Intrinsic value of EOG Resources - EOG

Previous Close

$98.07

  Intrinsic Value

$287.37

stock screener

  Rating & Target

str. buy

+193%

Previous close

$98.07

 
Intrinsic value

$287.37

 
Up/down potential

+193%

 
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 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 56.8

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  17,933
  27,707
  41,436
  60,121
  84,822
  116,611
  156,526
  205,529
  264,466
  334,042
  414,804
  507,138
  611,272
  727,292
  855,167
  994,764
  1,145,885
  1,308,285
  1,481,701
  1,665,872
  1,860,557
  2,065,554
  2,280,707
  2,505,918
  2,741,153
  2,986,443
  3,241,892
  3,507,669
  3,784,018
  4,071,247
Variable operating expenses, $m
  7,084
  10,944
  16,367
  23,748
  33,505
  46,061
  61,828
  81,184
  104,464
  131,947
  163,848
  200,319
  241,452
  287,281
  337,791
  392,932
  452,625
  516,773
  585,272
  658,019
  734,920
  815,894
  900,879
  989,838
  1,082,755
  1,179,645
  1,280,547
  1,385,529
  1,494,687
  1,608,142
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
  13,197
  17,191
  22,751
  30,273
  40,174
  52,876
  68,793
  88,302
  111,739
  139,382
  171,447
  208,085
  249,389
  295,392
  346,081
  401,404
  461,283
  525,622
  594,316
  667,262
  744,366
  825,548
  910,745
  999,921
  1,093,060
  1,190,177
  1,291,310
  1,396,529
  1,505,929
  1,619,631
Operating income, $m
  4,737
  10,516
  18,684
  29,848
  44,649
  63,735
  87,733
  117,227
  152,727
  194,660
  243,358
  299,053
  361,883
  431,901
  509,086
  593,360
  684,602
  782,664
  887,385
  998,610
  1,116,191
  1,240,007
  1,369,962
  1,505,998
  1,648,093
  1,796,267
  1,950,581
  2,111,140
  2,278,089
  2,451,615
EBITDA, $m
  10,217
  18,983
  31,347
  48,221
  70,571
  99,371
  135,568
  180,036
  233,548
  296,743
  370,122
  454,034
  548,687
  654,161
  770,425
  897,360
  1,034,784
  1,182,475
  1,340,193
  1,507,700
  1,684,778
  1,871,240
  2,066,946
  2,271,806
  2,485,789
  2,708,924
  2,941,303
  3,183,084
  3,434,485
  3,695,788
Interest expense (income), $m
  252
  345
  783
  1,420
  2,315
  3,533
  5,144
  7,217
  9,819
  13,014
  16,857
  21,393
  26,659
  32,680
  39,469
  47,034
  55,372
  64,474
  74,327
  84,916
  96,223
  108,232
  120,926
  134,292
  148,320
  163,004
  178,342
  194,336
  210,991
  228,321
  246,339
Earnings before tax, $m
  4,392
  9,733
  17,264
  27,533
  41,116
  58,591
  80,517
  107,408
  139,713
  177,803
  221,964
  272,393
  329,203
  392,431
  462,052
  537,988
  620,128
  708,336
  802,469
  902,386
  1,007,960
  1,119,081
  1,235,670
  1,357,677
  1,485,088
  1,617,924
  1,756,245
  1,900,148
  2,049,768
  2,205,276
Tax expense, $m
  1,186
  2,628
  4,661
  7,434
  11,101
  15,819
  21,740
  29,000
  37,722
  48,007
  59,930
  73,546
  88,885
  105,956
  124,754
  145,257
  167,435
  191,251
  216,667
  243,644
  272,149
  302,152
  333,631
  366,573
  400,974
  436,840
  474,186
  513,040
  553,437
  595,424
Net income, $m
  3,206
  7,105
  12,603
  20,099
  30,015
  42,771
  58,777
  78,408
  101,990
  129,796
  162,034
  198,847
  240,318
  286,475
  337,298
  392,732
  452,693
  517,085
  585,803
  658,742
  735,811
  816,929
  902,039
  991,104
  1,084,114
  1,181,085
  1,282,059
  1,387,108
  1,496,331
  1,609,851

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
  47,695
  73,689
  110,202
  159,897
  225,591
  310,136
  416,293
  546,619
  703,366
  888,409
  1,103,202
  1,348,771
  1,625,722
  1,934,289
  2,274,380
  2,645,650
  3,047,566
  3,479,481
  3,940,694
  4,430,510
  4,948,291
  5,493,495
  6,065,711
  6,664,677
  7,290,300
  7,942,668
  8,622,052
  9,328,908
  10,063,878
  10,827,784
Adjusted assets (=assets-cash), $m
  47,695
  73,689
  110,202
  159,897
  225,591
  310,136
  416,293
  546,619
  703,366
  888,409
  1,103,202
  1,348,771
  1,625,722
  1,934,289
  2,274,380
  2,645,650
  3,047,566
  3,479,481
  3,940,694
  4,430,510
  4,948,291
  5,493,495
  6,065,711
  6,664,677
  7,290,300
  7,942,668
  8,622,052
  9,328,908
  10,063,878
  10,827,784
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
  41,103
  63,504
  94,971
  137,798
  194,413
  267,273
  358,758
  471,072
  606,156
  765,624
  950,731
  1,162,360
  1,401,034
  1,666,954
  1,960,042
  2,280,000
  2,626,368
  2,998,589
  3,396,058
  3,818,178
  4,264,397
  4,734,250
  5,227,381
  5,743,565
  6,282,722
  6,844,928
  7,430,415
  8,039,578
  8,672,970
  9,331,297
Working capital, $m
  126
  194
  290
  421
  594
  816
  1,096
  1,439
  1,851
  2,338
  2,904
  3,550
  4,279
  5,091
  5,986
  6,963
  8,021
  9,158
  10,372
  11,661
  13,024
  14,459
  15,965
  17,541
  19,188
  20,905
  22,693
  24,554
  26,488
  28,499
Total debt, $m
  14,491
  26,292
  42,869
  65,430
  95,256
  133,639
  181,834
  241,003
  312,166
  396,175
  493,691
  605,179
  730,915
  871,004
  1,025,406
  1,193,962
  1,376,432
  1,572,522
  1,781,912
  2,004,289
  2,239,361
  2,486,884
  2,746,670
  3,018,601
  3,302,634
  3,598,809
  3,907,249
  4,228,162
  4,561,838
  4,908,651
Total liabilities, $m
  21,654
  33,455
  50,031
  72,593
  102,418
  140,802
  188,997
  248,165
  319,328
  403,338
  500,854
  612,342
  738,078
  878,167
  1,032,568
  1,201,125
  1,383,595
  1,579,685
  1,789,075
  2,011,451
  2,246,524
  2,494,047
  2,753,833
  3,025,763
  3,309,796
  3,605,971
  3,914,412
  4,235,324
  4,569,001
  4,915,814
Total equity, $m
  26,041
  40,234
  60,170
  87,304
  123,173
  169,334
  227,296
  298,454
  384,038
  485,071
  602,349
  736,429
  887,644
  1,056,122
  1,241,811
  1,444,525
  1,663,971
  1,899,797
  2,151,619
  2,419,058
  2,701,767
  2,999,448
  3,311,878
  3,638,914
  3,980,504
  4,336,697
  4,707,640
  5,093,584
  5,494,877
  5,911,970
Total liabilities and equity, $m
  47,695
  73,689
  110,201
  159,897
  225,591
  310,136
  416,293
  546,619
  703,366
  888,409
  1,103,203
  1,348,771
  1,625,722
  1,934,289
  2,274,379
  2,645,650
  3,047,566
  3,479,482
  3,940,694
  4,430,509
  4,948,291
  5,493,495
  6,065,711
  6,664,677
  7,290,300
  7,942,668
  8,622,052
  9,328,908
  10,063,878
  10,827,784
Debt-to-equity ratio
  0.560
  0.650
  0.710
  0.750
  0.770
  0.790
  0.800
  0.810
  0.810
  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
  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
  3,206
  7,105
  12,603
  20,099
  30,015
  42,771
  58,777
  78,408
  101,990
  129,796
  162,034
  198,847
  240,318
  286,475
  337,298
  392,732
  452,693
  517,085
  585,803
  658,742
  735,811
  816,929
  902,039
  991,104
  1,084,114
  1,181,085
  1,282,059
  1,387,108
  1,496,331
  1,609,851
Depreciation, amort., depletion, $m
  5,480
  8,467
  12,663
  18,373
  25,922
  35,636
  47,834
  62,810
  80,821
  102,083
  126,764
  154,981
  186,805
  222,261
  261,339
  304,000
  350,182
  399,812
  452,808
  509,090
  568,586
  631,233
  696,984
  765,809
  837,696
  912,657
  990,722
  1,071,944
  1,156,396
  1,244,173
Funds from operations, $m
  8,687
  15,572
  25,266
  38,472
  55,936
  78,408
  106,612
  141,217
  182,811
  231,880
  288,798
  353,828
  427,123
  508,735
  598,637
  696,732
  802,876
  916,897
  1,038,610
  1,167,832
  1,304,397
  1,448,163
  1,599,023
  1,756,913
  1,921,811
  2,093,742
  2,272,781
  2,459,052
  2,652,727
  2,854,024
Change in working capital, $m
  47
  68
  96
  131
  173
  223
  279
  343
  413
  487
  565
  646
  729
  812
  895
  977
  1,058
  1,137
  1,214
  1,289
  1,363
  1,435
  1,506
  1,576
  1,647
  1,717
  1,788
  1,860
  1,934
  2,011
Cash from operations, $m
  8,640
  15,504
  25,170
  38,342
  55,763
  78,185
  106,332
  140,874
  182,398
  231,393
  288,233
  353,182
  426,394
  507,923
  597,742
  695,754
  801,818
  915,760
  1,037,396
  1,166,543
  1,303,034
  1,446,728
  1,597,517
  1,755,337
  1,920,164
  2,092,025
  2,270,993
  2,457,192
  2,650,792
  2,852,014
Maintenance CAPEX, $m
  -3,425
  -5,480
  -8,467
  -12,663
  -18,373
  -25,922
  -35,636
  -47,834
  -62,810
  -80,821
  -102,083
  -126,764
  -154,981
  -186,805
  -222,261
  -261,339
  -304,000
  -350,182
  -399,812
  -452,808
  -509,090
  -568,586
  -631,233
  -696,984
  -765,809
  -837,696
  -912,657
  -990,722
  -1,071,944
  -1,156,396
New CAPEX, $m
  -15,417
  -22,401
  -31,466
  -42,827
  -56,615
  -72,860
  -91,485
  -112,314
  -135,083
  -159,468
  -185,107
  -211,629
  -238,675
  -265,920
  -293,088
  -319,958
  -346,369
  -372,221
  -397,469
  -422,119
  -446,220
  -469,853
  -493,131
  -516,184
  -539,157
  -562,206
  -585,487
  -609,163
  -633,391
  -658,328
Cash from investing activities, $m
  -18,842
  -27,881
  -39,933
  -55,490
  -74,988
  -98,782
  -127,121
  -160,148
  -197,893
  -240,289
  -287,190
  -338,393
  -393,656
  -452,725
  -515,349
  -581,297
  -650,369
  -722,403
  -797,281
  -874,927
  -955,310
  -1,038,439
  -1,124,364
  -1,213,168
  -1,304,966
  -1,399,902
  -1,498,144
  -1,599,885
  -1,705,335
  -1,814,724
Free cash flow, $m
  -10,202
  -12,378
  -14,764
  -17,148
  -19,225
  -20,597
  -20,790
  -19,274
  -15,494
  -8,896
  1,042
  14,789
  32,738
  55,199
  82,393
  114,458
  151,449
  193,357
  240,115
  291,616
  347,724
  408,288
  473,153
  542,169
  615,198
  692,123
  772,849
  857,307
  945,457
  1,037,290
Issuance/(repayment) of debt, $m
  8,104
  11,801
  16,577
  22,562
  29,825
  38,383
  48,195
  59,168
  71,163
  84,009
  97,516
  111,488
  125,736
  140,089
  154,401
  168,557
  182,470
  196,089
  209,390
  222,376
  235,073
  247,523
  259,786
  271,930
  284,033
  296,175
  308,440
  320,913
  333,676
  346,813
Issuance/(repurchase) of shares, $m
  6,552
  7,087
  7,333
  7,034
  5,855
  3,390
  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  
  14,656
  18,888
  23,910
  29,596
  35,680
  41,773
  48,195
  59,168
  71,163
  84,009
  97,516
  111,488
  125,736
  140,089
  154,401
  168,557
  182,470
  196,089
  209,390
  222,376
  235,073
  247,523
  259,786
  271,930
  284,033
  296,175
  308,440
  320,913
  333,676
  346,813
Total cash flow (excl. dividends), $m
  4,453
  6,511
  9,146
  12,448
  16,455
  21,177
  27,406
  39,894
  55,669
  75,113
  98,559
  126,277
  158,474
  195,288
  236,795
  283,014
  333,920
  389,447
  449,506
  513,993
  582,797
  655,811
  732,939
  814,099
  899,231
  988,298
  1,081,289
  1,178,219
  1,279,134
  1,384,103
Retained Cash Flow (-), $m
  -9,758
  -14,193
  -19,936
  -27,134
  -35,869
  -46,161
  -57,962
  -71,158
  -85,584
  -101,033
  -117,277
  -134,080
  -151,216
  -168,477
  -185,690
  -202,713
  -219,447
  -235,826
  -251,822
  -267,439
  -282,708
  -297,682
  -312,430
  -327,035
  -341,590
  -356,193
  -370,943
  -385,943
  -401,294
  -417,093
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -5,305
  -7,682
  -10,790
  -14,686
  -19,414
  -24,985
  -30,556
  -31,264
  -29,915
  -25,920
  -18,719
  -7,803
  7,258
  26,811
  51,105
  80,301
  114,473
  153,621
  197,684
  246,553
  300,088
  358,129
  420,509
  487,064
  557,641
  632,105
  710,345
  792,276
  877,840
  967,010
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
  -5,086
  -7,032
  -9,390
  -12,092
  -15,048
  -18,132
  -20,643
  -19,541
  -17,185
  -13,589
  -8,889
  -3,330
  2,760
  9,001
  15,004
  20,406
  24,907
  28,291
  30,438
  31,329
  31,039
  29,715
  27,561
  24,807
  21,693
  18,442
  15,246
  12,258
  9,582
  7,281
Current shareholders' claim on cash, %
  89.7
  83.2
  79.0
  76.5
  75.0
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4
  74.4

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 -51.6
Price to Sales 7.6
Price to Book 4
Price to Tangible Book
Price to Cash Flow 24
Price to Free Cash Flow -252.5
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 $11208.32 million for the last fiscal year's total revenue generated by EOG Resources. The default revenue input number comes from 0001 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 60% 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 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 EOG are equal to 229.2%.

Life of production assets of 7.5 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 0.7%. 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 - $16283.273 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 579.201 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 $56.8 billion.

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