Intrinsic value of BP ADR - BP

Previous Close

$44.67

  Intrinsic Value

$565.08

stock screener

  Rating & Target

str. buy

+999%

Previous close

$44.67

 
Intrinsic value

$565.08

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BP 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 40.7

 

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, %
  31.10
  28.49
  26.14
  24.03
  22.12
  20.41
  18.87
  17.48
  16.24
  15.11
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
Revenue, $m
  320,647
  411,999
  519,700
  644,568
  787,173
  947,850
  1,126,715
  1,323,704
  1,538,610
  1,771,120
  2,020,857
  2,287,417
  2,570,403
  2,869,451
  3,184,254
  3,514,580
  3,860,288
  4,221,331
  4,597,767
  4,989,760
  5,397,580
  5,821,605
  6,262,315
  6,720,293
  7,196,218
  7,690,865
  8,205,102
  8,739,887
  9,296,263
  9,875,359
Variable operating expenses, $m
  265,816
  341,547
  430,831
  534,347
  652,567
  785,767
  934,046
  1,097,351
  1,275,508
  1,468,259
  1,675,290
  1,896,269
  2,130,864
  2,378,775
  2,639,746
  2,913,587
  3,200,179
  3,499,483
  3,811,549
  4,136,511
  4,474,594
  4,826,111
  5,191,460
  5,571,123
  5,965,664
  6,375,727
  6,802,030
  7,245,366
  7,706,602
  8,186,673
Fixed operating expenses, $m
  33,745
  34,488
  35,247
  36,022
  36,814
  37,624
  38,452
  39,298
  40,163
  41,046
  41,949
  42,872
  43,815
  44,779
  45,764
  46,771
  47,800
  48,852
  49,926
  51,025
  52,147
  53,295
  54,467
  55,665
  56,890
  58,142
  59,421
  60,728
  62,064
  63,429
Total operating expenses, $m
  299,561
  376,035
  466,078
  570,369
  689,381
  823,391
  972,498
  1,136,649
  1,315,671
  1,509,305
  1,717,239
  1,939,141
  2,174,679
  2,423,554
  2,685,510
  2,960,358
  3,247,979
  3,548,335
  3,861,475
  4,187,536
  4,526,741
  4,879,406
  5,245,927
  5,626,788
  6,022,554
  6,433,869
  6,861,451
  7,306,094
  7,768,666
  8,250,102
Operating income, $m
  21,085
  35,964
  53,622
  74,199
  97,792
  124,458
  154,216
  187,055
  222,940
  261,815
  303,617
  348,276
  395,724
  445,897
  498,743
  554,222
  612,309
  672,996
  736,292
  802,224
  870,839
  942,200
  1,016,389
  1,093,505
  1,173,663
  1,256,996
  1,343,652
  1,433,793
  1,527,597
  1,625,257
EBITDA, $m
  41,547
  62,255
  86,786
  115,331
  148,025
  184,944
  226,116
  271,526
  321,124
  374,837
  432,575
  494,245
  559,750
  629,007
  701,942
  778,500
  858,648
  942,374
  1,029,692
  1,120,638
  1,215,278
  1,313,697
  1,416,009
  1,522,350
  1,632,879
  1,747,778
  1,867,249
  1,991,516
  2,120,825
  2,255,439
Interest expense (income), $m
  1,137
  3,414
  6,401
  9,991
  14,223
  19,129
  24,733
  31,047
  38,075
  45,816
  54,261
  63,397
  73,211
  83,685
  94,805
  106,556
  118,926
  131,906
  145,491
  159,678
  174,470
  189,873
  205,899
  222,561
  239,878
  257,874
  276,576
  296,013
  316,220
  337,234
  359,097
Earnings before tax, $m
  17,671
  29,563
  43,632
  59,976
  78,663
  99,725
  123,169
  148,980
  177,124
  207,555
  240,220
  275,066
  312,039
  351,092
  392,187
  435,296
  480,403
  527,505
  576,614
  627,754
  680,966
  736,301
  793,828
  853,626
  915,789
  980,420
  1,047,639
  1,117,573
  1,190,363
  1,266,160
Tax expense, $m
  4,771
  7,982
  11,781
  16,194
  21,239
  26,926
  33,256
  40,225
  47,823
  56,040
  64,859
  74,268
  84,250
  94,795
  105,891
  117,530
  129,709
  142,426
  155,686
  169,494
  183,861
  198,801
  214,334
  230,479
  247,263
  264,714
  282,862
  301,745
  321,398
  341,863
Net income, $m
  12,900
  21,581
  31,851
  43,783
  57,424
  72,799
  89,914
  108,755
  129,300
  151,515
  175,361
  200,798
  227,788
  256,297
  286,297
  317,766
  350,694
  385,079
  420,928
  458,260
  497,105
  537,500
  579,495
  623,147
  668,526
  715,707
  764,776
  815,828
  868,965
  924,297

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
  362,313
  465,536
  587,232
  728,325
  889,462
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,454
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,277
  4,361,907
  4,769,865
  5,195,217
  5,638,147
  6,098,961
  6,578,085
  7,076,063
  7,593,551
  8,131,319
  8,690,243
  9,271,302
  9,875,579
  10,504,252
  11,158,598
Adjusted assets (=assets-cash), $m
  362,313
  465,536
  587,232
  728,325
  889,462
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,454
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,277
  4,361,907
  4,769,865
  5,195,217
  5,638,147
  6,098,961
  6,578,085
  7,076,063
  7,593,551
  8,131,319
  8,690,243
  9,271,302
  9,875,579
  10,504,252
  11,158,598
Revenue / Adjusted assets
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
Average production assets, $m
  241,447
  310,235
  391,334
  485,360
  592,742
  713,731
  848,416
  996,749
  1,158,574
  1,333,653
  1,521,705
  1,722,425
  1,935,514
  2,160,696
  2,397,743
  2,646,479
  2,906,797
  3,178,662
  3,462,118
  3,757,289
  4,064,378
  4,383,669
  4,715,524
  5,060,380
  5,418,752
  5,791,221
  6,178,442
  6,581,135
  7,000,086
  7,436,145
Working capital, $m
  -10,261
  -13,184
  -16,630
  -20,626
  -25,190
  -30,331
  -36,055
  -42,359
  -49,236
  -56,676
  -64,667
  -73,197
  -82,253
  -91,822
  -101,896
  -112,467
  -123,529
  -135,083
  -147,129
  -159,672
  -172,723
  -186,291
  -200,394
  -215,049
  -230,279
  -246,108
  -262,563
  -279,676
  -297,480
  -316,011
Total debt, $m
  118,536
  185,011
  263,383
  354,247
  458,019
  574,941
  705,098
  848,444
  1,004,828
  1,174,021
  1,355,751
  1,549,722
  1,755,646
  1,973,258
  2,202,335
  2,442,709
  2,694,274
  2,956,999
  3,230,926
  3,516,172
  3,812,937
  4,121,493
  4,442,190
  4,775,453
  5,121,776
  5,481,722
  5,855,925
  6,245,079
  6,649,944
  7,071,343
Total liabilities, $m
  233,330
  299,805
  378,177
  469,041
  572,813
  689,735
  819,892
  963,238
  1,119,622
  1,288,815
  1,470,545
  1,664,516
  1,870,440
  2,088,052
  2,317,129
  2,557,503
  2,809,068
  3,071,793
  3,345,720
  3,630,966
  3,927,731
  4,236,287
  4,556,984
  4,890,247
  5,236,570
  5,596,516
  5,970,719
  6,359,873
  6,764,738
  7,186,137
Total equity, $m
  128,983
  165,731
  209,054
  259,284
  316,648
  381,282
  453,232
  532,473
  618,921
  712,451
  812,910
  920,136
  1,033,970
  1,154,265
  1,280,898
  1,413,775
  1,552,839
  1,698,072
  1,849,497
  2,007,180
  2,171,230
  2,341,798
  2,519,078
  2,703,304
  2,894,750
  3,093,726
  3,300,584
  3,515,706
  3,739,514
  3,972,461
Total liabilities and equity, $m
  362,313
  465,536
  587,231
  728,325
  889,461
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,455
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,278
  4,361,907
  4,769,865
  5,195,217
  5,638,146
  6,098,961
  6,578,085
  7,076,062
  7,593,551
  8,131,320
  8,690,242
  9,271,303
  9,875,579
  10,504,252
  11,158,598
Debt-to-equity ratio
  0.920
  1.120
  1.260
  1.370
  1.450
  1.510
  1.560
  1.590
  1.620
  1.650
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.740
  1.740
  1.750
  1.750
  1.760
  1.760
  1.760
  1.770
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
Adjusted equity ratio
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12,900
  21,581
  31,851
  43,783
  57,424
  72,799
  89,914
  108,755
  129,300
  151,515
  175,361
  200,798
  227,788
  256,297
  286,297
  317,766
  350,694
  385,079
  420,928
  458,260
  497,105
  537,500
  579,495
  623,147
  668,526
  715,707
  764,776
  815,828
  868,965
  924,297
Depreciation, amort., depletion, $m
  20,462
  26,291
  33,164
  41,132
  50,232
  60,486
  71,900
  84,470
  98,184
  113,021
  128,958
  145,968
  164,027
  183,110
  203,199
  224,278
  246,339
  269,378
  293,400
  318,414
  344,439
  371,497
  399,621
  428,846
  459,216
  490,781
  523,597
  557,723
  593,228
  630,182
Funds from operations, $m
  33,361
  47,872
  65,015
  84,915
  107,656
  133,285
  161,813
  193,226
  227,485
  264,536
  304,319
  346,766
  391,815
  439,407
  489,495
  542,044
  597,033
  654,457
  714,328
  776,675
  841,544
  908,997
  979,115
  1,051,993
  1,127,742
  1,206,488
  1,288,373
  1,373,551
  1,462,192
  1,554,479
Change in working capital, $m
  -2,434
  -2,923
  -3,446
  -3,996
  -4,563
  -5,142
  -5,724
  -6,304
  -6,877
  -7,440
  -7,992
  -8,530
  -9,056
  -9,570
  -10,074
  -10,570
  -11,063
  -11,553
  -12,046
  -12,544
  -13,050
  -13,569
  -14,103
  -14,655
  -15,230
  -15,829
  -16,456
  -17,113
  -17,804
  -18,531
Cash from operations, $m
  35,795
  50,796
  68,461
  88,911
  112,220
  138,426
  167,537
  199,529
  234,362
  271,977
  312,310
  355,296
  400,870
  448,977
  499,569
  552,614
  608,095
  666,010
  726,374
  789,219
  854,594
  922,566
  993,218
  1,066,648
  1,142,972
  1,222,317
  1,304,829
  1,390,665
  1,479,996
  1,573,010
Maintenance CAPEX, $m
  -15,613
  -20,462
  -26,291
  -33,164
  -41,132
  -50,232
  -60,486
  -71,900
  -84,470
  -98,184
  -113,021
  -128,958
  -145,968
  -164,027
  -183,110
  -203,199
  -224,278
  -246,339
  -269,378
  -293,400
  -318,414
  -344,439
  -371,497
  -399,621
  -428,846
  -459,216
  -490,781
  -523,597
  -557,723
  -593,228
New CAPEX, $m
  -57,210
  -68,788
  -81,099
  -94,025
  -107,382
  -120,989
  -134,685
  -148,333
  -161,824
  -175,080
  -188,052
  -200,720
  -213,088
  -225,183
  -237,047
  -248,736
  -260,318
  -271,865
  -283,456
  -295,171
  -307,089
  -319,291
  -331,855
  -344,857
  -358,371
  -372,469
  -387,221
  -402,693
  -418,951
  -436,059
Cash from investing activities, $m
  -72,823
  -89,250
  -107,390
  -127,189
  -148,514
  -171,221
  -195,171
  -220,233
  -246,294
  -273,264
  -301,073
  -329,678
  -359,056
  -389,210
  -420,157
  -451,935
  -484,596
  -518,204
  -552,834
  -588,571
  -625,503
  -663,730
  -703,352
  -744,478
  -787,217
  -831,685
  -878,002
  -926,290
  -976,674
  -1,029,287
Free cash flow, $m
  -37,028
  -38,454
  -38,928
  -38,279
  -36,295
  -32,795
  -27,634
  -20,703
  -11,933
  -1,287
  11,237
  25,618
  41,814
  59,767
  79,412
  100,680
  123,500
  147,806
  173,539
  200,648
  229,091
  258,836
  289,866
  322,171
  355,754
  390,631
  426,826
  464,375
  503,322
  543,723
Issuance/(repayment) of debt, $m
  55,306
  66,476
  78,372
  90,864
  103,772
  116,921
  130,157
  143,346
  156,384
  169,194
  181,729
  193,972
  205,924
  217,612
  229,077
  240,373
  251,566
  262,725
  273,926
  285,247
  296,764
  308,556
  320,698
  333,263
  346,323
  359,947
  374,202
  389,154
  404,866
  421,399
Issuance/(repurchase) of shares, $m
  17,593
  15,166
  11,473
  6,447
  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  
  72,899
  81,642
  89,845
  97,311
  103,772
  116,921
  130,157
  143,346
  156,384
  169,194
  181,729
  193,972
  205,924
  217,612
  229,077
  240,373
  251,566
  262,725
  273,926
  285,247
  296,764
  308,556
  320,698
  333,263
  346,323
  359,947
  374,202
  389,154
  404,866
  421,399
Total cash flow (excl. dividends), $m
  35,871
  43,187
  50,916
  59,032
  67,477
  84,126
  102,523
  122,643
  144,451
  167,906
  192,966
  219,590
  247,738
  277,379
  308,489
  341,053
  375,065
  410,531
  447,466
  485,895
  525,855
  567,392
  610,563
  655,433
  702,077
  750,578
  801,029
  853,529
  908,188
  965,121
Retained Cash Flow (-), $m
  -30,492
  -36,747
  -43,324
  -50,229
  -57,364
  -64,634
  -71,950
  -79,241
  -86,448
  -93,529
  -100,459
  -107,227
  -113,834
  -120,295
  -126,633
  -132,877
  -139,064
  -145,233
  -151,425
  -157,683
  -164,050
  -170,568
  -177,280
  -184,226
  -191,445
  -198,977
  -206,857
  -215,122
  -223,808
  -232,947
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
  5,378
  6,440
  7,593
  8,803
  10,113
  19,493
  30,573
  43,402
  58,003
  74,377
  92,507
  112,363
  133,904
  157,084
  181,857
  208,176
  236,001
  265,298
  296,041
  328,212
  361,805
  396,824
  433,283
  471,207
  510,632
  551,601
  594,171
  638,407
  684,380
  732,174
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  5,157
  5,896
  6,608
  7,248
  7,839
  14,147
  20,655
  27,127
  33,319
  38,993
  43,930
  47,949
  50,913
  52,736
  53,390
  52,902
  51,350
  48,857
  45,582
  41,706
  37,423
  32,926
  28,398
  24,000
  19,864
  16,093
  12,753
  9,877
  7,471
  5,513
Current shareholders' claim on cash, %
  79.7
  68.2
  62.1
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5
  59.5

BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company's segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging.

FINANCIAL RATIOS  of  BP ADR (BP)

Valuation Ratios
P/E Ratio 7549.3
Price to Sales 4.7
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 81.2
Price to Free Cash Flow -144.5
Growth Rates
Sales Growth Rate -17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.4%
Cap. Spend. - 3 Yr. Gr. Rate -7.4%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 54.2%
Total Debt to Equity 61.2%
Interest Coverage -1
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity 0.1%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 15.1%
Gross Margin - 3 Yr. Avg. 13.7%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -2%
Pre-Tax Margin -1.3%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 107.5%
Eff/ Tax Rate - 3 Yr. Avg. 53.3%
Payout Ratio 4009.6%

BP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BP stock intrinsic value calculation we used $244582 million for the last fiscal year's total revenue generated by BP ADR. The default revenue input number comes from 0001 income statement of BP ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BP stock valuation model: a) initial revenue growth rate of 31.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BP is calculated based on our internal credit rating of BP ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of BP ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BP stock the variable cost ratio is equal to 82.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $33019 million in the base year in the intrinsic value calculation for BP 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 BP ADR.

Corporate tax rate of 27% is the nominal tax rate for BP ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BP 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 BP are equal to 75.3%.

Life of production assets of 11.8 years is the average useful life of capital assets used in BP ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BP is equal to -3.2%. 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 - $98491 million for BP ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 910.52 million for BP ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of BP ADR at the current share price and the inputted number of shares is $40.7 billion.

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COMPANY NEWS

▶ TIMELINE-Shell's operations in Nigeria   [Sep-24-18 03:00AM  Reuters]
▶ Timeline: Shell's operations in Nigeria   [Sep-23-18 05:04AM  Reuters]
▶ Do Institutions Own Shares In BP plc (LON:BP.)?   [Sep-22-18 04:24AM  Simply Wall St.]
▶ BP: The Dividend and US Shale   [Sep-19-18 04:06PM  GuruFocus.com]
▶ Drilling Permit Roundup: BHP Billiton drilling until its last day in the Eagle Ford   [Sep-18-18 02:01PM  American City Business Journals]
▶ Norways Offshore Oil Boom Is Back On   [Sep-16-18 05:00PM  Oilprice.com]
▶ 3 Dividend Stocks to Fund Your Retirement Nest Egg   [Sep-15-18 04:07PM  Motley Fool]
▶ BP Looks Ready to Resume Its Long-Term Bull Trend   [Sep-13-18 11:24AM  TheStreet.com]
▶ BP Lower 48 plans major growth from its new Denver HQ (Photos)   [05:00PM  American City Business Journals]
▶ The Start Of Saudi Arabias Power Play   [Sep-09-18 03:00PM  Oilprice.com]
▶ Are BP plcs (LON:BP.) Interest Costs Too High?   [Sep-07-18 09:18AM  Simply Wall St.]
▶ Better Buy: ConocoPhillips vs. BP   [Sep-06-18 08:18AM  Motley Fool]
▶ BP Stock Upgraded: What You Need to Know   [Sep-05-18 01:07PM  Motley Fool]
▶ BP's Denver HQ opening as oil giant nears $10.5B investment in U.S. shale boom   [Sep-04-18 01:02PM  American City Business Journals]
▶ Gas prices climb as Labor Day holiday weekend kicks off   [Aug-31-18 10:31AM  Yahoo Finance Video]
▶ Why The Oil Crisis Was Good For Some Oil Companies   [Aug-29-18 10:00AM  Oilprice.com]
▶ BP Plc Stock Has Become One of Better Picks Energy Patch   [Aug-28-18 07:49PM  InvestorPlace]
▶ Oil Holds Gains Despite Downward Pressure   [03:00PM  Oilprice.com]
▶ [$$] BP bets big on shale for its US comeback   [Aug-15-18 11:01PM  Financial Times]
▶ Is Oil Slowly Cracking?   [Aug-10-18 06:09AM  TheStreet.com]
▶ Big Oil Earningspalooza -- Who Stands Out?   [Aug-07-18 09:00PM  Motley Fool]
▶ CEOs on Downside Risks on Trade, Oil, Geopolitics   [Aug-02-18 08:29AM  Bloomberg Video]
▶ [$$] BP Earnings Boosted by Higher Oil Prices   [Jul-31-18 08:36PM  The Wall Street Journal]
▶ BP: 2Q Earnings Snapshot   [05:40AM  Associated Press]
▶ [$$] BP Posts Sharp Rise in Profit   [02:55AM  The Wall Street Journal]
▶ BP Confidently Pursues Growth   [Jul-30-18 08:00PM  Rigzone.com]
▶ What BHP Billiton's $10.5B asset sale means for the Eagle Ford Shale   [03:23PM  American City Business Journals]
▶ [$$] BPs Shale Deal Signals Big Ambitions   [Jul-29-18 07:43PM  The Wall Street Journal]
▶ [$$] Big Oil Profits Fall Short of Crude-Price Rally   [Jul-27-18 07:51PM  The Wall Street Journal]
▶ BP PLC Makes a Massive Bet on Shale   [03:17PM  Motley Fool]
▶ [$$] Big Oil Profits Fall Short of Crude-Price Rally   [02:15PM  The Wall Street Journal]
▶ [$$] BP's Shale Deal Signals Big Ambitions   [01:18PM  The Wall Street Journal]
▶ BP's Charts Still Tell a Positive Story   [11:25AM  TheStreet.com]
▶ [$$] BP to buy BHPs US shale assets for $10.5bn   [12:21AM  Financial Times]

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