Intrinsic value of EOG Resources - EOG

Previous Close

$123.07

  Intrinsic Value

$221.87

stock screener

  Rating & Target

str. buy

+80%

Previous close

$123.07

 
Intrinsic value

$221.87

 
Up/down potential

+80%

 
Rating

str. buy

We calculate the intrinsic value of EOG 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 70.8

 

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, %
  46.50
  42.35
  38.62
  35.25
  32.23
  29.51
  27.05
  24.85
  22.86
  21.08
  19.47
  18.02
  16.72
  15.55
  14.49
  13.54
  12.69
  11.92
  11.23
  10.61
  10.05
  9.54
  9.09
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
Revenue, $m
  16,420
  23,373
  32,399
  43,821
  57,944
  75,040
  95,342
  119,034
  146,250
  177,077
  211,554
  249,683
  291,432
  336,746
  385,553
  437,774
  493,328
  552,138
  614,137
  679,273
  747,508
  818,827
  893,233
  970,748
  1,051,421
  1,135,316
  1,222,524
  1,313,152
  1,407,330
  1,505,206
Variable operating expenses, $m
  6,486
  9,233
  12,798
  17,309
  22,888
  29,641
  37,660
  47,018
  57,769
  69,945
  83,564
  98,625
  115,116
  133,015
  152,294
  172,921
  194,865
  218,094
  242,584
  268,313
  295,266
  323,437
  352,827
  383,446
  415,311
  448,450
  482,897
  518,695
  555,895
  594,556
Fixed operating expenses, $m
  6,113
  6,247
  6,384
  6,525
  6,669
  6,815
  6,965
  7,118
  7,275
  7,435
  7,599
  7,766
  7,937
  8,111
  8,290
  8,472
  8,658
  8,849
  9,044
  9,243
  9,446
  9,654
  9,866
  10,083
  10,305
  10,532
  10,763
  11,000
  11,242
  11,489
Total operating expenses, $m
  12,599
  15,480
  19,182
  23,834
  29,557
  36,456
  44,625
  54,136
  65,044
  77,380
  91,163
  106,391
  123,053
  141,126
  160,584
  181,393
  203,523
  226,943
  251,628
  277,556
  304,712
  333,091
  362,693
  393,529
  425,616
  458,982
  493,660
  529,695
  567,137
  606,045
Operating income, $m
  3,821
  7,894
  13,217
  19,987
  28,387
  38,584
  50,717
  64,897
  81,206
  99,696
  120,392
  143,292
  168,380
  195,620
  224,970
  256,381
  289,805
  325,195
  362,509
  401,717
  442,797
  485,737
  530,540
  577,220
  625,805
  676,335
  728,864
  783,457
  840,193
  899,160
EBITDA, $m
  7,585
  13,251
  20,643
  30,030
  41,668
  55,783
  72,569
  92,180
  114,727
  140,283
  168,880
  200,520
  235,176
  272,802
  313,339
  356,719
  402,876
  451,745
  503,270
  557,407
  614,126
  673,412
  735,269
  799,715
  866,790
  936,549
  1,009,066
  1,084,431
  1,162,753
  1,244,153
Interest expense (income), $m
  252
  345
  684
  1,137
  1,726
  2,470
  3,391
  4,506
  5,830
  7,374
  9,149
  11,159
  13,407
  15,893
  18,615
  21,570
  24,752
  28,157
  31,779
  35,614
  39,656
  43,903
  48,352
  53,002
  57,854
  62,908
  68,168
  73,638
  79,324
  85,234
  91,374
Earnings before tax, $m
  3,476
  7,210
  12,080
  18,261
  25,917
  35,193
  46,211
  59,067
  73,832
  90,547
  109,233
  129,885
  152,487
  177,005
  203,400
  231,629
  261,648
  293,415
  326,896
  362,061
  398,894
  437,385
  477,537
  519,366
  562,896
  608,167
  655,225
  704,133
  754,959
  807,786
Tax expense, $m
  939
  1,947
  3,262
  4,930
  6,998
  9,502
  12,477
  15,948
  19,935
  24,448
  29,493
  35,069
  41,171
  47,791
  54,918
  62,540
  70,645
  79,222
  88,262
  97,757
  107,701
  118,094
  128,935
  140,229
  151,982
  164,205
  176,911
  190,116
  203,839
  218,102
Net income, $m
  2,538
  5,263
  8,818
  13,331
  18,919
  25,691
  33,734
  43,119
  53,897
  66,100
  79,740
  94,816
  111,315
  129,213
  148,482
  169,089
  191,003
  214,193
  238,634
  264,305
  291,192
  319,291
  348,602
  379,137
  410,914
  443,962
  478,315
  514,017
  551,120
  589,684

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
  43,669
  62,163
  86,168
  116,545
  154,105
  199,575
  253,569
  316,580
  388,964
  470,949
  562,644
  664,050
  775,084
  895,600
  1,025,407
  1,164,294
  1,312,043
  1,468,452
  1,633,343
  1,806,576
  1,988,054
  2,177,733
  2,375,619
  2,581,778
  2,796,331
  3,019,458
  3,251,394
  3,492,426
  3,742,899
  4,003,207
Adjusted assets (=assets-cash), $m
  43,669
  62,163
  86,168
  116,545
  154,105
  199,575
  253,569
  316,580
  388,964
  470,949
  562,644
  664,050
  775,084
  895,600
  1,025,407
  1,164,294
  1,312,043
  1,468,452
  1,633,343
  1,806,576
  1,988,054
  2,177,733
  2,375,619
  2,581,778
  2,796,331
  3,019,458
  3,251,394
  3,492,426
  3,742,899
  4,003,207
Revenue / Adjusted assets
  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
Average production assets, $m
  37,634
  53,572
  74,259
  100,438
  132,807
  171,992
  218,524
  272,826
  335,206
  405,860
  484,882
  572,273
  667,962
  771,821
  883,688
  1,003,379
  1,130,708
  1,265,500
  1,407,602
  1,556,893
  1,713,289
  1,876,752
  2,047,289
  2,224,955
  2,409,856
  2,602,145
  2,802,025
  3,009,745
  3,225,601
  3,449,932
Working capital, $m
  -2,003
  -2,852
  -3,953
  -5,346
  -7,069
  -9,155
  -11,632
  -14,522
  -17,843
  -21,603
  -25,810
  -30,461
  -35,555
  -41,083
  -47,037
  -53,408
  -60,186
  -67,361
  -74,925
  -82,871
  -91,196
  -99,897
  -108,974
  -118,431
  -128,273
  -138,509
  -149,148
  -160,205
  -171,694
  -183,635
Total debt, $m
  12,663
  21,059
  31,957
  45,748
  62,801
  83,444
  107,957
  136,564
  169,426
  206,648
  248,277
  294,316
  344,725
  399,440
  458,372
  521,426
  588,504
  659,514
  734,375
  813,023
  895,414
  981,528
  1,071,368
  1,164,964
  1,262,371
  1,363,671
  1,468,970
  1,578,399
  1,692,113
  1,810,293
Total liabilities, $m
  19,826
  28,222
  39,120
  52,911
  69,964
  90,607
  115,120
  143,727
  176,589
  213,811
  255,440
  301,479
  351,888
  406,603
  465,535
  528,589
  595,667
  666,677
  741,538
  820,186
  902,577
  988,691
  1,078,531
  1,172,127
  1,269,534
  1,370,834
  1,476,133
  1,585,562
  1,699,276
  1,817,456
Total equity, $m
  23,844
  33,941
  47,048
  63,634
  84,142
  108,968
  138,449
  172,852
  212,374
  257,138
  307,203
  362,571
  423,196
  488,998
  559,872
  635,704
  716,375
  801,775
  891,805
  986,391
  1,085,478
  1,189,042
  1,297,088
  1,409,651
  1,526,797
  1,648,624
  1,775,261
  1,906,865
  2,043,623
  2,185,751
Total liabilities and equity, $m
  43,670
  62,163
  86,168
  116,545
  154,106
  199,575
  253,569
  316,579
  388,963
  470,949
  562,643
  664,050
  775,084
  895,601
  1,025,407
  1,164,293
  1,312,042
  1,468,452
  1,633,343
  1,806,577
  1,988,055
  2,177,733
  2,375,619
  2,581,778
  2,796,331
  3,019,458
  3,251,394
  3,492,427
  3,742,899
  4,003,207
Debt-to-equity ratio
  0.530
  0.620
  0.680
  0.720
  0.750
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
Adjusted equity ratio
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,538
  5,263
  8,818
  13,331
  18,919
  25,691
  33,734
  43,119
  53,897
  66,100
  79,740
  94,816
  111,315
  129,213
  148,482
  169,089
  191,003
  214,193
  238,634
  264,305
  291,192
  319,291
  348,602
  379,137
  410,914
  443,962
  478,315
  514,017
  551,120
  589,684
Depreciation, amort., depletion, $m
  3,763
  5,357
  7,426
  10,044
  13,281
  17,199
  21,852
  27,283
  33,521
  40,586
  48,488
  57,227
  66,796
  77,182
  88,369
  100,338
  113,071
  126,550
  140,760
  155,689
  171,329
  187,675
  204,729
  222,496
  240,986
  260,215
  280,202
  300,975
  322,560
  344,993
Funds from operations, $m
  6,301
  10,621
  16,244
  23,374
  32,200
  42,890
  55,586
  70,402
  87,418
  106,686
  128,228
  152,044
  178,111
  206,396
  236,851
  269,427
  304,074
  340,743
  379,394
  419,994
  462,521
  506,966
  553,331
  601,633
  651,900
  704,176
  758,517
  814,991
  873,680
  934,677
Change in working capital, $m
  -636
  -848
  -1,101
  -1,393
  -1,723
  -2,086
  -2,477
  -2,890
  -3,320
  -3,761
  -4,206
  -4,652
  -5,093
  -5,528
  -5,955
  -6,371
  -6,778
  -7,175
  -7,564
  -7,947
  -8,325
  -8,701
  -9,077
  -9,457
  -9,842
  -10,235
  -10,639
  -11,057
  -11,490
  -11,941
Cash from operations, $m
  6,937
  11,469
  17,345
  24,768
  33,923
  44,976
  58,063
  73,292
  90,738
  110,447
  132,434
  156,695
  183,205
  211,924
  242,806
  275,798
  310,851
  347,918
  386,958
  427,940
  470,846
  515,667
  562,408
  611,090
  661,742
  714,411
  769,156
  826,048
  885,170
  946,618
Maintenance CAPEX, $m
  -2,569
  -3,763
  -5,357
  -7,426
  -10,044
  -13,281
  -17,199
  -21,852
  -27,283
  -33,521
  -40,586
  -48,488
  -57,227
  -66,796
  -77,182
  -88,369
  -100,338
  -113,071
  -126,550
  -140,760
  -155,689
  -171,329
  -187,675
  -204,729
  -222,496
  -240,986
  -260,215
  -280,202
  -300,975
  -322,560
New CAPEX, $m
  -11,948
  -15,938
  -20,687
  -26,179
  -32,369
  -39,185
  -46,532
  -54,302
  -62,380
  -70,654
  -79,022
  -87,391
  -95,689
  -103,860
  -111,867
  -119,691
  -127,329
  -134,792
  -142,102
  -149,291
  -156,397
  -163,463
  -170,537
  -177,666
  -184,901
  -192,289
  -199,880
  -207,720
  -215,856
  -224,331
Cash from investing activities, $m
  -14,517
  -19,701
  -26,044
  -33,605
  -42,413
  -52,466
  -63,731
  -76,154
  -89,663
  -104,175
  -119,608
  -135,879
  -152,916
  -170,656
  -189,049
  -208,060
  -227,667
  -247,863
  -268,652
  -290,051
  -312,086
  -334,792
  -358,212
  -382,395
  -407,397
  -433,275
  -460,095
  -487,922
  -516,831
  -546,891
Free cash flow, $m
  -7,580
  -8,232
  -8,699
  -8,837
  -8,490
  -7,490
  -5,668
  -2,862
  1,076
  6,271
  12,827
  20,816
  30,289
  41,268
  53,757
  67,739
  83,184
  100,055
  118,306
  137,889
  158,760
  180,875
  204,197
  228,694
  254,346
  281,137
  309,062
  338,125
  368,340
  399,727
Issuance/(repayment) of debt, $m
  6,276
  8,396
  10,898
  13,791
  17,052
  20,643
  24,514
  28,607
  32,862
  37,221
  41,629
  46,038
  50,410
  54,714
  58,932
  63,054
  67,078
  71,010
  74,861
  78,648
  82,391
  86,114
  89,840
  93,596
  97,407
  101,300
  105,299
  109,429
  113,715
  118,180
Issuance/(repurchase) of shares, $m
  5,023
  4,834
  4,288
  3,255
  1,589
  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 from financing (excl. dividends), $m  
  11,299
  13,230
  15,186
  17,046
  18,641
  20,643
  24,514
  28,607
  32,862
  37,221
  41,629
  46,038
  50,410
  54,714
  58,932
  63,054
  67,078
  71,010
  74,861
  78,648
  82,391
  86,114
  89,840
  93,596
  97,407
  101,300
  105,299
  109,429
  113,715
  118,180
Total cash flow (excl. dividends), $m
  3,719
  4,998
  6,487
  8,210
  10,151
  13,153
  18,845
  25,745
  33,938
  43,493
  54,456
  66,854
  80,698
  95,982
  112,689
  130,793
  150,263
  171,065
  193,166
  216,537
  241,151
  266,989
  294,037
  322,291
  351,753
  382,436
  414,361
  447,554
  482,054
  517,906
Retained Cash Flow (-), $m
  -7,561
  -10,098
  -13,106
  -16,586
  -20,508
  -24,826
  -29,481
  -34,404
  -39,522
  -44,764
  -50,065
  -55,368
  -60,625
  -65,802
  -70,875
  -75,832
  -80,671
  -85,399
  -90,031
  -94,585
  -99,087
  -103,564
  -108,046
  -112,563
  -117,146
  -121,827
  -126,637
  -131,604
  -136,758
  -142,128
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
  134
  197
  280
  389
  526
  695
  900
  1,144
  1,428
  1,755
  2,125
  2,539
  2,996
  3,497
  4,041
  4,627
  5,253
  5,920
  6,626
  7,370
  8,151
  8,970
  9,826
  10,719
  11,649
  12,617
  13,624
  14,670
  15,758
  16,888
Cash available for distribution, $m
  -3,841
  -5,100
  -6,619
  -8,376
  -10,357
  -11,673
  -10,636
  -8,659
  -5,584
  -1,271
  4,391
  11,487
  20,074
  30,181
  41,814
  54,961
  69,591
  85,665
  103,136
  121,952
  142,064
  163,425
  185,991
  209,728
  234,607
  260,609
  287,724
  315,950
  345,296
  375,778
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
  -3,683
  -4,668
  -5,760
  -6,897
  -8,028
  -8,472
  -7,185
  -5,412
  -3,207
  -666
  2,085
  4,902
  7,632
  10,132
  12,276
  13,967
  15,142
  15,776
  15,880
  15,496
  14,694
  13,560
  12,190
  10,682
  9,127
  7,603
  6,175
  4,888
  3,769
  2,829
Current shareholders' claim on cash, %
  93.4
  89.2
  86.7
  85.3
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8
  84.8

EOG Resources, Inc. explores for, develops, produces and markets crude oil and natural gas in major producing basins in the United States, The Republic of Trinidad and Tobago, the United Kingdom, The People's Republic of China, Canada and, from time to time, select other international areas. Its operations are all crude oil and natural gas exploration and production related. As of December 31, 2016, its total estimated net proved reserves were over 2,147 million barrels of oil equivalent (MMBoe), of which over 1178 million barrels (MMBbl) were crude oil and condensate reserves, over 416 MMBbl were natural gas liquids reserves and over 3318 billion cubic feet, or 553 MMBoe, were natural gas reserves. Its operations are focused in the productive basins in the United States with a focus on crude oil and, to a lesser extent, liquids-rich natural gas plays. It has operations offshore Trinidad, in the United Kingdom East Irish Sea, in the China Sichuan Basin and in Canada.

FINANCIAL RATIOS  of  EOG Resources (EOG)

Valuation Ratios
P/E Ratio -64.7
Price to Sales 9.5
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 30.1
Price to Free Cash Flow -316.9
Growth Rates
Sales Growth Rate -15.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.5%
Cap. Spend. - 3 Yr. Gr. Rate -18.2%
Financial Strength
Quick Ratio 229
Current Ratio 0.1
LT Debt to Equity 49.9%
Total Debt to Equity 50%
Interest Coverage -5
Management Effectiveness
Return On Assets -3.3%
Ret/ On Assets - 3 Yr. Avg. -2.7%
Return On Total Capital -5.4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity -8.1%
Return On Equity - 3 Yr. Avg. -6.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.4%
Gross Margin - 3 Yr. Avg. 52.6%
EBITDA Margin 30.2%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin -16.5%
Oper. Margin - 3 Yr. Avg. -20.9%
Pre-Tax Margin -20.9%
Pre-Tax Margin - 3 Yr. Avg. -23.8%
Net Profit Margin -14.7%
Net Profit Margin - 3 Yr. Avg. -16.6%
Effective Tax Rate 29.6%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio -34%

EOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EOG stock intrinsic value calculation we used $11208 million for the last fiscal year's total revenue generated by EOG Resources. The default revenue input number comes from 2017 income statement of EOG 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 EOG stock valuation model: a) initial revenue growth rate of 46.5% 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 EOG is calculated based on our internal credit rating of EOG 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 EOG 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 EOG stock the variable cost ratio is equal to 39.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5981 million in the base year in the intrinsic value calculation for EOG 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 EOG Resources.

Corporate tax rate of 27% is the nominal tax rate for EOG 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 EOG stock is equal to 1.2%.

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 EOG are equal to 229.2%.

Life of production assets of 10 years is the average useful life of capital assets used in EOG 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 EOG is equal to -12.2%. 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 - $16283 million for EOG 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 575 million for EOG 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 EOG Resources at the current share price and the inputted number of shares is $70.8 billion.

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COMPANY NEWS

▶ EOG Resources to Present at Upcoming Conferences   [Aug-13-18 04:17PM  PR Newswire]
▶ 5 Energy Stocks to Sell Now   [08:48AM  InvestorPlace]
▶ Drilling Permit Roundup: Several saltwater disposal wells planned for Eagle Ford Shale   [Aug-07-18 08:30AM  American City Business Journals]
▶ Shale Producers Shift Away From Permian As Pipeline Bottleneck Weighs   [Aug-03-18 04:10PM  Investor's Business Daily]
▶ EOG Resources: 2Q Earnings Snapshot   [04:40PM  Associated Press]
▶ Nasdaq Turns Positive As This Top Stock Rebounds From Support   [10:28AM  Investor's Business Daily]
▶ The 5 Best Energy Stocks for 2018   [Jul-31-18 06:50PM  Investopedia]
▶ IBD Stock Of The Day Nears Buy Point With Earnings Set To Spike Again   [Jul-30-18 01:11PM  Investor's Business Daily]
▶ 7 Oil Stocks That Can Gush Big Returns   [Jul-27-18 12:35PM  Investopedia]
▶ Buy the 'Apple of Oil' and Three Other E&P Energy Stocks   [Jul-24-18 02:22PM  Barrons.com]
▶ Drilling Permit Roundup: Live Oak County emerging as new hot spot   [08:15AM  American City Business Journals]
▶ The Oil Market Is Stretched to the Limit   [10:21AM  Motley Fool]
▶ How EOG Uses Data To Stay Ahead Of The Crowd In Shale   [09:00AM  Investor's Business Daily]
▶ Market Direction Improves; These Stocks Aim To Lead Rally   [07:11AM  Investor's Business Daily]
▶ Crude Prices Fall On Surprise U.S. Inventory Gain; Trump Demands OPEC Action   [Jul-05-18 04:09PM  Investor's Business Daily]
▶ Crude Tops $75, And These 5 Oil Stocks Are Moving Toward Buy Points   [Jul-03-18 02:11PM  Investor's Business Daily]
▶ Drilling Permit Roundup: Murphy Oil lays out Eagle Ford plans   [10:26AM  American City Business Journals]
▶ SA law firm wins Eagle Ford royalty dispute in Texas Supreme Court   [Jul-02-18 03:14PM  American City Business Journals]
▶ Oil Prices: Next Stop, $90 a Barrel?   [Jun-29-18 10:20AM  Motley Fool]
▶ Shale Shifts Attention To This Forgotten Oil Play   [Jun-17-18 05:00PM  Oilprice.com]
▶ Should You Sell EOG Resources Inc (NYSE:EOG) At This PE Ratio?   [Jun-14-18 03:25PM  Simply Wall St.]
▶ VanEck Oil & Gas ETF Sports 18% Q2 Gain   [Jun-11-18 01:07PM  ETF Trends]
▶ [$$] Trump's Steel Tariffs Could Mess With Texas   [Jun-06-18 11:50PM  The Wall Street Journal]
▶ EOG Resources to Present at Upcoming Energy Conference   [Jun-05-18 04:18PM  PR Newswire]
▶ Why Arent Permian Oil Producers Profitable?   [May-31-18 06:00PM  Oilprice.com]
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