
  -31,119
  -32,846
  -34,650
  -36,534
  -38,505
  -40,566
  -42,723
  -44,979
  -47,343
  -49,817
  -52,409
Free cash flow, $m
  -4,729
  -5,262
  -5,807
  -6,366
  -6,938
  -7,524
  -8,126
  -8,744
  -9,380
  -10,035
  -10,712
  -11,412
  -12,137
  -12,889
  -13,670
  -14,483
  -15,330
  -16,213
  -17,134
  -18,096
  -19,102
  -20,153
  -21,253
  -22,405
  -23,611
  -24,875
  -26,199
  -27,586
  -29,041
  -30,567
Issuance/(repayment) of debt, $m
  4,626
  4,881
  5,187
  5,486
  5,780
  6,068
  6,354
  6,638
  6,924
  7,211
  7,504
  7,803
  8,110
  8,428
  8,758
  9,103
  9,463
  9,840
  10,236
  10,653
  11,092
  11,555
  12,044
  12,559
  13,102
  13,675
  14,280
  14,918
  15,591
  16,301
Issuance/(repurchase) of shares, $m
  2,815
  3,187
  3,568
  3,964
  4,378
  4,808
  5,255
  5,720
  6,201
  6,701
  6,657
  7,195
  7,754
  8,335
  8,938
  9,565
  10,217
  10,896
  11,603
  12,340
  13,108
  13,909
  14,746
  15,619
  16,532
  17,485
  18,482
  19,525
  20,617
  21,759
Cash from financing (excl. dividends), $m  
  7,441
  8,068
  8,755
  9,450
  10,158
  10,876
  11,609
  12,358
  13,125
  13,912
  14,161
  14,998
  15,864
  16,763
  17,696
  18,668
  19,680
  20,736
  21,839
  22,993
  24,200
  25,464
  26,790
  28,178
  29,634
  31,160
  32,762
  34,443
  36,208
  38,060
Total cash flow (excl. dividends), $m
  2,713
  2,806
  2,947
  3,085
  3,220
  3,352
  3,484
  3,614
  3,745
  3,878
  3,449
  3,587
  3,728
  3,874
  4,026
  4,184
  4,349
  4,523
  4,705
  4,897
  5,099
  5,311
  5,536
  5,773
  6,022
  6,286
  6,564
  6,857
  7,166
  7,493
Retained Cash Flow (-), $m
  -2,815
  -3,187
  -3,568
  -3,964
  -4,378
  -4,808
  -5,255
  -5,720
  -6,201
  -6,701
  -6,657
  -7,195
  -7,754
  -8,335
  -8,938
  -9,565
  -10,217
  -10,896
  -11,603
  -12,340
  -13,108
  -13,909
  -14,746
  -15,619
  -16,532
  -17,485
  -18,482
  -19,525
  -20,617
  -21,759
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
  -102
  -381
  -620
  -880
  -1,158
  -1,456
  -1,772
  -2,105
  -2,456
  -2,824
  -3,208
  -3,609
  -4,026
  -4,461
  -4,912
  -5,381
  -5,868
  -6,373
  -6,898
  -7,443
  -8,009
  -8,598
  -9,210
  -9,847
  -10,509
  -11,199
  -11,919
  -12,668
  -13,450
  -14,266
Discount rate, %
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
  -96
  -331
  -496
  -644
  -770
  -871
  -946
  -993
  -1,013
  -1,007
  -978
  -929
  -864
  -786
  -701
  -612
  -523
  -438
  -358
  -286
  -224
  -171
  -127
  -92
  -65
  -44
  -30
  -19
  -12
  -7
Current shareholders' claim on cash, %
  91.6
  84.0
  77.2
  70.9
  65.2
  60.1
  55.3
  51.0
  47.1
  43.5
  40.4
  37.6
  35.0
  32.5
  30.2
  28.1
  26.2
  24.3
  22.6
  21.1
  19.6
  18.2
  16.9
  15.8
  14.7
  13.6
  12.7
  11.8
  11.0
  10.2

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 Corporation (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 -67.4
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 $13382 million for the last fiscal year's total revenue generated by Anadarko Petroleum Corporation. The default revenue input number comes from 0001 income statement of Anadarko Petroleum Corporation. 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 14.3% 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 7%, whose default value for APC is calculated based on our internal credit rating of Anadarko Petroleum Corporation, 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 Corporation.
    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 104.7%.

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 5.9% for Anadarko Petroleum Corporation.

Corporate tax rate of 27% is the nominal tax rate for Anadarko Petroleum Corporation. 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 230.6%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Anadarko Petroleum Corporation 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 -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 - $8496 million for Anadarko Petroleum Corporation - 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 499.663 million for Anadarko Petroleum Corporation 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 Corporation at the current share price and the inputted number of shares is $30.9 billion.

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