Intrinsic value of Canadian Natural Resources - CNQ

Previous Close

$32.41

  Intrinsic Value

$5.08

stock screener

  Rating & Target

str. sell

-84%

Previous close

$32.41

 
Intrinsic value

$5.08

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of CNQ 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 39.6

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  20,928
  32,334
  48,356
  70,162
  98,988
  136,085
  182,666
  239,853
  308,632
  389,827
  484,077
  591,831
  713,355
  848,751
  997,981
  1,160,891
  1,337,249
  1,526,770
  1,729,147
  1,944,075
  2,171,273
  2,410,505
  2,661,589
  2,924,410
  3,198,929
  3,485,184
  3,783,292
  4,093,455
  4,415,955
  4,751,151
Variable operating expenses, $m
  9,397
  14,518
  21,712
  31,503
  44,446
  61,102
  82,017
  107,694
  138,576
  175,032
  217,351
  265,732
  320,296
  381,089
  448,093
  521,240
  600,425
  685,520
  776,387
  872,889
  974,902
  1,082,317
  1,195,053
  1,313,060
  1,436,319
  1,564,847
  1,698,698
  1,837,961
  1,982,764
  2,133,267
Fixed operating expenses, $m
  5,334
  5,451
  5,571
  5,694
  5,819
  5,947
  6,078
  6,211
  6,348
  6,488
  6,631
  6,776
  6,925
  7,078
  7,234
  7,393
  7,555
  7,722
  7,891
  8,065
  8,242
  8,424
  8,609
  8,799
  8,992
  9,190
  9,392
  9,599
  9,810
  10,026
Total operating expenses, $m
  14,731
  19,969
  27,283
  37,197
  50,265
  67,049
  88,095
  113,905
  144,924
  181,520
  223,982
  272,508
  327,221
  388,167
  455,327
  528,633
  607,980
  693,242
  784,278
  880,954
  983,144
  1,090,741
  1,203,662
  1,321,859
  1,445,311
  1,574,037
  1,708,090
  1,847,560
  1,992,574
  2,143,293
Operating income, $m
  6,198
  12,365
  21,073
  32,965
  48,723
  69,036
  94,571
  125,947
  163,708
  208,307
  260,096
  319,322
  386,133
  460,584
  542,654
  632,258
  729,269
  833,529
  944,869
  1,063,120
  1,188,129
  1,319,764
  1,457,926
  1,602,552
  1,753,618
  1,911,146
  2,075,202
  2,245,895
  2,423,381
  2,607,858
EBITDA, $m
  12,718
  22,440
  36,139
  54,826
  79,566
  111,437
  151,486
  200,680
  259,871
  329,769
  410,924
  503,724
  608,399
  725,037
  853,604
  993,968
  1,145,928
  1,309,239
  1,483,634
  1,668,853
  1,864,652
  2,070,827
  2,287,221
  2,513,736
  2,750,337
  2,997,056
  3,253,996
  3,521,330
  3,799,300
  4,088,217
Interest expense (income), $m
  457
  953
  2,030
  3,593
  5,789
  8,777
  12,727
  17,811
  24,195
  32,031
  41,457
  52,584
  65,500
  80,266
  96,920
  115,475
  135,925
  158,251
  182,419
  208,391
  236,124
  265,578
  296,713
  329,498
  363,906
  399,923
  437,543
  476,772
  517,624
  560,129
  604,324
Earnings before tax, $m
  5,245
  10,335
  17,480
  27,177
  39,946
  56,309
  76,760
  101,753
  131,677
  166,850
  207,512
  253,822
  305,867
  363,664
  427,179
  496,333
  571,019
  651,110
  736,478
  826,996
  922,551
  1,023,051
  1,128,429
  1,238,646
  1,353,695
  1,473,603
  1,598,430
  1,728,271
  1,863,252
  2,003,534
Tax expense, $m
  1,416
  2,790
  4,720
  7,338
  10,786
  15,203
  20,725
  27,473
  35,553
  45,050
  56,028
  68,532
  82,584
  98,189
  115,338
  134,010
  154,175
  175,800
  198,849
  223,289
  249,089
  276,224
  304,676
  334,434
  365,498
  397,873
  431,576
  466,633
  503,078
  540,954
Net income, $m
  3,829
  7,545
  12,760
  19,839
  29,161
  41,105
  56,035
  74,279
  96,124
  121,801
  151,484
  185,290
  223,283
  265,475
  311,841
  362,323
  416,844
  475,311
  537,629
  603,707
  673,462
  746,827
  823,753
  904,211
  988,197
  1,075,730
  1,166,854
  1,261,638
  1,360,174
  1,462,580

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
  93,014
  143,707
  214,914
  311,829
  439,946
  604,824
  811,851
  1,066,011
  1,371,698
  1,732,566
  2,151,453
  2,630,358
  3,170,466
  3,772,228
  4,435,470
  5,159,517
  5,943,331
  6,785,647
  7,685,098
  8,640,331
  9,650,102
  10,713,355
  11,829,284
  12,997,380
  14,217,464
  15,489,705
  16,814,632
  18,193,135
  19,626,465
  21,116,226
Adjusted assets (=assets-cash), $m
  93,014
  143,707
  214,914
  311,829
  439,946
  604,824
  811,851
  1,066,011
  1,371,698
  1,732,566
  2,151,453
  2,630,358
  3,170,466
  3,772,228
  4,435,470
  5,159,517
  5,943,331
  6,785,647
  7,685,098
  8,640,331
  9,650,102
  10,713,355
  11,829,284
  12,997,380
  14,217,464
  15,489,705
  16,814,632
  18,193,135
  19,626,465
  21,116,226
Revenue / Adjusted assets
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
Average production assets, $m
  74,337
  114,851
  171,759
  249,214
  351,605
  483,375
  648,831
  851,956
  1,096,261
  1,384,666
  1,719,441
  2,102,182
  2,533,836
  3,014,765
  3,544,828
  4,123,486
  4,749,910
  5,423,089
  6,141,930
  6,905,353
  7,712,362
  8,562,113
  9,453,963
  10,387,506
  11,362,597
  12,379,372
  13,438,254
  14,539,953
  15,685,471
  16,876,088
Working capital, $m
  -649
  -1,002
  -1,499
  -2,175
  -3,069
  -4,219
  -5,663
  -7,435
  -9,568
  -12,085
  -15,006
  -18,347
  -22,114
  -26,311
  -30,937
  -35,988
  -41,455
  -47,330
  -53,604
  -60,266
  -67,309
  -74,726
  -82,509
  -90,657
  -99,167
  -108,041
  -117,282
  -126,897
  -136,895
  -147,286
Total debt, $m
  37,592
  66,537
  107,197
  162,535
  235,690
  329,835
  448,048
  593,173
  767,720
  973,776
  1,212,961
  1,486,415
  1,794,817
  2,138,423
  2,517,134
  2,930,565
  3,378,123
  3,859,085
  4,372,672
  4,918,110
  5,494,689
  6,101,806
  6,739,002
  7,405,985
  8,102,653
  8,829,102
  9,585,635
  10,372,761
  11,191,192
  12,041,846
Total liabilities, $m
  53,111
  82,057
  122,716
  178,054
  251,209
  345,354
  463,567
  608,692
  783,239
  989,295
  1,228,480
  1,501,934
  1,810,336
  2,153,942
  2,532,654
  2,946,084
  3,393,642
  3,874,604
  4,388,191
  4,933,629
  5,510,208
  6,117,326
  6,754,521
  7,421,504
  8,118,172
  8,844,622
  9,601,155
  10,388,280
  11,206,712
  12,057,365
Total equity, $m
  39,903
  61,650
  92,198
  133,775
  188,737
  259,469
  348,284
  457,319
  588,458
  743,271
  922,973
  1,128,424
  1,360,130
  1,618,286
  1,902,817
  2,213,433
  2,549,689
  2,911,042
  3,296,907
  3,706,702
  4,139,894
  4,596,029
  5,074,763
  5,575,876
  6,099,292
  6,645,083
  7,213,477
  7,804,855
  8,419,753
  9,058,861
Total liabilities and equity, $m
  93,014
  143,707
  214,914
  311,829
  439,946
  604,823
  811,851
  1,066,011
  1,371,697
  1,732,566
  2,151,453
  2,630,358
  3,170,466
  3,772,228
  4,435,471
  5,159,517
  5,943,331
  6,785,646
  7,685,098
  8,640,331
  9,650,102
  10,713,355
  11,829,284
  12,997,380
  14,217,464
  15,489,705
  16,814,632
  18,193,135
  19,626,465
  21,116,226
Debt-to-equity ratio
  0.940
  1.080
  1.160
  1.210
  1.250
  1.270
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
Adjusted equity ratio
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,829
  7,545
  12,760
  19,839
  29,161
  41,105
  56,035
  74,279
  96,124
  121,801
  151,484
  185,290
  223,283
  265,475
  311,841
  362,323
  416,844
  475,311
  537,629
  603,707
  673,462
  746,827
  823,753
  904,211
  988,197
  1,075,730
  1,166,854
  1,261,638
  1,360,174
  1,462,580
Depreciation, amort., depletion, $m
  6,521
  10,075
  15,067
  21,861
  30,843
  42,401
  56,915
  74,733
  96,163
  121,462
  150,828
  184,402
  222,266
  264,453
  310,950
  361,709
  416,659
  475,710
  538,766
  605,733
  676,523
  751,063
  829,295
  911,185
  996,719
  1,085,910
  1,178,794
  1,275,435
  1,375,918
  1,480,359
Funds from operations, $m
  10,350
  17,619
  27,827
  41,700
  60,003
  83,507
  112,950
  149,012
  192,287
  243,263
  302,312
  369,692
  445,549
  529,928
  622,791
  724,033
  833,502
  951,020
  1,076,395
  1,209,440
  1,349,985
  1,497,890
  1,653,048
  1,815,396
  1,984,916
  2,161,640
  2,345,648
  2,537,072
  2,736,092
  2,942,938
Change in working capital, $m
  -243
  -354
  -497
  -676
  -894
  -1,150
  -1,444
  -1,773
  -2,132
  -2,517
  -2,922
  -3,340
  -3,767
  -4,197
  -4,626
  -5,050
  -5,467
  -5,875
  -6,274
  -6,663
  -7,043
  -7,416
  -7,784
  -8,147
  -8,510
  -8,874
  -9,241
  -9,615
  -9,997
  -10,391
Cash from operations, $m
  10,593
  17,973
  28,324
  42,376
  60,897
  84,657
  114,394
  150,785
  194,419
  245,780
  305,234
  373,033
  449,316
  534,125
  627,417
  729,083
  838,969
  956,895
  1,082,668
  1,216,102
  1,357,028
  1,505,306
  1,660,832
  1,823,543
  1,993,426
  2,170,514
  2,354,890
  2,546,687
  2,746,090
  2,953,329
Maintenance CAPEX, $m
  -4,075
  -6,521
  -10,075
  -15,067
  -21,861
  -30,843
  -42,401
  -56,915
  -74,733
  -96,163
  -121,462
  -150,828
  -184,402
  -222,266
  -264,453
  -310,950
  -361,709
  -416,659
  -475,710
  -538,766
  -605,733
  -676,523
  -751,063
  -829,295
  -911,185
  -996,719
  -1,085,910
  -1,178,794
  -1,275,435
  -1,375,918
New CAPEX, $m
  -27,880
  -40,514
  -56,908
  -77,455
  -102,391
  -131,771
  -165,456
  -203,125
  -244,304
  -288,406
  -334,775
  -382,741
  -431,654
  -480,929
  -530,063
  -578,658
  -626,424
  -673,179
  -718,842
  -763,423
  -807,009
  -849,751
  -891,850
  -933,543
  -975,091
  -1,016,775
  -1,058,881
  -1,101,700
  -1,145,517
  -1,190,617
Cash from investing activities, $m
  -31,955
  -47,035
  -66,983
  -92,522
  -124,252
  -162,614
  -207,857
  -260,040
  -319,037
  -384,569
  -456,237
  -533,569
  -616,056
  -703,195
  -794,516
  -889,608
  -988,133
  -1,089,838
  -1,194,552
  -1,302,189
  -1,412,742
  -1,526,274
  -1,642,913
  -1,762,838
  -1,886,276
  -2,013,494
  -2,144,791
  -2,280,494
  -2,420,952
  -2,566,535
Free cash flow, $m
  -21,363
  -29,062
  -38,660
  -50,145
  -63,355
  -77,956
  -93,463
  -109,255
  -124,618
  -138,789
  -151,003
  -160,536
  -166,740
  -169,070
  -167,099
  -160,525
  -149,164
  -132,942
  -111,883
  -86,086
  -55,713
  -20,968
  17,919
  60,706
  107,150
  157,020
  210,098
  266,193
  325,138
  386,794
Issuance/(repayment) of debt, $m
  19,950
  28,946
  40,659
  55,339
  73,155
  94,145
  118,212
  145,126
  174,547
  206,056
  239,185
  273,454
  308,402
  343,606
  378,711
  413,431
  447,558
  480,962
  513,587
  545,438
  576,579
  607,117
  637,195
  666,983
  696,668
  726,450
  756,533
  787,125
  818,431
  850,653
Issuance/(repurchase) of shares, $m
  11,209
  14,203
  17,787
  21,738
  25,801
  29,627
  32,779
  34,755
  35,015
  33,012
  28,219
  20,160
  8,424
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  31,159
  43,149
  58,446
  77,077
  98,956
  123,772
  150,991
  179,881
  209,562
  239,068
  267,404
  293,614
  316,826
  343,606
  378,711
  413,431
  447,558
  480,962
  513,587
  545,438
  576,579
  607,117
  637,195
  666,983
  696,668
  726,450
  756,533
  787,125
  818,431
  850,653
Total cash flow (excl. dividends), $m
  9,797
  14,087
  19,787
  26,931
  35,601
  45,816
  57,529
  70,626
  84,944
  100,278
  116,401
  133,078
  150,085
  174,537
  211,612
  252,905
  298,394
  348,020
  401,704
  459,352
  520,866
  586,149
  655,114
  727,689
  803,818
  883,469
  966,632
  1,053,319
  1,143,570
  1,237,448
Retained Cash Flow (-), $m
  -15,038
  -21,747
  -30,548
  -41,577
  -54,962
  -70,733
  -88,814
  -109,035
  -131,139
  -154,812
  -179,703
  -205,450
  -231,706
  -258,156
  -284,531
  -310,616
  -336,256
  -361,353
  -385,865
  -409,795
  -433,192
  -456,135
  -478,733
  -501,113
  -523,416
  -545,791
  -568,394
  -591,378
  -614,899
  -639,107
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
  -5,241
  -7,661
  -10,761
  -14,646
  -19,361
  -24,916
  -31,286
  -38,409
  -46,195
  -54,534
  -63,302
  -72,372
  -81,621
  -83,620
  -72,919
  -57,711
  -37,862
  -13,333
  15,839
  49,557
  87,674
  130,014
  176,381
  226,576
  280,402
  337,678
  398,238
  461,941
  528,671
  598,340
Discount rate, %
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
  -4,949
  -6,793
  -8,907
  -11,245
  -13,694
  -16,118
  -18,366
  -20,293
  -21,773
  -22,715
  -23,070
  -22,832
  -22,040
  -19,095
  -13,903
  -9,064
  -4,828
  -1,360
  1,271
  3,076
  4,135
  4,571
  4,530
  4,162
  3,602
  2,963
  2,328
  1,753
  1,267
  880
Current shareholders' claim on cash, %
  78.0
  63.7
  54.0
  47.0
  41.9
  38.2
  35.4
  33.3
  31.8
  30.7
  30.0
  29.6
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4
  29.4

Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company's segments include Exploration and Production, Oil Sands Mining and Upgrading, and Midstream. The Exploration and Production segment includes exploration, development, production and marketing of crude oil, natural gas liquids (NGLs) and natural gas. The Company's exploration and production operations are focused in North America in Western Canada, the United Kingdom portion of the North Sea, and Cote d'Ivoire, Gabon and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil (SCO) through bitumen mining and upgrading operations. Midstream activities include the Company's pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership).

FINANCIAL RATIOS  of  Canadian Natural Resources (CNQ)

Valuation Ratios
P/E Ratio -238.4
Price to Sales 4.6
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow -138.5
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 57.1%
Total Debt to Equity 64%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 41.9%
EBITDA Margin - 3 Yr. Avg. 47.1%
Operating Margin -12.1%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 80.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio -371.5%

CNQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNQ stock intrinsic value calculation we used $13080.1256874 million for the last fiscal year's total revenue generated by Canadian Natural Resources. The default revenue input number comes from 0001 income statement of Canadian Natural Resources. 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 CNQ stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.9%, whose default value for CNQ is calculated based on our internal credit rating of Canadian Natural Resources, 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 Canadian Natural Resources.
    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 CNQ stock the variable cost ratio is equal to 44.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5219 million in the base year in the intrinsic value calculation for CNQ 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 Canadian Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Canadian Natural Resources. 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 CNQ 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 CNQ are equal to 355.2%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Canadian Natural Resources 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 CNQ is equal to -3.1%. 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 - $24864.8860958 million for Canadian Natural Resources - 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 1222.77 million for Canadian Natural Resources 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 Canadian Natural Resources at the current share price and the inputted number of shares is $39.6 billion.

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COMPANY NEWS

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