Intrinsic value of ConocoPhillips - COP

Previous Close

$69.41

  Intrinsic Value

$88.77

stock screener

  Rating & Target

buy

+28%

Previous close

$69.41

 
Intrinsic value

$88.77

 
Up/down potential

+28%

 
Rating

buy

We calculate the intrinsic value of COP 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 84.7

 

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, %
  33.80
  30.92
  28.33
  26.00
  23.90
  22.01
  20.31
  18.77
  17.40
  16.16
  15.04
  14.04
  13.13
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
Revenue, $m
  43,597
  57,078
  73,247
  92,287
  114,340
  139,502
  167,828
  199,338
  234,018
  271,830
  312,718
  356,617
  403,455
  453,162
  505,677
  560,946
  618,929
  679,603
  742,961
  809,013
  877,791
  949,342
  1,023,734
  1,101,051
  1,181,398
  1,264,894
  1,351,676
  1,441,896
  1,535,724
  1,633,342
Variable operating expenses, $m
  28,992
  37,957
  48,709
  61,371
  76,036
  92,769
  111,606
  132,560
  155,622
  180,767
  207,958
  237,150
  268,297
  301,353
  336,275
  373,029
  411,588
  451,936
  494,069
  537,994
  583,731
  631,312
  680,783
  732,199
  785,630
  841,155
  898,864
  958,861
  1,021,256
  1,086,173
Fixed operating expenses, $m
  12,587
  12,864
  13,147
  13,436
  13,732
  14,034
  14,343
  14,658
  14,981
  15,310
  15,647
  15,991
  16,343
  16,703
  17,070
  17,446
  17,829
  18,222
  18,622
  19,032
  19,451
  19,879
  20,316
  20,763
  21,220
  21,687
  22,164
  22,651
  23,150
  23,659
Total operating expenses, $m
  41,579
  50,821
  61,856
  74,807
  89,768
  106,803
  125,949
  147,218
  170,603
  196,077
  223,605
  253,141
  284,640
  318,056
  353,345
  390,475
  429,417
  470,158
  512,691
  557,026
  603,182
  651,191
  701,099
  752,962
  806,850
  862,842
  921,028
  981,512
  1,044,406
  1,109,832
Operating income, $m
  2,018
  6,257
  11,391
  17,480
  24,572
  32,699
  41,880
  52,120
  63,415
  75,753
  89,114
  103,475
  118,814
  135,107
  152,332
  170,471
  189,512
  209,446
  230,269
  251,987
  274,609
  298,151
  322,635
  348,089
  374,549
  402,053
  430,648
  460,384
  491,318
  523,511
EBITDA, $m
  8,976
  15,367
  23,081
  32,209
  42,821
  54,964
  68,665
  83,934
  100,765
  119,137
  139,023
  160,391
  183,206
  207,432
  233,038
  259,998
  288,293
  317,910
  348,846
  381,106
  414,705
  449,666
  486,023
  523,817
  563,100
  603,930
  646,375
  690,510
  736,419
  784,192
Interest expense (income), $m
  1,151
  1,026
  1,798
  2,739
  3,867
  5,196
  6,735
  8,491
  10,468
  12,667
  15,087
  17,726
  20,580
  23,644
  26,912
  30,381
  34,046
  37,904
  41,950
  46,185
  50,607
  55,216
  60,016
  65,010
  70,202
  75,598
  81,205
  87,032
  93,089
  99,385
  105,934
Earnings before tax, $m
  992
  4,459
  8,652
  13,613
  19,376
  25,964
  33,389
  41,652
  50,748
  60,665
  71,387
  82,896
  95,171
  108,195
  121,950
  136,425
  151,608
  167,495
  184,085
  201,381
  219,393
  238,134
  257,625
  277,887
  298,951
  320,848
  343,615
  367,295
  391,932
  417,577
Tax expense, $m
  268
  1,204
  2,336
  3,676
  5,232
  7,010
  9,015
  11,246
  13,702
  16,380
  19,275
  22,382
  25,696
  29,213
  32,927
  36,835
  40,934
  45,224
  49,703
  54,373
  59,236
  64,296
  69,559
  75,030
  80,717
  86,629
  92,776
  99,170
  105,822
  112,746
Net income, $m
  724
  3,255
  6,316
  9,938
  14,145
  18,954
  24,374
  30,406
  37,046
  44,286
  52,113
  60,514
  69,475
  78,982
  89,024
  99,590
  110,674
  122,271
  134,382
  147,008
  160,157
  173,838
  188,066
  202,858
  218,234
  234,219
  250,839
  268,125
  286,111
  304,831

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
  97,316
  127,406
  163,497
  205,998
  255,223
  311,388
  374,617
  444,951
  522,361
  606,763
  698,031
  796,019
  900,568
  1,011,523
  1,128,744
  1,252,112
  1,381,539
  1,516,971
  1,658,395
  1,805,833
  1,959,355
  2,119,067
  2,285,120
  2,457,704
  2,637,049
  2,823,424
  3,017,133
  3,218,518
  3,427,955
  3,645,854
Adjusted assets (=assets-cash), $m
  97,316
  127,406
  163,497
  205,998
  255,223
  311,388
  374,617
  444,951
  522,361
  606,763
  698,031
  796,019
  900,568
  1,011,523
  1,128,744
  1,252,112
  1,381,539
  1,516,971
  1,658,395
  1,805,833
  1,959,355
  2,119,067
  2,285,120
  2,457,704
  2,637,049
  2,823,424
  3,017,133
  3,218,518
  3,427,955
  3,645,854
Revenue / Adjusted assets
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
Average production assets, $m
  69,581
  91,096
  116,902
  147,291
  182,487
  222,645
  267,854
  318,143
  373,492
  433,840
  499,098
  569,160
  643,913
  723,247
  807,061
  895,270
  987,811
  1,084,647
  1,185,765
  1,291,185
  1,400,954
  1,515,150
  1,633,879
  1,757,278
  1,885,511
  2,018,771
  2,157,275
  2,301,266
  2,451,015
  2,606,815
Working capital, $m
  -3,967
  -5,194
  -6,665
  -8,398
  -10,405
  -12,695
  -15,272
  -18,140
  -21,296
  -24,736
  -28,457
  -32,452
  -36,714
  -41,238
  -46,017
  -51,046
  -56,323
  -61,844
  -67,609
  -73,620
  -79,879
  -86,390
  -93,160
  -100,196
  -107,507
  -115,105
  -123,002
  -131,213
  -139,751
  -148,634
Total debt, $m
  33,294
  50,716
  71,613
  96,221
  124,722
  157,242
  193,851
  234,575
  279,395
  328,263
  381,108
  437,843
  498,377
  562,620
  630,491
  701,921
  776,859
  855,274
  937,158
  1,022,525
  1,111,414
  1,203,888
  1,300,032
  1,399,959
  1,503,800
  1,611,711
  1,723,868
  1,840,470
  1,961,734
  2,087,897
Total liabilities, $m
  56,346
  73,768
  94,665
  119,273
  147,774
  180,294
  216,903
  257,627
  302,447
  351,315
  404,160
  460,895
  521,429
  585,672
  653,543
  724,973
  799,911
  878,326
  960,210
  1,045,577
  1,134,466
  1,226,940
  1,323,084
  1,423,011
  1,526,852
  1,634,763
  1,746,920
  1,863,522
  1,984,786
  2,110,949
Total equity, $m
  40,970
  53,638
  68,832
  86,725
  107,449
  131,094
  157,714
  187,324
  219,914
  255,447
  293,871
  335,124
  379,139
  425,851
  475,201
  527,139
  581,628
  638,645
  698,184
  760,256
  824,888
  892,127
  962,035
  1,034,693
  1,110,198
  1,188,662
  1,270,213
  1,354,996
  1,443,169
  1,534,904
Total liabilities and equity, $m
  97,316
  127,406
  163,497
  205,998
  255,223
  311,388
  374,617
  444,951
  522,361
  606,762
  698,031
  796,019
  900,568
  1,011,523
  1,128,744
  1,252,112
  1,381,539
  1,516,971
  1,658,394
  1,805,833
  1,959,354
  2,119,067
  2,285,119
  2,457,704
  2,637,050
  2,823,425
  3,017,133
  3,218,518
  3,427,955
  3,645,853
Debt-to-equity ratio
  0.810
  0.950
  1.040
  1.110
  1.160
  1.200
  1.230
  1.250
  1.270
  1.290
  1.300
  1.310
  1.310
  1.320
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.350
  1.350
  1.350
  1.350
  1.350
  1.360
  1.360
  1.360
  1.360
  1.360
Adjusted equity ratio
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  724
  3,255
  6,316
  9,938
  14,145
  18,954
  24,374
  30,406
  37,046
  44,286
  52,113
  60,514
  69,475
  78,982
  89,024
  99,590
  110,674
  122,271
  134,382
  147,008
  160,157
  173,838
  188,066
  202,858
  218,234
  234,219
  250,839
  268,125
  286,111
  304,831
Depreciation, amort., depletion, $m
  6,958
  9,110
  11,690
  14,729
  18,249
  22,264
  26,785
  31,814
  37,349
  43,384
  49,910
  56,916
  64,391
  72,325
  80,706
  89,527
  98,781
  108,465
  118,577
  129,119
  140,095
  151,515
  163,388
  175,728
  188,551
  201,877
  215,727
  230,127
  245,102
  260,681
Funds from operations, $m
  7,682
  12,365
  18,006
  24,667
  32,393
  41,218
  51,159
  62,220
  74,396
  87,670
  102,023
  117,430
  133,866
  151,307
  169,730
  189,117
  209,455
  230,736
  252,958
  276,126
  300,252
  325,353
  351,454
  378,586
  406,785
  436,096
  466,567
  498,252
  531,212
  565,513
Change in working capital, $m
  -1,002
  -1,227
  -1,471
  -1,733
  -2,007
  -2,290
  -2,578
  -2,867
  -3,156
  -3,441
  -3,721
  -3,995
  -4,262
  -4,523
  -4,779
  -5,029
  -5,276
  -5,521
  -5,766
  -6,011
  -6,259
  -6,511
  -6,770
  -7,036
  -7,312
  -7,598
  -7,897
  -8,210
  -8,538
  -8,883
Cash from operations, $m
  8,685
  13,592
  19,478
  26,399
  34,400
  43,508
  53,737
  65,088
  77,551
  91,111
  105,743
  121,425
  138,128
  155,830
  174,509
  194,147
  214,732
  236,257
  258,724
  282,137
  306,511
  331,864
  358,224
  385,622
  414,097
  443,694
  474,464
  506,462
  539,751
  574,396
Maintenance CAPEX, $m
  -5,201
  -6,958
  -9,110
  -11,690
  -14,729
  -18,249
  -22,264
  -26,785
  -31,814
  -37,349
  -43,384
  -49,910
  -56,916
  -64,391
  -72,325
  -80,706
  -89,527
  -98,781
  -108,465
  -118,577
  -129,119
  -140,095
  -151,515
  -163,388
  -175,728
  -188,551
  -201,877
  -215,727
  -230,127
  -245,102
New CAPEX, $m
  -17,574
  -21,515
  -25,806
  -30,389
  -35,196
  -40,158
  -45,209
  -50,289
  -55,349
  -60,348
  -65,258
  -70,062
  -74,753
  -79,334
  -83,814
  -88,209
  -92,541
  -96,835
  -101,119
  -105,420
  -109,769
  -114,196
  -118,729
  -123,399
  -128,233
  -133,259
  -138,504
  -143,992
  -149,749
  -155,799
Cash from investing activities, $m
  -22,775
  -28,473
  -34,916
  -42,079
  -49,925
  -58,407
  -67,473
  -77,074
  -87,163
  -97,697
  -108,642
  -119,972
  -131,669
  -143,725
  -156,139
  -168,915
  -182,068
  -195,616
  -209,584
  -223,997
  -238,888
  -254,291
  -270,244
  -286,787
  -303,961
  -321,810
  -340,381
  -359,719
  -379,876
  -400,901
Free cash flow, $m
  -14,091
  -14,881
  -15,438
  -15,680
  -15,525
  -14,899
  -13,737
  -11,987
  -9,612
  -6,586
  -2,899
  1,453
  6,459
  12,105
  18,370
  25,232
  32,663
  40,641
  49,141
  58,141
  67,623
  77,573
  87,979
  98,835
  110,136
  121,883
  134,083
  146,743
  159,875
  173,495
Issuance/(repayment) of debt, $m
  14,291
  17,422
  20,897
  24,608
  28,501
  32,519
  36,610
  40,723
  44,820
  48,869
  52,845
  56,735
  60,534
  64,243
  67,871
  71,430
  74,938
  78,415
  81,884
  85,367
  88,889
  92,473
  96,145
  99,926
  103,841
  107,911
  112,158
  116,602
  121,264
  126,163
Issuance/(repurchase) of shares, $m
  9,639
  9,413
  8,878
  7,956
  6,579
  4,691
  2,245
  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  
  23,930
  26,835
  29,775
  32,564
  35,080
  37,210
  38,855
  40,723
  44,820
  48,869
  52,845
  56,735
  60,534
  64,243
  67,871
  71,430
  74,938
  78,415
  81,884
  85,367
  88,889
  92,473
  96,145
  99,926
  103,841
  107,911
  112,158
  116,602
  121,264
  126,163
Total cash flow (excl. dividends), $m
  9,839
  11,954
  14,338
  16,884
  19,555
  22,312
  25,118
  28,736
  35,209
  42,282
  49,946
  58,188
  66,993
  76,348
  86,241
  96,662
  107,602
  119,056
  131,024
  143,508
  156,512
  170,047
  184,124
  198,761
  213,977
  229,794
  246,241
  263,345
  281,139
  299,659
Retained Cash Flow (-), $m
  -10,363
  -12,668
  -15,195
  -17,893
  -20,724
  -23,645
  -26,619
  -29,611
  -32,590
  -35,533
  -38,424
  -41,253
  -44,015
  -46,712
  -49,350
  -51,938
  -54,489
  -57,017
  -59,539
  -62,072
  -64,632
  -67,239
  -69,908
  -72,658
  -75,504
  -78,464
  -81,552
  -84,783
  -88,173
  -91,735
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
  -524
  -714
  -857
  -1,009
  -1,169
  -1,333
  -1,501
  -874
  2,619
  6,749
  11,522
  16,935
  22,978
  29,636
  36,891
  44,724
  53,113
  62,039
  71,485
  81,436
  91,880
  102,808
  114,216
  126,103
  138,472
  151,331
  164,689
  178,562
  192,966
  207,923
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
  -502
  -654
  -746
  -831
  -906
  -968
  -1,014
  -546
  1,504
  3,538
  5,472
  7,227
  8,737
  9,949
  10,831
  11,365
  11,556
  11,425
  11,007
  10,348
  9,503
  8,530
  7,486
  6,423
  5,387
  4,415
  3,535
  2,763
  2,106
  1,566
Current shareholders' claim on cash, %
  89.8
  82.9
  78.2
  75.1
  73.1
  72.0
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5
  71.5

ConocoPhillips is an independent exploration and production company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The Company operates through five segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International. The Alaska segment explores for, produces, transports and markets crude oil, natural gas liquids, natural gas and LNG. The Lower 48 segment consists of operations located in the United States Lower 48 states and the Gulf of Mexico. Its Canadian operations consists of oil sands developments in the Athabasca Region of northeastern Alberta. The Europe and North Africa segment consists of operations and exploration activities in Norway, the United Kingdom and Libya. The Asia Pacific and Middle East segment has exploration and production operations in China, Indonesia, Malaysia and Australia.

FINANCIAL RATIOS  of  ConocoPhillips (COP)

Valuation Ratios
P/E Ratio -23.8
Price to Sales 3.6
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 19.5
Price to Free Cash Flow -184.3
Growth Rates
Sales Growth Rate -18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -51.6%
Cap. Spend. - 3 Yr. Gr. Rate -20.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 74.9%
Total Debt to Equity 78%
Interest Coverage -4
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0.9%
Return On Equity -9.7%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 21.3%
Operating Margin -17.9%
Oper. Margin - 3 Yr. Avg. -9.3%
Pre-Tax Margin -22.9%
Pre-Tax Margin - 3 Yr. Avg. -9.8%
Net Profit Margin -15%
Net Profit Margin - 3 Yr. Avg. -5.6%
Effective Tax Rate 35.6%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio -34.7%

COP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COP stock intrinsic value calculation we used $32584 million for the last fiscal year's total revenue generated by ConocoPhillips. The default revenue input number comes from 2017 income statement of ConocoPhillips. 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 COP stock valuation model: a) initial revenue growth rate of 33.8% 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 COP is calculated based on our internal credit rating of ConocoPhillips, 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 ConocoPhillips.
    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 COP stock the variable cost ratio is equal to 66.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12316 million in the base year in the intrinsic value calculation for COP 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 ConocoPhillips.

Corporate tax rate of 27% is the nominal tax rate for ConocoPhillips. 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 COP 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 COP are equal to 159.6%.

Life of production assets of 10 years is the average useful life of capital assets used in ConocoPhillips 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 COP is equal to -9.1%. 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 - $30607 million for ConocoPhillips - 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 1221 million for ConocoPhillips 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 ConocoPhillips at the current share price and the inputted number of shares is $84.7 billion.

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