Intrinsic value of Hess Corp. - HES

Previous Close

$64.04

  Intrinsic Value

$8.51

stock screener

  Rating & Target

str. sell

-87%

Previous close

$64.04

 
Intrinsic value

$8.51

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of HES 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 20.1

 

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, %
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
Revenue, $m
  6,032
  6,692
  7,384
  8,109
  8,865
  9,654
  10,475
  11,330
  12,218
  13,142
  14,101
  15,098
  16,134
  17,212
  18,332
  19,498
  20,711
  21,975
  23,291
  24,664
  26,095
  27,588
  29,147
  30,774
  32,475
  34,253
  36,111
  38,056
  40,090
  42,219
Variable operating expenses, $m
  10,220
  11,334
  12,503
  13,726
  15,004
  16,335
  17,722
  19,165
  20,664
  22,223
  23,807
  25,491
  27,240
  29,059
  30,951
  32,919
  34,968
  37,101
  39,324
  41,641
  44,057
  46,578
  49,209
  51,958
  54,829
  57,830
  60,968
  64,251
  67,685
  71,280
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
  10,220
  11,334
  12,503
  13,726
  15,004
  16,335
  17,722
  19,165
  20,664
  22,223
  23,807
  25,491
  27,240
  29,059
  30,951
  32,919
  34,968
  37,101
  39,324
  41,641
  44,057
  46,578
  49,209
  51,958
  54,829
  57,830
  60,968
  64,251
  67,685
  71,280
Operating income, $m
  -4,188
  -4,642
  -5,119
  -5,618
  -6,138
  -6,681
  -7,247
  -7,835
  -8,446
  -9,082
  -9,706
  -10,393
  -11,106
  -11,848
  -12,619
  -13,421
  -14,256
  -15,126
  -16,032
  -16,977
  -17,962
  -18,990
  -20,063
  -21,183
  -22,354
  -23,578
  -24,857
  -26,195
  -27,595
  -29,061
EBITDA, $m
  -1,891
  -2,097
  -2,315
  -2,542
  -2,779
  -3,026
  -3,283
  -3,551
  -3,830
  -4,119
  -4,420
  -4,732
  -5,057
  -5,395
  -5,746
  -6,111
  -6,492
  -6,888
  -7,300
  -7,731
  -8,179
  -8,647
  -9,136
  -9,646
  -10,179
  -10,736
  -11,319
  -11,928
  -12,566
  -13,233
Interest expense (income), $m
  338
  345
  418
  494
  573
  657
  743
  834
  928
  1,026
  1,128
  1,234
  1,345
  1,459
  1,578
  1,702
  1,831
  1,964
  2,104
  2,249
  2,400
  2,558
  2,722
  2,893
  3,072
  3,259
  3,455
  3,659
  3,872
  4,095
  4,329
Earnings before tax, $m
  -4,533
  -5,060
  -5,613
  -6,191
  -6,795
  -7,425
  -8,081
  -8,763
  -9,473
  -10,210
  -10,941
  -11,737
  -12,565
  -13,426
  -14,321
  -15,252
  -16,221
  -17,230
  -18,281
  -19,377
  -20,520
  -21,712
  -22,956
  -24,256
  -25,613
  -27,032
  -28,516
  -30,067
  -31,691
  -33,390
Tax expense, $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
Net income, $m
  -4,533
  -5,060
  -5,613
  -6,191
  -6,795
  -7,425
  -8,081
  -8,763
  -9,473
  -10,210
  -10,941
  -11,737
  -12,565
  -13,426
  -14,321
  -15,252
  -16,221
  -17,230
  -18,281
  -19,377
  -20,520
  -21,712
  -22,956
  -24,256
  -25,613
  -27,032
  -28,516
  -30,067
  -31,691
  -33,390

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
  23,111
  25,639
  28,292
  31,068
  33,967
  36,989
  40,135
  43,409
  46,813
  50,351
  54,027
  57,847
  61,818
  65,946
  70,239
  74,705
  79,354
  84,195
  89,239
  94,497
  99,980
  105,701
  111,673
  117,910
  124,426
  131,237
  138,358
  145,807
  153,601
  161,759
Adjusted assets (=assets-cash), $m
  23,111
  25,639
  28,292
  31,068
  33,967
  36,989
  40,135
  43,409
  46,813
  50,351
  54,027
  57,847
  61,818
  65,946
  70,239
  74,705
  79,354
  84,195
  89,239
  94,497
  99,980
  105,701
  111,673
  117,910
  124,426
  131,237
  138,358
  145,807
  153,601
  161,759
Revenue / Adjusted assets
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
Average production assets, $m
  22,614
  25,088
  27,683
  30,400
  33,236
  36,193
  39,272
  42,475
  45,806
  49,268
  52,865
  56,603
  60,488
  64,527
  68,728
  73,098
  77,647
  82,384
  87,319
  92,464
  97,829
  103,427
  109,271
  115,373
  121,749
  128,414
  135,382
  142,671
  150,297
  158,279
Working capital, $m
  -229
  -254
  -281
  -308
  -337
  -367
  -398
  -431
  -464
  -499
  -536
  -574
  -613
  -654
  -697
  -741
  -787
  -835
  -885
  -937
  -992
  -1,048
  -1,108
  -1,169
  -1,234
  -1,302
  -1,372
  -1,446
  -1,523
  -1,604
Total debt, $m
  7,743
  9,146
  10,618
  12,159
  13,767
  15,445
  17,191
  19,008
  20,897
  22,861
  24,901
  27,021
  29,225
  31,516
  33,899
  36,377
  38,958
  41,644
  44,444
  47,362
  50,405
  53,580
  56,894
  60,356
  63,972
  67,752
  71,705
  75,839
  80,165
  84,692
Total liabilities, $m
  12,827
  14,230
  15,702
  17,243
  18,851
  20,529
  22,275
  24,092
  25,981
  27,945
  29,985
  32,105
  34,309
  36,600
  38,983
  41,461
  44,042
  46,728
  49,528
  52,446
  55,489
  58,664
  61,978
  65,440
  69,056
  72,836
  76,789
  80,923
  85,249
  89,776
Total equity, $m
  10,284
  11,410
  12,590
  13,825
  15,115
  16,460
  17,860
  19,317
  20,832
  22,406
  24,042
  25,742
  27,509
  29,346
  31,256
  33,244
  35,313
  37,467
  39,711
  42,051
  44,491
  47,037
  49,694
  52,470
  55,370
  58,400
  61,569
  64,884
  68,353
  71,983
Total liabilities and equity, $m
  23,111
  25,640
  28,292
  31,068
  33,966
  36,989
  40,135
  43,409
  46,813
  50,351
  54,027
  57,847
  61,818
  65,946
  70,239
  74,705
  79,355
  84,195
  89,239
  94,497
  99,980
  105,701
  111,672
  117,910
  124,426
  131,236
  138,358
  145,807
  153,602
  161,759
Debt-to-equity ratio
  0.750
  0.800
  0.840
  0.880
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.160
  1.160
  1.160
  1.170
  1.170
  1.180
Adjusted equity ratio
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,533
  -5,060
  -5,613
  -6,191
  -6,795
  -7,425
  -8,081
  -8,763
  -9,473
  -10,210
  -10,941
  -11,737
  -12,565
  -13,426
  -14,321
  -15,252
  -16,221
  -17,230
  -18,281
  -19,377
  -20,520
  -21,712
  -22,956
  -24,256
  -25,613
  -27,032
  -28,516
  -30,067
  -31,691
  -33,390
Depreciation, amort., depletion, $m
  2,297
  2,545
  2,804
  3,076
  3,360
  3,655
  3,963
  4,284
  4,617
  4,963
  5,286
  5,660
  6,049
  6,453
  6,873
  7,310
  7,765
  8,238
  8,732
  9,246
  9,783
  10,343
  10,927
  11,537
  12,175
  12,841
  13,538
  14,267
  15,030
  15,828
Funds from operations, $m
  -2,236
  -2,516
  -2,808
  -3,115
  -3,435
  -3,769
  -4,117
  -4,480
  -4,856
  -5,248
  -5,654
  -6,077
  -6,516
  -6,973
  -7,448
  -7,942
  -8,456
  -8,992
  -9,549
  -10,131
  -10,737
  -11,369
  -12,029
  -12,718
  -13,438
  -14,191
  -14,977
  -15,800
  -16,661
  -17,562
Change in working capital, $m
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
Cash from operations, $m
  -2,212
  -2,491
  -2,782
  -3,087
  -3,407
  -3,739
  -4,086
  -4,447
  -4,822
  -5,212
  -5,618
  -6,039
  -6,477
  -6,932
  -7,405
  -7,898
  -8,410
  -8,944
  -9,499
  -10,078
  -10,682
  -11,312
  -11,970
  -12,656
  -13,374
  -14,123
  -14,907
  -15,726
  -16,584
  -17,481
Maintenance CAPEX, $m
  -2,026
  -2,261
  -2,509
  -2,768
  -3,040
  -3,324
  -3,619
  -3,927
  -4,248
  -4,581
  -4,927
  -5,286
  -5,660
  -6,049
  -6,453
  -6,873
  -7,310
  -7,765
  -8,238
  -8,732
  -9,246
  -9,783
  -10,343
  -10,927
  -11,537
  -12,175
  -12,841
  -13,538
  -14,267
  -15,030
New CAPEX, $m
  -2,353
  -2,474
  -2,596
  -2,716
  -2,836
  -2,957
  -3,079
  -3,203
  -3,331
  -3,462
  -3,597
  -3,738
  -3,885
  -4,039
  -4,201
  -4,370
  -4,549
  -4,737
  -4,935
  -5,144
  -5,365
  -5,598
  -5,844
  -6,103
  -6,376
  -6,664
  -6,968
  -7,289
  -7,626
  -7,982
Cash from investing activities, $m
  -4,379
  -4,735
  -5,105
  -5,484
  -5,876
  -6,281
  -6,698
  -7,130
  -7,579
  -8,043
  -8,524
  -9,024
  -9,545
  -10,088
  -10,654
  -11,243
  -11,859
  -12,502
  -13,173
  -13,876
  -14,611
  -15,381
  -16,187
  -17,030
  -17,913
  -18,839
  -19,809
  -20,827
  -21,893
  -23,012
Free cash flow, $m
  -6,591
  -7,226
  -7,886
  -8,572
  -9,283
  -10,020
  -10,785
  -11,578
  -12,400
  -13,255
  -14,142
  -15,064
  -16,022
  -17,020
  -18,059
  -19,141
  -20,269
  -21,445
  -22,673
  -23,955
  -25,294
  -26,693
  -28,156
  -29,686
  -31,287
  -32,962
  -34,716
  -36,553
  -38,477
  -40,493
Issuance/(repayment) of debt, $m
  1,346
  1,403
  1,472
  1,541
  1,609
  1,677
  1,746
  1,817
  1,889
  1,963
  2,040
  2,120
  2,204
  2,291
  2,383
  2,479
  2,580
  2,687
  2,799
  2,918
  3,043
  3,175
  3,314
  3,461
  3,617
  3,780
  3,952
  4,134
  4,326
  4,527
Issuance/(repurchase) of shares, $m
  5,599
  6,186
  6,793
  7,426
  8,085
  8,770
  9,481
  10,220
  10,987
  11,785
  12,577
  13,437
  14,332
  15,263
  16,231
  17,239
  18,290
  19,384
  20,526
  21,717
  22,960
  24,258
  25,614
  27,031
  28,513
  30,063
  31,685
  33,382
  35,159
  37,020
Cash from financing (excl. dividends), $m  
  6,945
  7,589
  8,265
  8,967
  9,694
  10,447
  11,227
  12,037
  12,876
  13,748
  14,617
  15,557
  16,536
  17,554
  18,614
  19,718
  20,870
  22,071
  23,325
  24,635
  26,003
  27,433
  28,928
  30,492
  32,130
  33,843
  35,637
  37,516
  39,485
  41,547
Total cash flow (excl. dividends), $m
  353
  363
  379
  395
  411
  427
  443
  459
  476
  493
  475
  494
  513
  534
  555
  577
  601
  626
  652
  680
  709
  740
  772
  806
  842
  880
  921
  963
  1,008
  1,055
Retained Cash Flow (-), $m
  -5,599
  -6,186
  -6,793
  -7,426
  -8,085
  -8,770
  -9,481
  -10,220
  -10,987
  -11,785
  -12,577
  -13,437
  -14,332
  -15,263
  -16,231
  -17,239
  -18,290
  -19,384
  -20,526
  -21,717
  -22,960
  -24,258
  -25,614
  -27,031
  -28,513
  -30,063
  -31,685
  -33,382
  -35,159
  -37,020
Prev. year cash balance distribution, $m
  1,832
  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
  86
  97
  107
  118
  130
  142
  154
  168
  181
  195
  210
  226
  242
  258
  275
  293
  312
  331
  352
  373
  395
  418
  441
  466
  492
  520
  548
  578
  609
  641
Cash available for distribution, $m
  -3,414
  -5,823
  -6,414
  -7,031
  -7,674
  -8,343
  -9,038
  -9,761
  -10,511
  -11,291
  -12,101
  -12,943
  -13,819
  -14,729
  -15,676
  -16,662
  -17,689
  -18,758
  -19,874
  -21,037
  -22,251
  -23,518
  -24,842
  -26,225
  -27,670
  -29,182
  -30,764
  -32,419
  -34,151
  -35,965
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
  -3,273
  -5,330
  -5,582
  -5,790
  -5,948
  -6,055
  -6,106
  -6,101
  -6,038
  -5,920
  -5,747
  -5,523
  -5,254
  -4,945
  -4,602
  -4,234
  -3,849
  -3,455
  -3,060
  -2,673
  -2,301
  -1,951
  -1,628
  -1,336
  -1,076
  -851
  -660
  -502
  -373
  -271
Current shareholders' claim on cash, %
  75.0
  56.4
  42.5
  32.1
  24.3
  18.4
  14.0
  10.6
  8.1
  6.2
  4.7
  3.6
  2.8
  2.1
  1.6
  1.2
  1.0
  0.7
  0.6
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0

Hess Corporation is an exploration and production company. The Company is engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids (NGL) and natural gas. The Company's segments include Exploration and Production, and Bakken Midstream. Its Exploration and Production segment explores for, develops, produces, purchases and sells crude oil, NGLs and natural gas with production operations primarily in the United States, Denmark, the Malaysia/Thailand Joint Development Area (JDA), Malaysia and Norway. The Bakken Midstream segment provides fee-based services, including crude oil and natural gas gathering, processing of natural gas and the fractionation of NGLs, transportation of crude oil by rail car, terminaling and loading crude oil and NGLs, and the storage and terminaling of propane, primarily in the Bakken shale play of North Dakota.

FINANCIAL RATIOS  of  Hess Corp. (HES)

Valuation Ratios
P/E Ratio -3.3
Price to Sales 4.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 25.5
Price to Free Cash Flow -13.9
Growth Rates
Sales Growth Rate -25.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -47.9%
Cap. Spend. - 3 Yr. Gr. Rate -17.2%
Financial Strength
Quick Ratio 24
Current Ratio 0.1
LT Debt to Equity 46.1%
Total Debt to Equity 46.8%
Interest Coverage -10
Management Effectiveness
Return On Assets -17.8%
Ret/ On Assets - 3 Yr. Avg. -6.5%
Return On Total Capital -25.9%
Ret/ On T. Cap. - 3 Yr. Avg. -9.8%
Return On Equity -36.2%
Return On Equity - 3 Yr. Avg. -13.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 75.9%
Gross Margin - 3 Yr. Avg. 78.3%
EBITDA Margin -5.6%
EBITDA Margin - 3 Yr. Avg. 17.1%
Operating Margin -73.4%
Oper. Margin - 3 Yr. Avg. -38.7%
Pre-Tax Margin -79.9%
Pre-Tax Margin - 3 Yr. Avg. -40.8%
Net Profit Margin -127.2%
Net Profit Margin - 3 Yr. Avg. -50.8%
Effective Tax Rate -57.7%
Eff/ Tax Rate - 3 Yr. Avg. 1.1%
Payout Ratio -5.7%

HES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HES stock intrinsic value calculation we used $5405 million for the last fiscal year's total revenue generated by Hess Corp.. The default revenue input number comes from 2017 income statement of Hess Corp.. 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 HES stock valuation model: a) initial revenue growth rate of 11.6% 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 HES is calculated based on our internal credit rating of Hess Corp., 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 Hess Corp..
    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 HES stock the variable cost ratio is equal to 169.5%.

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 HES 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 Hess Corp..

Corporate tax rate of 27% is the nominal tax rate for Hess Corp.. 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 HES stock is equal to 1.6%.

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 HES are equal to 374.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Hess Corp. 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 HES is equal to -3.8%. 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 - $11051 million for Hess Corp. - 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 314 million for Hess Corp. 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 Hess Corp. at the current share price and the inputted number of shares is $20.1 billion.

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COMPANY NEWS

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▶ Hess Corporation Publishes 2017 Sustainability Report   [Jul-10-18 08:00AM  Business Wire]
▶ Top Ranked Momentum Stocks to Buy for July 6th   [Jul-06-18 09:49AM  Zacks]
▶ USVI: Oil refinery to reopen under $1.4B deal with ArcLight   [Jul-02-18 09:49PM  Associated Press]
▶ Hess Announces Sale of Utica Acreage   [07:00AM  Business Wire]
▶ Stock Market News For Jun 25, 2018   [Jun-25-18 10:00AM  Zacks]
▶ Stock Market News For Jun 21, 2018   [Jun-21-18 10:10AM  Zacks]
▶ U.S. Shale, OPEC To Discuss Market Balance In Vienna   [Jun-15-18 10:30AM  Oilprice.com]
▶ Hess Edging Toward a Major Breakout   [Jun-07-18 02:46PM  TheStreet.com]
▶ Hess Announces Regular Quarterly Dividend On Common Stock   [Jun-05-18 08:23PM  Business Wire]
▶ What Is Hess Corporations (NYSE:HES) Share Price Doing?   [May-18-18 05:47PM  Simply Wall St.]
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▶ MARKETS: Wall Street braces for Trump-Iran announcement   [May-08-18 10:59AM  Yahoo Finance Video]
▶ Here are the hottest U.S. oil stocks of 2018   [May-07-18 03:48PM  MarketWatch]
▶ How Oil Hedging Could Cost Companies $7 Billion   [May-02-18 01:00PM  Oilprice.com]
▶ Crude Oil Price Forecast: Fragile Sentiment   [Apr-29-18 09:13PM  Investopedia]
▶ Hess Donates $300,000 to LA 1 Highway Initiative   [Apr-26-18 11:00AM  Business Wire]
▶ Hess Corporation to Host Earnings Call   [08:00AM  ACCESSWIRE]
▶ Hess: 1Q Earnings Snapshot   [07:50AM  Associated Press]
▶ Should You Sell Hess (HES) Before Earnings?   [Apr-24-18 08:38AM  Zacks]
▶ Hess Shows Upside Potential   [10:36AM  TheStreet.com]
▶ Hess Schedules Earnings Release Conference Call   [Apr-09-18 03:55PM  Business Wire]
▶ 1 Upstream Oil Producer for Your Watch List   [Apr-03-18 11:58AM  Motley Fool]
▶ Crude Oil Prices Are Up Sharply, But Is The Bakken Shale Play Back?   [Mar-29-18 02:23PM  Investor's Business Daily]
▶ The Oil Market Problem No One Is Talking About -- Yet   [Mar-25-18 09:35AM  Motley Fool]
▶ Is Guyana Prepared For An Oil Boom?   [Mar-21-18 06:00PM  Oilprice.com]
▶ The Worlds Next Oil Hotspot   [Mar-19-18 06:00PM  Oilprice.com]
▶ If I Had to Buy One Stock in March, It Would Be This One   [Mar-14-18 09:00PM  Motley Fool]
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