Intrinsic value of ConocoPhillips - COP

Previous Close

$54.91

  Intrinsic Value

$7.28

stock screener

  Rating & Target

str. sell

-87%

Previous close

$54.91

 
Intrinsic value

$7.28

 
Up/down potential

-87%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of ConocoPhillips (COP) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -18.02
  3.40
  3.56
  3.70
  3.83
  3.95
  4.06
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.92
Revenue, $m
  24,147
  24,968
  25,857
  26,815
  27,843
  28,942
  30,116
  31,366
  32,694
  34,104
  35,597
  37,179
  38,851
  40,618
  42,484
  44,452
  46,528
  48,717
  51,023
  53,451
  56,008
  58,700
  61,532
  64,512
  67,646
  70,942
  74,407
  78,051
  81,881
  85,906
  90,137
Variable operating expenses, $m
 
  30,960
  32,063
  33,250
  34,525
  35,889
  37,344
  38,894
  40,541
  42,288
  44,141
  46,102
  48,175
  50,366
  52,680
  55,121
  57,695
  60,409
  63,268
  66,280
  69,450
  72,788
  76,300
  79,995
  83,881
  87,968
  92,265
  96,783
  101,532
  106,524
  111,770
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
  28,465
  30,960
  32,063
  33,250
  34,525
  35,889
  37,344
  38,894
  40,541
  42,288
  44,141
  46,102
  48,175
  50,366
  52,680
  55,121
  57,695
  60,409
  63,268
  66,280
  69,450
  72,788
  76,300
  79,995
  83,881
  87,968
  92,265
  96,783
  101,532
  106,524
  111,770
Operating income, $m
  -4,318
  -5,992
  -6,206
  -6,436
  -6,682
  -6,946
  -7,228
  -7,528
  -7,847
  -8,185
  -8,543
  -8,923
  -9,324
  -9,748
  -10,196
  -10,669
  -11,167
  -11,692
  -12,245
  -12,828
  -13,442
  -14,088
  -14,768
  -15,483
  -16,235
  -17,026
  -17,858
  -18,732
  -19,651
  -20,618
  -21,633
EBITDA, $m
  4,744
  3,358
  3,478
  3,606
  3,745
  3,893
  4,050
  4,218
  4,397
  4,587
  4,788
  5,000
  5,225
  5,463
  5,714
  5,979
  6,258
  6,552
  6,862
  7,189
  7,533
  7,895
  8,276
  8,676
  9,098
  9,541
  10,007
  10,497
  11,012
  11,554
  12,123
Interest expense (income), $m
  1,151
  1,152
  1,237
  1,324
  1,418
  1,519
  1,627
  1,742
  1,865
  1,995
  2,133
  2,280
  2,435
  2,599
  2,772
  2,955
  3,148
  3,351
  3,566
  3,792
  4,030
  4,281
  4,545
  4,823
  5,115
  5,422
  5,745
  6,085
  6,442
  6,818
  7,213
Earnings before tax, $m
  -5,530
  -7,145
  -7,443
  -7,760
  -8,101
  -8,465
  -8,855
  -9,270
  -9,711
  -10,180
  -10,676
  -11,202
  -11,759
  -12,347
  -12,968
  -13,623
  -14,315
  -15,043
  -15,811
  -16,620
  -17,472
  -18,369
  -19,313
  -20,305
  -21,350
  -22,448
  -23,603
  -24,817
  -26,094
  -27,436
  -28,846
Tax expense, $m
  -1,971
  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
  -3,615
  -7,145
  -7,443
  -7,760
  -8,101
  -8,465
  -8,855
  -9,270
  -9,711
  -10,180
  -10,676
  -11,202
  -11,759
  -12,347
  -12,968
  -13,623
  -14,315
  -15,043
  -15,811
  -16,620
  -17,472
  -18,369
  -19,313
  -20,305
  -21,350
  -22,448
  -23,603
  -24,817
  -26,094
  -27,436
  -28,846

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,660
  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
  89,772
  89,171
  92,346
  95,766
  99,438
  103,366
  107,557
  112,021
  116,765
  121,799
  127,133
  132,781
  138,753
  145,064
  151,727
  158,758
  166,173
  173,989
  182,224
  190,898
  200,030
  209,642
  219,758
  230,399
  241,592
  253,364
  265,741
  278,753
  292,432
  306,808
  321,917
Adjusted assets (=assets-cash), $m
  86,112
  89,171
  92,346
  95,766
  99,438
  103,366
  107,557
  112,021
  116,765
  121,799
  127,133
  132,781
  138,753
  145,064
  151,727
  158,758
  166,173
  173,989
  182,224
  190,898
  200,030
  209,642
  219,758
  230,399
  241,592
  253,364
  265,741
  278,753
  292,432
  306,808
  321,917
Revenue / Adjusted assets
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Average production assets, $m
  62,389
  64,517
  66,814
  69,289
  71,945
  74,787
  77,820
  81,049
  84,481
  88,124
  91,984
  96,070
  100,391
  104,957
  109,778
  114,865
  120,230
  125,885
  131,843
  138,118
  144,726
  151,681
  158,999
  166,698
  174,797
  183,314
  192,269
  201,684
  211,580
  221,982
  232,914
Working capital, $m
  1,700
  -899
  -931
  -965
  -1,002
  -1,042
  -1,084
  -1,129
  -1,177
  -1,228
  -1,282
  -1,338
  -1,399
  -1,462
  -1,529
  -1,600
  -1,675
  -1,754
  -1,837
  -1,924
  -2,016
  -2,113
  -2,215
  -2,322
  -2,435
  -2,554
  -2,679
  -2,810
  -2,948
  -3,093
  -3,245
Total debt, $m
  27,275
  28,120
  30,101
  32,235
  34,526
  36,977
  39,593
  42,378
  45,338
  48,479
  51,808
  55,332
  59,059
  62,997
  67,155
  71,542
  76,169
  81,046
  86,185
  91,597
  97,296
  103,294
  109,606
  116,246
  123,231
  130,576
  138,299
  146,419
  154,954
  163,925
  173,353
Total liabilities, $m
  54,798
  55,643
  57,624
  59,758
  62,049
  64,500
  67,116
  69,901
  72,861
  76,002
  79,331
  82,855
  86,582
  90,520
  94,678
  99,065
  103,692
  108,569
  113,708
  119,120
  124,819
  130,817
  137,129
  143,769
  150,754
  158,099
  165,822
  173,942
  182,477
  191,448
  200,876
Total equity, $m
  34,974
  33,528
  34,722
  36,008
  37,389
  38,866
  40,442
  42,120
  43,903
  45,796
  47,802
  49,926
  52,171
  54,544
  57,049
  59,693
  62,481
  65,420
  68,516
  71,778
  75,211
  78,826
  82,629
  86,630
  90,839
  95,265
  99,919
  104,811
  109,954
  115,360
  121,041
Total liabilities and equity, $m
  89,772
  89,171
  92,346
  95,766
  99,438
  103,366
  107,558
  112,021
  116,764
  121,798
  127,133
  132,781
  138,753
  145,064
  151,727
  158,758
  166,173
  173,989
  182,224
  190,898
  200,030
  209,643
  219,758
  230,399
  241,593
  253,364
  265,741
  278,753
  292,431
  306,808
  321,917
Debt-to-equity ratio
  0.780
  0.840
  0.870
  0.900
  0.920
  0.950
  0.980
  1.010
  1.030
  1.060
  1.080
  1.110
  1.130
  1.150
  1.180
  1.200
  1.220
  1.240
  1.260
  1.280
  1.290
  1.310
  1.330
  1.340
  1.360
  1.370
  1.380
  1.400
  1.410
  1.420
  1.430
Adjusted equity ratio
  0.364
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,615
  -7,145
  -7,443
  -7,760
  -8,101
  -8,465
  -8,855
  -9,270
  -9,711
  -10,180
  -10,676
  -11,202
  -11,759
  -12,347
  -12,968
  -13,623
  -14,315
  -15,043
  -15,811
  -16,620
  -17,472
  -18,369
  -19,313
  -20,305
  -21,350
  -22,448
  -23,603
  -24,817
  -26,094
  -27,436
  -28,846
Depreciation, amort., depletion, $m
  9,062
  9,350
  9,683
  10,042
  10,427
  10,839
  11,278
  11,746
  12,244
  12,772
  13,331
  13,923
  14,549
  15,211
  15,910
  16,647
  17,425
  18,244
  19,108
  20,017
  20,975
  21,983
  23,043
  24,159
  25,333
  26,567
  27,865
  29,229
  30,664
  32,171
  33,756
Funds from operations, $m
  3,922
  2,206
  2,240
  2,282
  2,326
  2,373
  2,423
  2,476
  2,532
  2,592
  2,654
  2,721
  2,791
  2,864
  2,942
  3,024
  3,110
  3,201
  3,296
  3,397
  3,502
  3,614
  3,731
  3,854
  3,983
  4,119
  4,262
  4,412
  4,570
  4,736
  4,910
Change in working capital, $m
  -481
  -30
  -32
  -34
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
  -138
  -145
  -152
Cash from operations, $m
  4,403
  2,235
  2,272
  2,316
  2,363
  2,413
  2,466
  2,521
  2,580
  2,643
  2,708
  2,778
  2,851
  2,928
  3,009
  3,095
  3,185
  3,279
  3,379
  3,484
  3,595
  3,711
  3,833
  3,961
  4,096
  4,238
  4,387
  4,543
  4,708
  4,881
  5,062
Maintenance CAPEX, $m
  0
  -9,042
  -9,350
  -9,683
  -10,042
  -10,427
  -10,839
  -11,278
  -11,746
  -12,244
  -12,772
  -13,331
  -13,923
  -14,549
  -15,211
  -15,910
  -16,647
  -17,425
  -18,244
  -19,108
  -20,017
  -20,975
  -21,983
  -23,043
  -24,159
  -25,333
  -26,567
  -27,865
  -29,229
  -30,664
  -32,171
New CAPEX, $m
  -4,869
  -2,129
  -2,297
  -2,475
  -2,656
  -2,842
  -3,033
  -3,229
  -3,432
  -3,642
  -3,860
  -4,086
  -4,321
  -4,566
  -4,821
  -5,087
  -5,365
  -5,655
  -5,958
  -6,276
  -6,607
  -6,955
  -7,318
  -7,699
  -8,099
  -8,517
  -8,955
  -9,415
  -9,897
  -10,402
  -10,932
Cash from investing activities, $m
  -3,859
  -11,171
  -11,647
  -12,158
  -12,698
  -13,269
  -13,872
  -14,507
  -15,178
  -15,886
  -16,632
  -17,417
  -18,244
  -19,115
  -20,032
  -20,997
  -22,012
  -23,080
  -24,202
  -25,384
  -26,624
  -27,930
  -29,301
  -30,742
  -32,258
  -33,850
  -35,522
  -37,280
  -39,126
  -41,066
  -43,103
Free cash flow, $m
  544
  -8,935
  -9,375
  -9,842
  -10,335
  -10,856
  -11,406
  -11,986
  -12,598
  -13,243
  -13,923
  -14,639
  -15,394
  -16,187
  -17,023
  -17,902
  -18,827
  -19,800
  -20,823
  -21,899
  -23,030
  -24,219
  -25,469
  -26,782
  -28,162
  -29,612
  -31,136
  -32,736
  -34,418
  -36,185
  -38,041
Issuance/(repayment) of debt, $m
  2,343
  1,934
  1,981
  2,134
  2,291
  2,451
  2,616
  2,785
  2,960
  3,141
  3,329
  3,524
  3,727
  3,938
  4,158
  4,387
  4,627
  4,877
  5,139
  5,412
  5,699
  5,998
  6,312
  6,640
  6,985
  7,345
  7,723
  8,120
  8,535
  8,971
  9,428
Issuance/(repurchase) of shares, $m
  -189
  8,270
  8,637
  9,046
  9,481
  9,942
  10,431
  10,948
  11,495
  12,073
  12,682
  13,326
  14,004
  14,720
  15,473
  16,267
  17,103
  17,982
  18,908
  19,882
  20,906
  21,983
  23,116
  24,307
  25,558
  26,874
  28,257
  29,710
  31,237
  32,841
  34,527
Cash from financing (excl. dividends), $m  
  2,017
  10,204
  10,618
  11,180
  11,772
  12,393
  13,047
  13,733
  14,455
  15,214
  16,011
  16,850
  17,731
  18,658
  19,631
  20,654
  21,730
  22,859
  24,047
  25,294
  26,605
  27,981
  29,428
  30,947
  32,543
  34,219
  35,980
  37,830
  39,772
  41,812
  43,955
Total cash flow (excl. dividends), $m
  2,495
  1,269
  1,243
  1,339
  1,437
  1,538
  1,641
  1,747
  1,857
  1,970
  2,088
  2,210
  2,338
  2,470
  2,608
  2,752
  2,902
  3,059
  3,223
  3,395
  3,575
  3,762
  3,959
  4,165
  4,381
  4,607
  4,845
  5,093
  5,354
  5,627
  5,914
Retained Cash Flow (-), $m
  4,788
  -8,270
  -8,637
  -9,046
  -9,481
  -9,942
  -10,431
  -10,948
  -11,495
  -12,073
  -12,682
  -13,326
  -14,004
  -14,720
  -15,473
  -16,267
  -17,103
  -17,982
  -18,908
  -19,882
  -20,906
  -21,983
  -23,116
  -24,307
  -25,558
  -26,874
  -28,257
  -29,710
  -31,237
  -32,841
  -34,527
Prev. year cash balance distribution, $m
 
  2,571
  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
 
  -4,430
  -7,394
  -7,707
  -8,044
  -8,405
  -8,790
  -9,201
  -9,638
  -10,102
  -10,594
  -11,115
  -11,667
  -12,250
  -12,865
  -13,515
  -14,200
  -14,923
  -15,685
  -16,487
  -17,331
  -18,221
  -19,157
  -20,141
  -21,177
  -22,267
  -23,412
  -24,617
  -25,883
  -27,214
  -28,613
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  -4,140
  -6,416
  -6,166
  -5,890
  -5,587
  -5,260
  -4,912
  -4,546
  -4,166
  -3,779
  -3,389
  -3,003
  -2,628
  -2,268
  -1,929
  -1,615
  -1,331
  -1,077
  -856
  -667
  -509
  -380
  -278
  -198
  -137
  -93
  -61
  -39
  -24
  -14
Current shareholders' claim on cash, %
  100
  88.1
  77.5
  68.1
  59.8
  52.4
  45.9
  40.1
  35.0
  30.6
  26.7
  23.2
  20.2
  17.6
  15.3
  13.3
  11.5
  10.0
  8.7
  7.5
  6.5
  5.6
  4.9
  4.2
  3.7
  3.2
  2.7
  2.4
  2.0
  1.8
  1.5

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 -18.8
Price to Sales 2.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 15.4
Price to Free Cash Flow -145.8
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 $24147 million for the last fiscal year's total revenue generated by ConocoPhillips. The default revenue input number comes from 2016 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 3.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7%, whose default value for 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 124%.

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 4.4% 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 258.4%.

Life of production assets of 6.9 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 -3.6%. 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 - $34974 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 1201.86 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 $66.0 billion.

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Financial statements of COP
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