Intrinsic value of ConocoPhillips - COP

Previous Close

$62.57

  Intrinsic Value

$7.04

stock screener

  Rating & Target

str. sell

-89%

Previous close

$62.57

 
Intrinsic value

$7.04

 
Up/down potential

-89%

 
Rating

str. sell

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 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 71.0

 

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, %
  18.60
  17.24
  16.02
  14.91
  13.92
  13.03
  12.23
  11.50
  10.85
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
Revenue, $m
  45,930
  53,849
  62,473
  71,790
  81,786
  92,443
  103,747
  115,682
  128,239
  141,408
  155,184
  169,566
  184,557
  200,165
  216,401
  233,281
  250,824
  269,054
  287,999
  307,690
  328,162
  349,453
  371,606
  394,665
  418,680
  443,702
  469,786
  496,990
  525,377
  555,011
Variable operating expenses, $m
  47,492
  55,679
  64,597
  74,231
  84,567
  95,586
  107,274
  119,616
  132,599
  146,216
  160,460
  175,331
  190,832
  206,971
  223,759
  241,212
  259,352
  278,202
  297,791
  318,151
  339,319
  361,334
  384,240
  408,084
  432,915
  458,788
  485,758
  513,888
  543,240
  573,882
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
  47,492
  55,679
  64,597
  74,231
  84,567
  95,586
  107,274
  119,616
  132,599
  146,216
  160,460
  175,331
  190,832
  206,971
  223,759
  241,212
  259,352
  278,202
  297,791
  318,151
  339,319
  361,334
  384,240
  408,084
  432,915
  458,788
  485,758
  513,888
  543,240
  573,882
Operating income, $m
  -1,562
  -1,831
  -2,124
  -2,441
  -2,781
  -3,143
  -3,527
  -3,933
  -4,360
  -4,808
  -5,276
  -5,765
  -6,275
  -6,806
  -7,358
  -7,932
  -8,528
  -9,148
  -9,792
  -10,461
  -11,157
  -11,881
  -12,635
  -13,419
  -14,235
  -15,086
  -15,973
  -16,898
  -17,863
  -18,870
EBITDA, $m
  5,477
  6,421
  7,450
  8,561
  9,753
  11,024
  12,371
  13,795
  15,292
  16,862
  18,505
  20,220
  22,008
  23,869
  25,805
  27,818
  29,910
  32,084
  34,343
  36,691
  39,132
  41,671
  44,313
  47,063
  49,926
  52,910
  56,020
  59,264
  62,650
  66,183
Interest expense (income), $m
  1,151
  808
  1,191
  1,610
  2,067
  2,560
  3,089
  3,653
  4,252
  4,883
  5,548
  6,245
  6,974
  7,736
  8,529
  9,355
  10,215
  11,108
  12,037
  13,002
  14,004
  15,047
  16,130
  17,257
  18,430
  19,650
  20,922
  22,246
  23,627
  25,067
  26,569
Earnings before tax, $m
  -2,370
  -3,022
  -3,734
  -4,508
  -5,341
  -6,232
  -7,181
  -8,185
  -9,243
  -10,356
  -11,521
  -12,739
  -14,010
  -15,335
  -16,713
  -18,146
  -19,636
  -21,184
  -22,794
  -24,466
  -26,204
  -28,012
  -29,892
  -31,848
  -33,886
  -36,007
  -38,219
  -40,524
  -42,929
  -45,440
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
  -2,370
  -3,022
  -3,734
  -4,508
  -5,341
  -6,232
  -7,181
  -8,185
  -9,243
  -10,356
  -11,521
  -12,739
  -14,010
  -15,335
  -16,713
  -18,146
  -19,636
  -21,184
  -22,794
  -24,466
  -26,204
  -28,012
  -29,892
  -31,848
  -33,886
  -36,007
  -38,219
  -40,524
  -42,929
  -45,440

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
  82,608
  96,850
  112,361
  129,120
  147,097
  166,264
  186,595
  208,062
  230,646
  254,331
  279,108
  304,975
  331,938
  360,010
  389,211
  419,570
  451,122
  483,910
  517,983
  553,399
  590,219
  628,513
  668,356
  709,830
  753,022
  798,025
  844,938
  893,867
  944,923
  998,222
Adjusted assets (=assets-cash), $m
  82,608
  96,850
  112,361
  129,120
  147,097
  166,264
  186,595
  208,062
  230,646
  254,331
  279,108
  304,975
  331,938
  360,010
  389,211
  419,570
  451,122
  483,910
  517,983
  553,399
  590,219
  628,513
  668,356
  709,830
  753,022
  798,025
  844,938
  893,867
  944,923
  998,222
Revenue / Adjusted assets
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
Average production assets, $m
  54,198
  63,541
  73,718
  84,713
  96,507
  109,083
  122,421
  136,505
  151,322
  166,861
  183,117
  200,088
  217,778
  236,195
  255,353
  275,271
  295,972
  317,484
  339,838
  363,074
  387,231
  412,355
  438,495
  465,705
  494,042
  523,568
  554,347
  586,448
  619,945
  654,913
Working capital, $m
  -1,929
  -2,262
  -2,624
  -3,015
  -3,435
  -3,883
  -4,357
  -4,859
  -5,386
  -5,939
  -6,518
  -7,122
  -7,751
  -8,407
  -9,089
  -9,798
  -10,535
  -11,300
  -12,096
  -12,923
  -13,783
  -14,677
  -15,607
  -16,576
  -17,585
  -18,635
  -19,731
  -20,874
  -22,066
  -23,310
Total debt, $m
  22,061
  29,822
  38,276
  47,409
  57,207
  67,653
  78,733
  90,433
  102,741
  115,649
  129,153
  143,250
  157,945
  173,244
  189,159
  205,704
  222,900
  240,770
  259,340
  278,641
  298,708
  319,578
  341,293
  363,896
  387,436
  411,962
  437,530
  464,197
  492,022
  521,070
Total liabilities, $m
  45,022
  52,783
  61,237
  70,370
  80,168
  90,614
  101,694
  113,394
  125,702
  138,610
  152,114
  166,211
  180,906
  196,205
  212,120
  228,665
  245,861
  263,731
  282,301
  301,602
  321,669
  342,539
  364,254
  386,857
  410,397
  434,923
  460,491
  487,158
  514,983
  544,031
Total equity, $m
  37,587
  44,067
  51,124
  58,749
  66,929
  75,650
  84,901
  94,668
  104,944
  115,720
  126,994
  138,764
  151,032
  163,804
  177,091
  190,904
  205,260
  220,179
  235,682
  251,796
  268,549
  285,973
  304,102
  322,972
  342,625
  363,101
  384,447
  406,710
  429,940
  454,191
Total liabilities and equity, $m
  82,609
  96,850
  112,361
  129,119
  147,097
  166,264
  186,595
  208,062
  230,646
  254,330
  279,108
  304,975
  331,938
  360,009
  389,211
  419,569
  451,121
  483,910
  517,983
  553,398
  590,218
  628,512
  668,356
  709,829
  753,022
  798,024
  844,938
  893,868
  944,923
  998,222
Debt-to-equity ratio
  0.590
  0.680
  0.750
  0.810
  0.850
  0.890
  0.930
  0.960
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
  1.130
  1.140
  1.140
  1.140
  1.150
Adjusted equity ratio
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,370
  -3,022
  -3,734
  -4,508
  -5,341
  -6,232
  -7,181
  -8,185
  -9,243
  -10,356
  -11,521
  -12,739
  -14,010
  -15,335
  -16,713
  -18,146
  -19,636
  -21,184
  -22,794
  -24,466
  -26,204
  -28,012
  -29,892
  -31,848
  -33,886
  -36,007
  -38,219
  -40,524
  -42,929
  -45,440
Depreciation, amort., depletion, $m
  7,039
  8,252
  9,574
  11,002
  12,533
  14,167
  15,899
  17,728
  19,652
  21,670
  23,781
  25,985
  28,283
  30,675
  33,163
  35,750
  38,438
  41,232
  44,135
  47,152
  50,290
  53,553
  56,947
  60,481
  64,161
  67,996
  71,993
  76,162
  80,512
  85,054
Funds from operations, $m
  4,669
  5,230
  5,839
  6,494
  7,193
  7,934
  8,718
  9,543
  10,409
  11,314
  12,260
  13,246
  14,272
  15,340
  16,450
  17,603
  18,802
  20,047
  21,341
  22,687
  24,086
  25,541
  27,056
  28,633
  30,276
  31,988
  33,774
  35,638
  37,583
  39,614
Change in working capital, $m
  -303
  -333
  -362
  -391
  -420
  -448
  -475
  -501
  -527
  -553
  -579
  -604
  -630
  -656
  -682
  -709
  -737
  -766
  -796
  -827
  -860
  -894
  -930
  -968
  -1,009
  -1,051
  -1,096
  -1,143
  -1,192
  -1,245
Cash from operations, $m
  4,971
  5,563
  6,202
  6,885
  7,612
  8,382
  9,193
  10,044
  10,936
  11,868
  12,839
  13,850
  14,902
  15,996
  17,132
  18,312
  19,539
  20,813
  22,137
  23,514
  24,945
  26,435
  27,986
  29,601
  31,284
  33,039
  34,870
  36,780
  38,775
  40,859
Maintenance CAPEX, $m
  -5,934
  -7,039
  -8,252
  -9,574
  -11,002
  -12,533
  -14,167
  -15,899
  -17,728
  -19,652
  -21,670
  -23,781
  -25,985
  -28,283
  -30,675
  -33,163
  -35,750
  -38,438
  -41,232
  -44,135
  -47,152
  -50,290
  -53,553
  -56,947
  -60,481
  -64,161
  -67,996
  -71,993
  -76,162
  -80,512
New CAPEX, $m
  -8,507
  -9,344
  -10,177
  -10,995
  -11,795
  -12,576
  -13,338
  -14,084
  -14,817
  -15,539
  -16,256
  -16,971
  -17,690
  -18,417
  -19,158
  -19,918
  -20,701
  -21,512
  -22,355
  -23,235
  -24,157
  -25,124
  -26,140
  -27,210
  -28,337
  -29,526
  -30,779
  -32,101
  -33,496
  -34,968
Cash from investing activities, $m
  -14,441
  -16,383
  -18,429
  -20,569
  -22,797
  -25,109
  -27,505
  -29,983
  -32,545
  -35,191
  -37,926
  -40,752
  -43,675
  -46,700
  -49,833
  -53,081
  -56,451
  -59,950
  -63,587
  -67,370
  -71,309
  -75,414
  -79,693
  -84,157
  -88,818
  -93,687
  -98,775
  -104,094
  -109,658
  -115,480
Free cash flow, $m
  -9,470
  -10,820
  -12,227
  -13,683
  -15,184
  -16,727
  -18,312
  -19,939
  -21,609
  -23,324
  -25,087
  -26,902
  -28,773
  -30,705
  -32,701
  -34,768
  -36,912
  -39,137
  -41,450
  -43,856
  -46,364
  -48,978
  -51,707
  -54,556
  -57,534
  -60,648
  -63,905
  -67,314
  -70,883
  -74,622
Issuance/(repayment) of debt, $m
  7,093
  7,762
  8,454
  9,133
  9,798
  10,446
  11,080
  11,700
  12,308
  12,908
  13,503
  14,098
  14,695
  15,299
  15,915
  16,546
  17,196
  17,869
  18,570
  19,301
  20,067
  20,870
  21,715
  22,603
  23,540
  24,527
  25,568
  26,666
  27,825
  29,048
Issuance/(repurchase) of shares, $m
  8,248
  9,502
  10,792
  12,133
  13,520
  14,954
  16,431
  17,952
  19,519
  21,132
  22,795
  24,509
  26,279
  28,107
  29,999
  31,959
  33,992
  36,103
  38,297
  40,580
  42,957
  45,435
  48,020
  50,719
  53,538
  56,484
  59,564
  62,787
  66,160
  69,691
Cash from financing (excl. dividends), $m  
  15,341
  17,264
  19,246
  21,266
  23,318
  25,400
  27,511
  29,652
  31,827
  34,040
  36,298
  38,607
  40,974
  43,406
  45,914
  48,505
  51,188
  53,972
  56,867
  59,881
  63,024
  66,305
  69,735
  73,322
  77,078
  81,011
  85,132
  89,453
  93,985
  98,739
Total cash flow (excl. dividends), $m
  5,871
  6,444
  7,019
  7,583
  8,134
  8,673
  9,199
  9,714
  10,219
  10,717
  11,211
  11,704
  12,200
  12,702
  13,213
  13,737
  14,277
  14,836
  15,417
  16,025
  16,660
  17,327
  18,028
  18,766
  19,543
  20,363
  21,227
  22,139
  23,101
  24,117
Retained Cash Flow (-), $m
  -8,248
  -9,502
  -10,792
  -12,133
  -13,520
  -14,954
  -16,431
  -17,952
  -19,519
  -21,132
  -22,795
  -24,509
  -26,279
  -28,107
  -29,999
  -31,959
  -33,992
  -36,103
  -38,297
  -40,580
  -42,957
  -45,435
  -48,020
  -50,719
  -53,538
  -56,484
  -59,564
  -62,787
  -66,160
  -69,691
Prev. year cash balance distribution, $m
  230
  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
  -2,147
  -3,058
  -3,774
  -4,550
  -5,386
  -6,281
  -7,232
  -8,239
  -9,300
  -10,416
  -11,584
  -12,805
  -14,078
  -15,405
  -16,786
  -18,223
  -19,716
  -21,267
  -22,879
  -24,555
  -26,297
  -28,108
  -29,992
  -31,953
  -33,994
  -36,121
  -38,337
  -40,648
  -43,058
  -45,574
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
  -2,059
  -2,800
  -3,284
  -3,747
  -4,175
  -4,558
  -4,886
  -5,150
  -5,343
  -5,461
  -5,501
  -5,464
  -5,353
  -5,172
  -4,928
  -4,631
  -4,290
  -3,917
  -3,523
  -3,120
  -2,720
  -2,332
  -1,966
  -1,627
  -1,322
  -1,054
  -823
  -629
  -470
  -343
Current shareholders' claim on cash, %
  89.5
  80.4
  72.4
  65.4
  59.3
  53.9
  49.1
  44.8
  41.0
  37.6
  34.5
  31.8
  29.3
  27.0
  25.0
  23.1
  21.4
  19.8
  18.4
  17.0
  15.8
  14.7
  13.7
  12.7
  11.8
  11.0
  10.3
  9.6
  8.9
  8.3

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 -21.4
Price to Sales 3.2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow -166.1
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 $38727 million for the last fiscal year's total revenue generated by ConocoPhillips. The default revenue input number comes from 0001 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 18.6% 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 103.4%.

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 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 118%.

Life of production assets of 7.7 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 -4.2%. 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 - $31939 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 1134.339 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 $71.0 billion.

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