Intrinsic value of EOG Resources - EOG

Previous Close

$96.84

  Intrinsic Value

$6.06

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

-65%

Previous close

$96.84

 
Intrinsic value

$6.06

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

-65%

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

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 2016), $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 55.9

 

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, %
  -15.07
  46.30
  42.17
  38.45
  35.11
  32.10
  29.39
  26.95
  24.75
  22.78
  21.00
  19.40
  17.96
  16.66
  15.50
  14.45
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.95
Revenue, $m
  7,445
  10,892
  15,485
  21,440
  28,967
  38,264
  49,509
  62,851
  78,409
  96,269
  116,486
  139,085
  164,065
  191,405
  221,069
  253,009
  287,174
  323,510
  361,967
  402,504
  445,085
  489,687
  536,301
  584,928
  635,585
  688,302
  743,125
  800,111
  859,332
  920,872
  984,829
Variable operating expenses, $m
 
  19,203
  27,300
  37,798
  51,068
  67,460
  87,284
  110,806
  138,235
  169,722
  205,365
  245,206
  289,246
  337,447
  389,744
  446,055
  506,287
  570,348
  638,149
  709,614
  784,684
  863,319
  945,498
  1,031,227
  1,120,536
  1,213,477
  1,310,129
  1,410,595
  1,515,002
  1,623,498
  1,736,254
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
  8,670
  19,203
  27,300
  37,798
  51,068
  67,460
  87,284
  110,806
  138,235
  169,722
  205,365
  245,206
  289,246
  337,447
  389,744
  446,055
  506,287
  570,348
  638,149
  709,614
  784,684
  863,319
  945,498
  1,031,227
  1,120,536
  1,213,477
  1,310,129
  1,410,595
  1,515,002
  1,623,498
  1,736,254
Operating income, $m
  -1,225
  -8,311
  -11,815
  -16,359
  -22,102
  -29,196
  -37,775
  -47,955
  -59,826
  -73,453
  -88,879
  -106,122
  -125,181
  -146,042
  -168,675
  -193,046
  -219,113
  -246,838
  -276,181
  -307,110
  -339,600
  -373,631
  -409,197
  -446,300
  -484,951
  -525,175
  -567,004
  -610,485
  -655,670
  -702,625
  -751,425
EBITDA, $m
  2,328
  -3,095
  -4,400
  -6,092
  -8,231
  -10,872
  -14,068
  -17,859
  -22,279
  -27,354
  -33,099
  -39,520
  -46,618
  -54,386
  -62,815
  -71,891
  -81,598
  -91,923
  -102,850
  -114,369
  -126,468
  -139,141
  -152,386
  -166,203
  -180,597
  -195,576
  -211,154
  -227,346
  -244,173
  -261,659
  -279,832
Interest expense (income), $m
  252
  258
  520
  870
  1,323
  1,895
  2,602
  3,458
  4,472
  5,656
  7,014
  8,552
  10,271
  12,171
  14,251
  16,507
  18,936
  21,535
  24,299
  27,224
  30,307
  33,546
  36,939
  40,484
  44,183
  48,036
  52,046
  56,216
  60,551
  65,055
  69,736
Earnings before tax, $m
  -1,558
  -8,569
  -12,335
  -17,228
  -23,424
  -31,091
  -40,378
  -51,413
  -64,298
  -79,109
  -95,893
  -114,674
  -135,452
  -158,213
  -182,926
  -209,553
  -238,050
  -268,373
  -300,480
  -334,335
  -369,907
  -407,178
  -446,136
  -486,784
  -529,134
  -573,211
  -619,051
  -666,701
  -716,221
  -767,681
  -821,161
Tax expense, $m
  -461
  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
  -1,097
  -8,569
  -12,335
  -17,228
  -23,424
  -31,091
  -40,378
  -51,413
  -64,298
  -79,109
  -95,893
  -114,674
  -135,452
  -158,213
  -182,926
  -209,553
  -238,050
  -268,373
  -300,480
  -334,335
  -369,907
  -407,178
  -446,136
  -486,784
  -529,134
  -573,211
  -619,051
  -666,701
  -716,221
  -767,681
  -821,161

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,600
  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
  29,299
  40,491
  57,566
  79,702
  107,683
  142,246
  184,048
  233,646
  291,482
  357,877
  433,033
  517,043
  609,906
  711,543
  821,817
  940,554
  1,067,560
  1,202,638
  1,345,604
  1,496,297
  1,654,590
  1,820,399
  1,993,683
  2,174,452
  2,362,768
  2,558,744
  2,762,546
  2,974,390
  3,194,542
  3,423,317
  3,661,076
Adjusted assets (=assets-cash), $m
  27,699
  40,491
  57,566
  79,702
  107,683
  142,246
  184,048
  233,646
  291,482
  357,877
  433,033
  517,043
  609,906
  711,543
  821,817
  940,554
  1,067,560
  1,202,638
  1,345,604
  1,496,297
  1,654,590
  1,820,399
  1,993,683
  2,174,452
  2,362,768
  2,558,744
  2,762,546
  2,974,390
  3,194,542
  3,423,317
  3,661,076
Revenue / Adjusted assets
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
Average production assets, $m
  24,959
  36,510
  51,906
  71,866
  97,096
  128,261
  165,954
  210,676
  262,826
  322,693
  390,461
  466,212
  549,945
  641,590
  741,023
  848,086
  962,606
  1,084,404
  1,213,315
  1,349,193
  1,491,924
  1,641,432
  1,797,680
  1,960,677
  2,130,479
  2,307,189
  2,490,955
  2,681,972
  2,880,480
  3,086,764
  3,301,148
Working capital, $m
  1,358
  -349
  -496
  -686
  -927
  -1,224
  -1,584
  -2,011
  -2,509
  -3,081
  -3,728
  -4,451
  -5,250
  -6,125
  -7,074
  -8,096
  -9,190
  -10,352
  -11,583
  -12,880
  -14,243
  -15,670
  -17,162
  -18,718
  -20,339
  -22,026
  -23,780
  -25,604
  -27,499
  -29,468
  -31,515
Total debt, $m
  6,986
  14,060
  23,503
  35,744
  51,218
  70,331
  93,448
  120,875
  152,859
  189,575
  231,136
  277,594
  328,947
  385,152
  446,134
  511,795
  582,030
  656,728
  735,788
  819,121
  906,657
  998,349
  1,094,175
  1,194,141
  1,298,280
  1,406,655
  1,519,357
  1,636,507
  1,758,251
  1,884,763
  2,016,244
Total liabilities, $m
  15,318
  22,391
  31,834
  44,075
  59,549
  78,662
  101,779
  129,206
  161,190
  197,906
  239,467
  285,925
  337,278
  393,483
  454,465
  520,126
  590,361
  665,059
  744,119
  827,452
  914,988
  1,006,680
  1,102,506
  1,202,472
  1,306,611
  1,414,986
  1,527,688
  1,644,838
  1,766,582
  1,893,094
  2,024,575
Total equity, $m
  13,982
  18,099
  25,732
  35,627
  48,134
  63,584
  82,270
  104,440
  130,293
  159,971
  193,566
  231,118
  272,628
  318,060
  367,352
  420,428
  477,199
  537,579
  601,485
  668,845
  739,602
  813,718
  891,176
  971,980
  1,056,157
  1,143,759
  1,234,858
  1,329,552
  1,427,960
  1,530,223
  1,636,501
Total liabilities and equity, $m
  29,300
  40,490
  57,566
  79,702
  107,683
  142,246
  184,049
  233,646
  291,483
  357,877
  433,033
  517,043
  609,906
  711,543
  821,817
  940,554
  1,067,560
  1,202,638
  1,345,604
  1,496,297
  1,654,590
  1,820,398
  1,993,682
  2,174,452
  2,362,768
  2,558,745
  2,762,546
  2,974,390
  3,194,542
  3,423,317
  3,661,076
Debt-to-equity ratio
  0.500
  0.780
  0.910
  1.000
  1.060
  1.110
  1.140
  1.160
  1.170
  1.190
  1.190
  1.200
  1.210
  1.210
  1.210
  1.220
  1.220
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
Adjusted equity ratio
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,097
  -8,569
  -12,335
  -17,228
  -23,424
  -31,091
  -40,378
  -51,413
  -64,298
  -79,109
  -95,893
  -114,674
  -135,452
  -158,213
  -182,926
  -209,553
  -238,050
  -268,373
  -300,480
  -334,335
  -369,907
  -407,178
  -446,136
  -486,784
  -529,134
  -573,211
  -619,051
  -666,701
  -716,221
  -767,681
  -821,161
Depreciation, amort., depletion, $m
  3,553
  5,216
  7,415
  10,267
  13,871
  18,323
  23,708
  30,097
  37,547
  46,099
  55,780
  66,602
  78,564
  91,656
  105,860
  121,155
  137,515
  154,915
  173,331
  192,742
  213,132
  234,490
  256,811
  280,097
  304,354
  329,598
  355,851
  383,139
  411,497
  440,966
  471,593
Funds from operations, $m
  2,103
  -3,353
  -4,920
  -6,962
  -9,553
  -12,768
  -16,670
  -21,316
  -26,752
  -33,010
  -40,113
  -48,072
  -56,889
  -66,557
  -77,066
  -88,398
  -100,535
  -113,458
  -127,149
  -141,593
  -156,775
  -172,687
  -189,325
  -206,687
  -224,780
  -243,612
  -263,200
  -283,562
  -304,724
  -326,715
  -349,568
Change in working capital, $m
  -256
  -110
  -147
  -191
  -241
  -298
  -360
  -427
  -498
  -572
  -647
  -723
  -799
  -875
  -949
  -1,022
  -1,093
  -1,163
  -1,231
  -1,297
  -1,363
  -1,427
  -1,492
  -1,556
  -1,621
  -1,687
  -1,754
  -1,824
  -1,895
  -1,969
  -2,047
Cash from operations, $m
  2,359
  -3,243
  -4,773
  -6,771
  -9,312
  -12,470
  -16,310
  -20,889
  -26,254
  -32,438
  -39,466
  -47,349
  -56,089
  -65,683
  -76,117
  -87,376
  -99,442
  -112,295
  -125,919
  -140,296
  -155,413
  -171,260
  -187,833
  -205,131
  -223,159
  -241,926
  -261,446
  -281,738
  -302,829
  -324,745
  -347,522
Maintenance CAPEX, $m
  0
  -3,566
  -5,216
  -7,415
  -10,267
  -13,871
  -18,323
  -23,708
  -30,097
  -37,547
  -46,099
  -55,780
  -66,602
  -78,564
  -91,656
  -105,860
  -121,155
  -137,515
  -154,915
  -173,331
  -192,742
  -213,132
  -234,490
  -256,811
  -280,097
  -304,354
  -329,598
  -355,851
  -383,139
  -411,497
  -440,966
New CAPEX, $m
  -2,583
  -11,551
  -15,396
  -19,960
  -25,230
  -31,165
  -37,693
  -44,722
  -52,150
  -59,867
  -67,767
  -75,751
  -83,733
  -91,645
  -99,433
  -107,064
  -114,520
  -121,798
  -128,910
  -135,878
  -142,731
  -149,507
  -156,248
  -162,997
  -169,802
  -176,710
  -183,766
  -191,017
  -198,508
  -206,283
  -214,384
Cash from investing activities, $m
  -1,253
  -15,117
  -20,612
  -27,375
  -35,497
  -45,036
  -56,016
  -68,430
  -82,247
  -97,414
  -113,866
  -131,531
  -150,335
  -170,209
  -191,089
  -212,924
  -235,675
  -259,313
  -283,825
  -309,209
  -335,473
  -362,639
  -390,738
  -419,808
  -449,899
  -481,064
  -513,364
  -546,868
  -581,647
  -617,780
  -655,350
Free cash flow, $m
  1,106
  -18,359
  -25,385
  -34,146
  -44,809
  -57,506
  -72,326
  -89,319
  -108,500
  -129,852
  -153,332
  -178,880
  -206,424
  -235,891
  -267,205
  -300,300
  -335,116
  -371,609
  -409,744
  -449,504
  -490,886
  -533,900
  -578,571
  -624,940
  -673,058
  -722,989
  -774,810
  -828,606
  -884,476
  -942,526
  -1,002,873
Issuance/(repayment) of debt, $m
  161
  7,081
  9,442
  12,241
  15,474
  19,113
  23,117
  27,428
  31,983
  36,716
  41,561
  46,458
  51,353
  56,205
  60,982
  65,662
  70,234
  74,698
  79,060
  83,333
  87,536
  91,692
  95,826
  99,965
  104,139
  108,375
  112,702
  117,150
  121,744
  126,512
  131,481
Issuance/(repurchase) of shares, $m
  -59
  14,279
  19,968
  27,123
  35,932
  46,540
  59,063
  73,583
  90,151
  108,787
  129,488
  152,226
  176,962
  203,645
  232,219
  262,628
  294,822
  328,753
  364,386
  401,694
  440,664
  481,294
  523,594
  567,588
  613,312
  660,812
  710,150
  761,395
  814,629
  869,943
  927,439
Cash from financing (excl. dividends), $m  
  130
  21,360
  29,410
  39,364
  51,406
  65,653
  82,180
  101,011
  122,134
  145,503
  171,049
  198,684
  228,315
  259,850
  293,201
  328,290
  365,056
  403,451
  443,446
  485,027
  528,200
  572,986
  619,420
  667,553
  717,451
  769,187
  822,852
  878,545
  936,373
  996,455
  1,058,920
Total cash flow (excl. dividends), $m
  1,254
  3,001
  4,025
  5,218
  6,596
  8,148
  9,854
  11,692
  13,634
  15,651
  17,717
  19,804
  21,891
  23,959
  25,995
  27,990
  29,939
  31,842
  33,702
  35,523
  37,315
  39,086
  40,849
  42,613
  44,392
  46,198
  48,043
  49,938
  51,897
  53,930
  56,048
Retained Cash Flow (-), $m
  -1,039
  -14,279
  -19,968
  -27,123
  -35,932
  -46,540
  -59,063
  -73,583
  -90,151
  -108,787
  -129,488
  -152,226
  -176,962
  -203,645
  -232,219
  -262,628
  -294,822
  -328,753
  -364,386
  -401,694
  -440,664
  -481,294
  -523,594
  -567,588
  -613,312
  -660,812
  -710,150
  -761,395
  -814,629
  -869,943
  -927,439
Prev. year cash balance distribution, $m
 
  1,593
  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
 
  -9,685
  -15,943
  -21,905
  -29,336
  -38,393
  -49,209
  -61,891
  -76,517
  -93,136
  -111,771
  -132,422
  -155,071
  -179,686
  -206,223
  -234,638
  -264,882
  -296,911
  -330,684
  -366,171
  -403,349
  -442,208
  -482,746
  -524,975
  -568,919
  -614,614
  -662,107
  -711,457
  -762,732
  -816,013
  -871,392
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  -9,241
  -14,450
  -18,765
  -23,630
  -28,914
  -34,444
  -40,005
  -45,361
  -50,270
  -54,502
  -57,853
  -60,165
  -61,331
  -61,308
  -60,113
  -57,824
  -54,570
  -50,522
  -45,881
  -40,860
  -35,672
  -30,517
  -25,569
  -20,970
  -16,822
  -13,191
  -10,102
  -7,549
  -5,499
  -3,901
Current shareholders' claim on cash, %
  100
  77.6
  60.8
  48.1
  38.4
  30.9
  25.1
  20.5
  16.9
  13.9
  11.6
  9.7
  8.1
  6.8
  5.8
  4.9
  4.2
  3.6
  3.0
  2.6
  2.2
  1.9
  1.7
  1.4
  1.2
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5

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 -50.9
Price to Sales 7.5
Price to Book 4
Price to Tangible Book
Price to Cash Flow 23.7
Price to Free Cash Flow -249.3
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 $7445 million for the last fiscal year's total revenue generated by EOG Resources. The default revenue input number comes from 2016 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 46.3% 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 4.8%, 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 176.3%.

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 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 3.7% 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 335.2%.

Life of production assets of 7 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 -3.2%. 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 - $13982 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 576.736 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 $55.9 billion.

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COMPANY NEWS

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▶ 'Apple Of Oil' Leads Shale Stocks Forming Bases: Investing Action Plan   [Oct-03-17 04:10PM  Investor's Business Daily]
▶ How EOG Resources Performed in September   [07:42AM  Market Realist]
▶ Sustainability Or Growth? E&Ps Face A Difficult Decision   [Oct-01-17 04:00PM  Oilprice.com]
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▶ Eagle Ford Sees Surge In Production   [Sep-23-17 07:00PM  Oilprice.com]
▶ EOG Resources names retired CEO of Houston company to board   [Sep-22-17 09:45AM  American City Business Journals]
▶ What Does EOG Resources Incs (EOG) Share Price Indicate?   [Sep-19-17 08:27PM  Simply Wall St.]
▶ 3 Stocks That Look Just Like ExxonMobil in 1996   [Sep-16-17 12:00PM  Motley Fool]
▶ Morgan Stanley Picked a Bad Day to Downgrade Whiting   [Sep-13-17 12:05PM  Barrons.com]
▶ How Much Cash Did EOG Resources Generate in 2Q17?   [Sep-12-17 10:36AM  Market Realist]
▶ Energy Sector: Analysts Recommendations on September 48   [Sep-11-17 03:06PM  Market Realist]
▶ Cramer's biggest investing mistakes   [Sep-01-17 07:09PM  CNBC Videos]
▶ Three E&P Stocks That Look Attractive Now   [Aug-29-17 10:29AM  Barrons.com]
▶ Oil Stocks & Hurricane Harvey: It's Complicated   [Aug-28-17 03:40PM  Barrons.com]
▶ 52-Week Company Lows   [12:24PM  GuruFocus.com]
▶ Occidentals Underperformance of Crude Oil and Natural Gas   [Aug-22-17 05:43PM  Market Realist]
▶ US Crude Oil Inventories: Biggest Draw since September 2016   [Aug-17-17 10:00AM  Market Realist]
▶ Evening Sector Snapshot: Retail, Oil & Gas Rebound   [Aug-08-17 05:01PM  Barrons.com]
Financial statements of EOG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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