Intrinsic value of ConocoPhillips - COP

Previous Close

$75.36

  Intrinsic Value

$6.58

stock screener

  Rating & Target

str. sell

-91%

Previous close

$75.36

 
Intrinsic value

$6.58

 
Up/down potential

-91%

 
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 87.6

 

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, %
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  33,887
  35,277
  36,755
  38,325
  39,989
  41,753
  43,619
  45,591
  47,674
  49,873
  52,193
  54,639
  57,216
  59,932
  62,791
  65,801
  68,970
  72,303
  75,810
  79,498
  83,376
  87,454
  91,740
  96,246
  100,981
  105,958
  111,187
  116,682
  122,455
  128,520
Variable operating expenses, $m
  22,535
  23,459
  24,442
  25,486
  26,593
  27,766
  29,006
  30,318
  31,703
  33,166
  34,708
  36,335
  38,049
  39,855
  41,756
  43,758
  45,865
  48,082
  50,413
  52,866
  55,445
  58,157
  61,007
  64,003
  67,153
  70,462
  73,940
  77,594
  81,433
  85,466
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
  35,122
  36,323
  37,589
  38,922
  40,325
  41,800
  43,349
  44,976
  46,684
  48,476
  50,355
  52,326
  54,392
  56,558
  58,826
  61,204
  63,694
  66,304
  69,035
  71,898
  74,896
  78,036
  81,323
  84,766
  88,373
  92,149
  96,104
  100,245
  104,583
  109,125
Operating income, $m
  -1,235
  -1,046
  -834
  -597
  -335
  -47
  270
  615
  990
  1,397
  1,838
  2,313
  2,824
  3,375
  3,965
  4,598
  5,275
  6,000
  6,774
  7,600
  8,480
  9,418
  10,417
  11,479
  12,609
  13,809
  15,084
  16,437
  17,873
  19,395
EBITDA, $m
  5,882
  6,362
  6,885
  7,451
  8,063
  8,721
  9,430
  10,189
  11,002
  11,871
  12,798
  13,787
  14,840
  15,960
  17,151
  18,416
  19,759
  21,184
  22,694
  24,294
  25,989
  27,783
  29,682
  31,691
  33,815
  36,060
  38,433
  40,940
  43,588
  46,385
Interest expense (income), $m
  1,151
  1,064
  1,149
  1,242
  1,340
  1,444
  1,555
  1,673
  1,797
  1,928
  2,067
  2,213
  2,367
  2,530
  2,702
  2,882
  3,072
  3,273
  3,484
  3,705
  3,939
  4,184
  4,442
  4,714
  4,999
  5,299
  5,614
  5,945
  6,293
  6,658
  7,043
Earnings before tax, $m
  -2,299
  -2,195
  -2,076
  -1,937
  -1,780
  -1,602
  -1,403
  -1,182
  -938
  -669
  -375
  -54
  294
  673
  1,083
  1,525
  2,003
  2,516
  3,068
  3,661
  4,296
  4,976
  5,703
  6,480
  7,310
  8,195
  9,139
  10,144
  11,214
  12,353
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  80
  182
  292
  412
  541
  679
  828
  988
  1,160
  1,344
  1,540
  1,750
  1,974
  2,213
  2,468
  2,739
  3,028
  3,335
Net income, $m
  -2,299
  -2,195
  -2,076
  -1,937
  -1,780
  -1,602
  -1,403
  -1,182
  -938
  -669
  -375
  -54
  215
  491
  790
  1,114
  1,462
  1,837
  2,240
  2,672
  3,136
  3,632
  4,163
  4,731
  5,337
  5,983
  6,672
  7,405
  8,186
  9,017

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
  72,876
  75,864
  79,043
  82,419
  85,999
  89,791
  93,803
  98,045
  102,525
  107,254
  112,243
  117,503
  123,046
  128,885
  135,035
  141,509
  148,322
  155,490
  163,032
  170,963
  179,303
  188,072
  197,291
  206,980
  217,164
  227,867
  239,113
  250,929
  263,344
  276,388
Adjusted assets (=assets-cash), $m
  72,876
  75,864
  79,043
  82,419
  85,999
  89,791
  93,803
  98,045
  102,525
  107,254
  112,243
  117,503
  123,046
  128,885
  135,035
  141,509
  148,322
  155,490
  163,032
  170,963
  179,303
  188,072
  197,291
  206,980
  217,164
  227,867
  239,113
  250,929
  263,344
  276,388
Revenue / Adjusted assets
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
Average production assets, $m
  54,084
  56,302
  58,661
  61,166
  63,823
  66,637
  69,615
  72,763
  76,088
  79,597
  83,300
  87,203
  91,317
  95,651
  100,215
  105,019
  110,075
  115,396
  120,992
  126,878
  133,068
  139,576
  146,417
  153,608
  161,166
  169,109
  177,455
  186,225
  195,438
  205,118
Working capital, $m
  -407
  -423
  -441
  -460
  -480
  -501
  -523
  -547
  -572
  -598
  -626
  -656
  -687
  -719
  -753
  -790
  -828
  -868
  -910
  -954
  -1,001
  -1,049
  -1,101
  -1,155
  -1,212
  -1,271
  -1,334
  -1,400
  -1,469
  -1,542
Total debt, $m
  21,281
  22,993
  24,814
  26,749
  28,800
  30,973
  33,272
  35,703
  38,270
  40,980
  43,838
  46,852
  50,028
  53,374
  56,898
  60,607
  64,511
  68,619
  72,940
  77,485
  82,264
  87,288
  92,571
  98,123
  103,958
  110,091
  116,535
  123,305
  130,419
  137,893
Total liabilities, $m
  41,758
  43,470
  45,291
  47,226
  49,277
  51,450
  53,749
  56,180
  58,747
  61,457
  64,315
  67,329
  70,505
  73,851
  77,375
  81,084
  84,988
  89,096
  93,417
  97,962
  102,741
  107,765
  113,048
  118,600
  124,435
  130,568
  137,012
  143,782
  150,896
  158,370
Total equity, $m
  31,118
  32,394
  33,751
  35,193
  36,721
  38,341
  40,054
  41,865
  43,778
  45,797
  47,928
  50,174
  52,541
  55,034
  57,660
  60,424
  63,333
  66,394
  69,614
  73,001
  76,562
  80,307
  84,243
  88,381
  92,729
  97,299
  102,101
  107,147
  112,448
  118,017
Total liabilities and equity, $m
  72,876
  75,864
  79,042
  82,419
  85,998
  89,791
  93,803
  98,045
  102,525
  107,254
  112,243
  117,503
  123,046
  128,885
  135,035
  141,508
  148,321
  155,490
  163,031
  170,963
  179,303
  188,072
  197,291
  206,981
  217,164
  227,867
  239,113
  250,929
  263,344
  276,387
Debt-to-equity ratio
  0.680
  0.710
  0.740
  0.760
  0.780
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.970
  0.990
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
Adjusted equity ratio
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,299
  -2,195
  -2,076
  -1,937
  -1,780
  -1,602
  -1,403
  -1,182
  -938
  -669
  -375
  -54
  215
  491
  790
  1,114
  1,462
  1,837
  2,240
  2,672
  3,136
  3,632
  4,163
  4,731
  5,337
  5,983
  6,672
  7,405
  8,186
  9,017
Depreciation, amort., depletion, $m
  7,116
  7,408
  7,719
  8,048
  8,398
  8,768
  9,160
  9,574
  10,012
  10,473
  10,960
  11,474
  12,015
  12,586
  13,186
  13,818
  14,484
  15,184
  15,920
  16,695
  17,509
  18,365
  19,265
  20,212
  21,206
  22,251
  23,349
  24,503
  25,716
  26,989
Funds from operations, $m
  4,818
  5,213
  5,643
  6,111
  6,618
  7,166
  7,757
  8,392
  9,074
  9,804
  10,585
  11,420
  12,230
  13,077
  13,977
  14,932
  15,946
  17,021
  18,160
  19,367
  20,645
  21,998
  23,429
  24,942
  26,543
  28,234
  30,021
  31,909
  33,902
  36,007
Change in working capital, $m
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
Cash from operations, $m
  4,833
  5,229
  5,661
  6,130
  6,638
  7,187
  7,779
  8,416
  9,099
  9,831
  10,613
  11,449
  12,261
  13,110
  14,011
  14,968
  15,984
  17,061
  18,202
  19,411
  20,692
  22,047
  23,480
  24,996
  26,599
  28,294
  30,084
  31,974
  33,971
  36,079
Maintenance CAPEX, $m
  -6,843
  -7,116
  -7,408
  -7,719
  -8,048
  -8,398
  -8,768
  -9,160
  -9,574
  -10,012
  -10,473
  -10,960
  -11,474
  -12,015
  -12,586
  -13,186
  -13,818
  -14,484
  -15,184
  -15,920
  -16,695
  -17,509
  -18,365
  -19,265
  -20,212
  -21,206
  -22,251
  -23,349
  -24,503
  -25,716
New CAPEX, $m
  -2,077
  -2,217
  -2,359
  -2,505
  -2,657
  -2,814
  -2,978
  -3,148
  -3,325
  -3,510
  -3,702
  -3,904
  -4,114
  -4,334
  -4,564
  -4,804
  -5,056
  -5,320
  -5,597
  -5,886
  -6,190
  -6,508
  -6,841
  -7,191
  -7,558
  -7,943
  -8,346
  -8,770
  -9,214
  -9,680
Cash from investing activities, $m
  -8,920
  -9,333
  -9,767
  -10,224
  -10,705
  -11,212
  -11,746
  -12,308
  -12,899
  -13,522
  -14,175
  -14,864
  -15,588
  -16,349
  -17,150
  -17,990
  -18,874
  -19,804
  -20,781
  -21,806
  -22,885
  -24,017
  -25,206
  -26,456
  -27,770
  -29,149
  -30,597
  -32,119
  -33,717
  -35,396
Free cash flow, $m
  -4,087
  -4,104
  -4,107
  -4,094
  -4,067
  -4,025
  -3,966
  -3,892
  -3,800
  -3,691
  -3,563
  -3,415
  -3,327
  -3,240
  -3,138
  -3,023
  -2,891
  -2,743
  -2,578
  -2,395
  -2,193
  -1,970
  -1,726
  -1,460
  -1,170
  -855
  -514
  -144
  254
  684
Issuance/(repayment) of debt, $m
  1,578
  1,712
  1,821
  1,934
  2,051
  2,173
  2,299
  2,430
  2,567
  2,710
  2,859
  3,014
  3,176
  3,346
  3,524
  3,709
  3,904
  4,108
  4,321
  4,545
  4,779
  5,025
  5,282
  5,552
  5,835
  6,132
  6,444
  6,771
  7,114
  7,474
Issuance/(repurchase) of shares, $m
  3,510
  3,471
  3,433
  3,379
  3,308
  3,221
  3,116
  2,993
  2,851
  2,689
  2,505
  2,300
  2,152
  2,002
  1,835
  1,651
  1,447
  1,224
  980
  714
  425
  112
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5,088
  5,183
  5,254
  5,313
  5,359
  5,394
  5,415
  5,423
  5,418
  5,399
  5,364
  5,314
  5,328
  5,348
  5,359
  5,360
  5,351
  5,332
  5,301
  5,259
  5,204
  5,137
  5,282
  5,552
  5,835
  6,132
  6,444
  6,771
  7,114
  7,474
Total cash flow (excl. dividends), $m
  1,001
  1,079
  1,148
  1,219
  1,293
  1,369
  1,449
  1,532
  1,618
  1,708
  1,801
  1,899
  2,002
  2,109
  2,220
  2,338
  2,460
  2,589
  2,723
  2,864
  3,012
  3,166
  3,556
  4,092
  4,665
  5,277
  5,930
  6,626
  7,368
  8,158
Retained Cash Flow (-), $m
  -3,510
  -3,471
  -3,433
  -3,379
  -3,308
  -3,221
  -3,116
  -2,993
  -2,851
  -2,689
  -2,505
  -2,300
  -2,367
  -2,493
  -2,626
  -2,764
  -2,909
  -3,061
  -3,220
  -3,387
  -3,561
  -3,744
  -3,936
  -4,137
  -4,349
  -4,570
  -4,802
  -5,046
  -5,301
  -5,569
Prev. year cash balance distribution, $m
  700
  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
  -1,809
  -2,392
  -2,285
  -2,160
  -2,016
  -1,852
  -1,667
  -1,461
  -1,233
  -981
  -704
  -401
  -365
  -385
  -405
  -427
  -449
  -472
  -497
  -523
  -550
  -578
  -380
  -45
  317
  707
  1,128
  1,581
  2,067
  2,588
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
  -1,734
  -2,190
  -1,989
  -1,778
  -1,562
  -1,344
  -1,126
  -913
  -708
  -514
  -334
  -171
  -139
  -129
  -119
  -108
  -98
  -87
  -77
  -66
  -57
  -48
  -25
  -2
  12
  21
  24
  24
  23
  19
Current shareholders' claim on cash, %
  96.1
  92.5
  89.2
  86.1
  83.4
  80.9
  78.7
  76.7
  74.9
  73.3
  71.9
  70.8
  69.7
  68.8
  68.0
  67.3
  66.8
  66.3
  66.0
  65.8
  65.6
  65.6
  65.6
  65.6
  65.6
  65.6
  65.6
  65.6
  65.6
  65.6

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 -25.8
Price to Sales 3.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 21.2
Price to Free Cash Flow -200.1
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 $32584 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 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 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 7.6 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 -1.2%. 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 - $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 1162.09 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 $87.6 billion.

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COMPANY NEWS

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▶ ConocoPhillips plans modest job cuts in Houston, elsewhere next month   [09:25AM  American City Business Journals]
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▶ ConocoPhillips to sell Barnett assets to another Houston co.   [Aug-02-18 05:18PM  American City Business Journals]
▶ ConocoPhillips to Sell Barnett Assets   [Aug-01-18 08:00PM  Rigzone.com]

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