Intrinsic value of Kosmos Energy Ltd. - KOS

Previous Close

$5.84

  Intrinsic Value

$0.59

stock screener

  Rating & Target

str. sell

-90%

Previous close

$5.84

 
Intrinsic value

$0.59

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of KOS 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 2.3

 

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
  1,443
  2,230
  3,335
  4,838
  6,826
  9,384
  12,597
  16,540
  21,283
  26,882
  33,382
  40,812
  49,193
  58,530
  68,820
  80,055
  92,216
  105,285
  119,241
  134,063
  149,730
  166,227
  183,542
  201,666
  220,597
  240,337
  260,894
  282,283
  304,522
  327,637
Variable operating expenses, $m
  1,520
  2,348
  3,511
  5,095
  7,188
  9,882
  13,264
  17,417
  22,411
  28,307
  35,151
  42,975
  51,800
  61,632
  72,468
  84,297
  97,104
  110,866
  125,561
  141,168
  157,666
  175,037
  193,270
  212,354
  232,288
  253,075
  274,722
  297,244
  320,662
  345,002
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
  1,520
  2,348
  3,511
  5,095
  7,188
  9,882
  13,264
  17,417
  22,411
  28,307
  35,151
  42,975
  51,800
  61,632
  72,468
  84,297
  97,104
  110,866
  125,561
  141,168
  157,666
  175,037
  193,270
  212,354
  232,288
  253,075
  274,722
  297,244
  320,662
  345,002
Operating income, $m
  -76
  -118
  -177
  -256
  -362
  -497
  -668
  -877
  -1,128
  -1,425
  -1,769
  -2,163
  -2,607
  -3,102
  -3,647
  -4,243
  -4,887
  -5,580
  -6,320
  -7,105
  -7,936
  -8,810
  -9,728
  -10,688
  -11,692
  -12,738
  -13,827
  -14,961
  -16,140
  -17,365
EBITDA, $m
  467
  722
  1,080
  1,567
  2,210
  3,039
  4,079
  5,356
  6,892
  8,705
  10,810
  13,216
  15,930
  18,953
  22,286
  25,924
  29,862
  34,094
  38,613
  43,413
  48,486
  53,828
  59,435
  65,304
  71,434
  77,827
  84,484
  91,410
  98,612
  106,097
Interest expense (income), $m
  28
  125
  236
  398
  625
  934
  1,343
  1,869
  2,529
  3,340
  4,315
  5,466
  6,802
  8,329
  10,052
  11,971
  14,087
  16,396
  18,896
  21,583
  24,451
  27,498
  30,719
  34,110
  37,669
  41,395
  45,287
  49,344
  53,570
  57,967
  62,539
Earnings before tax, $m
  -202
  -354
  -575
  -881
  -1,296
  -1,840
  -2,536
  -3,406
  -4,468
  -5,739
  -7,235
  -8,965
  -10,936
  -13,154
  -15,619
  -18,329
  -21,283
  -24,476
  -27,902
  -31,557
  -35,434
  -39,529
  -43,838
  -48,358
  -53,087
  -58,024
  -63,172
  -68,531
  -74,107
  -79,904
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
  -202
  -354
  -575
  -881
  -1,296
  -1,840
  -2,536
  -3,406
  -4,468
  -5,739
  -7,235
  -8,965
  -10,936
  -13,154
  -15,619
  -18,329
  -21,283
  -24,476
  -27,902
  -31,557
  -35,434
  -39,529
  -43,838
  -48,358
  -53,087
  -58,024
  -63,172
  -68,531
  -74,107
  -79,904

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
  6,530
  10,089
  15,089
  21,893
  30,888
  42,463
  56,998
  74,842
  96,304
  121,639
  151,049
  184,671
  222,591
  264,840
  311,404
  362,238
  417,268
  476,405
  539,553
  606,618
  677,512
  752,160
  830,507
  912,516
  998,176
  1,087,497
  1,180,517
  1,277,299
  1,377,929
  1,482,522
Adjusted assets (=assets-cash), $m
  6,530
  10,089
  15,089
  21,893
  30,888
  42,463
  56,998
  74,842
  96,304
  121,639
  151,049
  184,671
  222,591
  264,840
  311,404
  362,238
  417,268
  476,405
  539,553
  606,618
  677,512
  752,160
  830,507
  912,516
  998,176
  1,087,497
  1,180,517
  1,277,299
  1,377,929
  1,482,522
Revenue / Adjusted assets
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
Average production assets, $m
  4,623
  7,142
  10,681
  15,497
  21,864
  30,058
  40,347
  52,978
  68,170
  86,104
  106,922
  130,722
  157,564
  187,470
  220,432
  256,415
  295,368
  337,229
  381,930
  429,402
  479,585
  532,426
  587,885
  645,937
  706,572
  769,799
  835,644
  904,152
  975,385
  1,049,423
Working capital, $m
  -97
  -149
  -223
  -324
  -457
  -629
  -844
  -1,108
  -1,426
  -1,801
  -2,237
  -2,734
  -3,296
  -3,921
  -4,611
  -5,364
  -6,178
  -7,054
  -7,989
  -8,982
  -10,032
  -11,137
  -12,297
  -13,512
  -14,780
  -16,103
  -17,480
  -18,913
  -20,403
  -21,952
Total debt, $m
  4,002
  6,743
  10,592
  15,831
  22,757
  31,671
  42,862
  56,602
  73,128
  92,636
  115,281
  141,171
  170,369
  202,900
  238,755
  277,897
  320,270
  365,806
  414,430
  466,070
  520,658
  578,137
  638,464
  701,611
  767,569
  836,346
  907,972
  982,494
  1,059,979
  1,140,516
Total liabilities, $m
  5,028
  7,769
  11,618
  16,857
  23,783
  32,697
  43,889
  57,629
  74,154
  93,662
  116,307
  142,197
  171,395
  203,926
  239,781
  278,923
  321,296
  366,832
  415,456
  467,096
  521,684
  579,163
  639,490
  702,638
  768,595
  837,373
  908,998
  983,520
  1,061,006
  1,141,542
Total equity, $m
  1,502
  2,321
  3,470
  5,035
  7,104
  9,767
  13,110
  17,214
  22,150
  27,977
  34,741
  42,474
  51,196
  60,913
  71,623
  83,315
  95,972
  109,573
  124,097
  139,522
  155,828
  172,997
  191,017
  209,879
  229,580
  250,124
  271,519
  293,779
  316,924
  340,980
Total liabilities and equity, $m
  6,530
  10,090
  15,088
  21,892
  30,887
  42,464
  56,999
  74,843
  96,304
  121,639
  151,048
  184,671
  222,591
  264,839
  311,404
  362,238
  417,268
  476,405
  539,553
  606,618
  677,512
  752,160
  830,507
  912,517
  998,175
  1,087,497
  1,180,517
  1,277,299
  1,377,930
  1,482,522
Debt-to-equity ratio
  2.660
  2.910
  3.050
  3.140
  3.200
  3.240
  3.270
  3.290
  3.300
  3.310
  3.320
  3.320
  3.330
  3.330
  3.330
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
  3.340
Adjusted equity ratio
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -202
  -354
  -575
  -881
  -1,296
  -1,840
  -2,536
  -3,406
  -4,468
  -5,739
  -7,235
  -8,965
  -10,936
  -13,154
  -15,619
  -18,329
  -21,283
  -24,476
  -27,902
  -31,557
  -35,434
  -39,529
  -43,838
  -48,358
  -53,087
  -58,024
  -63,172
  -68,531
  -74,107
  -79,904
Depreciation, amort., depletion, $m
  544
  840
  1,257
  1,823
  2,572
  3,536
  4,747
  6,233
  8,020
  10,130
  12,579
  15,379
  18,537
  22,055
  25,933
  30,166
  34,749
  39,674
  44,933
  50,518
  56,422
  62,638
  69,163
  75,993
  83,126
  90,565
  98,311
  106,371
  114,751
  123,461
Funds from operations, $m
  342
  486
  682
  942
  1,276
  1,696
  2,211
  2,827
  3,552
  4,391
  5,344
  6,414
  7,601
  8,901
  10,315
  11,837
  13,466
  15,198
  17,031
  18,961
  20,988
  23,110
  25,325
  27,635
  30,039
  32,540
  35,139
  37,840
  40,644
  43,558
Change in working capital, $m
  -36
  -53
  -74
  -101
  -133
  -171
  -215
  -264
  -318
  -375
  -435
  -498
  -561
  -626
  -689
  -753
  -815
  -876
  -935
  -993
  -1,050
  -1,105
  -1,160
  -1,214
  -1,268
  -1,323
  -1,377
  -1,433
  -1,490
  -1,549
Cash from operations, $m
  378
  539
  756
  1,043
  1,410
  1,868
  2,426
  3,091
  3,870
  4,766
  5,780
  6,912
  8,162
  9,527
  11,004
  12,590
  14,281
  16,074
  17,966
  19,954
  22,038
  24,215
  26,485
  28,849
  31,308
  33,863
  36,517
  39,273
  42,134
  45,107
Maintenance CAPEX, $m
  -340
  -544
  -840
  -1,257
  -1,823
  -2,572
  -3,536
  -4,747
  -6,233
  -8,020
  -10,130
  -12,579
  -15,379
  -18,537
  -22,055
  -25,933
  -30,166
  -34,749
  -39,674
  -44,933
  -50,518
  -56,422
  -62,638
  -69,163
  -75,993
  -83,126
  -90,565
  -98,311
  -106,371
  -114,751
New CAPEX, $m
  -1,734
  -2,519
  -3,539
  -4,816
  -6,367
  -8,194
  -10,289
  -12,631
  -15,192
  -17,934
  -20,818
  -23,800
  -26,842
  -29,906
  -32,961
  -35,983
  -38,954
  -41,861
  -44,700
  -47,473
  -50,183
  -52,841
  -55,459
  -58,051
  -60,635
  -63,227
  -65,845
  -68,508
  -71,233
  -74,037
Cash from investing activities, $m
  -2,074
  -3,063
  -4,379
  -6,073
  -8,190
  -10,766
  -13,825
  -17,378
  -21,425
  -25,954
  -30,948
  -36,379
  -42,221
  -48,443
  -55,016
  -61,916
  -69,120
  -76,610
  -84,374
  -92,406
  -100,701
  -109,263
  -118,097
  -127,214
  -136,628
  -146,353
  -156,410
  -166,819
  -177,604
  -188,788
Free cash flow, $m
  -1,695
  -2,525
  -3,623
  -5,030
  -6,781
  -8,899
  -11,399
  -14,286
  -17,554
  -21,188
  -25,168
  -29,467
  -34,059
  -38,916
  -44,013
  -49,327
  -54,839
  -60,537
  -66,409
  -72,451
  -78,663
  -85,048
  -91,612
  -98,365
  -105,320
  -112,490
  -119,893
  -127,547
  -135,469
  -143,682
Issuance/(repayment) of debt, $m
  1,882
  2,740
  3,849
  5,239
  6,926
  8,913
  11,192
  13,740
  16,525
  19,509
  22,645
  25,890
  29,198
  32,531
  35,855
  39,142
  42,373
  45,536
  48,624
  51,640
  54,588
  57,479
  60,327
  63,147
  65,958
  68,777
  71,625
  74,522
  77,486
  80,536
Issuance/(repurchase) of shares, $m
  762
  1,173
  1,724
  2,446
  3,365
  4,502
  5,879
  7,510
  9,404
  11,567
  13,999
  16,698
  19,658
  22,871
  26,328
  30,021
  33,940
  38,078
  42,426
  46,982
  51,739
  56,698
  61,858
  67,220
  72,788
  78,568
  84,566
  90,791
  97,252
  103,960
Cash from financing (excl. dividends), $m  
  2,644
  3,913
  5,573
  7,685
  10,291
  13,415
  17,071
  21,250
  25,929
  31,076
  36,644
  42,588
  48,856
  55,402
  62,183
  69,163
  76,313
  83,614
  91,050
  98,622
  106,327
  114,177
  122,185
  130,367
  138,746
  147,345
  156,191
  165,313
  174,738
  184,496
Total cash flow (excl. dividends), $m
  949
  1,389
  1,951
  2,655
  3,510
  4,517
  5,672
  6,963
  8,375
  9,887
  11,476
  13,120
  14,797
  16,486
  18,171
  19,836
  21,474
  23,077
  24,642
  26,170
  27,664
  29,130
  30,573
  32,002
  33,426
  34,855
  36,298
  37,766
  39,268
  40,814
Retained Cash Flow (-), $m
  -762
  -1,173
  -1,724
  -2,446
  -3,365
  -4,502
  -5,879
  -7,510
  -9,404
  -11,567
  -13,999
  -16,698
  -19,658
  -22,871
  -26,328
  -30,021
  -33,940
  -38,078
  -42,426
  -46,982
  -51,739
  -56,698
  -61,858
  -67,220
  -72,788
  -78,568
  -84,566
  -90,791
  -97,252
  -103,960
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
  186
  216
  226
  209
  145
  15
  -207
  -547
  -1,029
  -1,680
  -2,523
  -3,578
  -4,861
  -6,385
  -8,158
  -10,185
  -12,466
  -15,001
  -17,785
  -20,811
  -24,075
  -27,569
  -31,285
  -35,218
  -39,362
  -43,713
  -48,268
  -53,025
  -57,984
  -63,146
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  170
  179
  168
  138
  84
  7
  -90
  -200
  -316
  -425
  -518
  -587
  -627
  -636
  -615
  -570
  -506
  -433
  -356
  -281
  -214
  -157
  -111
  -76
  -49
  -31
  -19
  -11
  -6
  -3
Current shareholders' claim on cash, %
  75.5
  57.4
  44.2
  34.5
  27.2
  21.7
  17.4
  14.2
  11.6
  9.6
  8.0
  6.7
  5.7
  4.8
  4.1
  3.5
  3.0
  2.6
  2.2
  1.9
  1.7
  1.5
  1.3
  1.1
  1.0
  0.9
  0.8
  0.7
  0.6
  0.5

Kosmos Energy Ltd. (Kosmos) is an independent oil and gas exploration and production company. The Company is focused on the emerging areas along the Atlantic Margins. Its assets include existing production and development projects offshore Ghana, discoveries and further exploration potential offshore Mauritania and Senegal, as well as exploration licenses with hydrocarbon potential offshore Sao Tome and Principe, Suriname, Morocco and Western Sahara. The Company has operations in Africa and South America. The West Cape Three Points (WCTP) Block and Deepwater Tano (DT) Block are located within the Tano Basin, offshore Ghana. The Tano Basin represents the eastern extension of the Deep Ivorian Basin, which resulted from the development of an extensional sedimentary basin caused by tensional forces associated with opening of the Atlantic Ocean, as South America separated from Africa in the Mid-Cretaceous period.

FINANCIAL RATIOS  of  Kosmos Energy Ltd. (KOS)

Valuation Ratios
P/E Ratio -8
Price to Sales 7.3
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 43.4
Price to Free Cash Flow -4.6
Growth Rates
Sales Growth Rate -30.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.8%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 122.3%
Total Debt to Equity 122.3%
Interest Coverage -10
Management Effectiveness
Return On Assets -7.9%
Ret/ On Assets - 3 Yr. Avg. -0%
Return On Total Capital -12.4%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity -23.6%
Return On Equity - 3 Yr. Avg. -1.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 61.6%
Gross Margin - 3 Yr. Avg. 75.4%
EBITDA Margin -37.4%
EBITDA Margin - 3 Yr. Avg. 40.2%
Operating Margin -89.4%
Oper. Margin - 3 Yr. Avg. -25.9%
Pre-Tax Margin -95.2%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin -91.6%
Net Profit Margin - 3 Yr. Avg. -24.9%
Effective Tax Rate 3.7%
Eff/ Tax Rate - 3 Yr. Avg. 79.3%
Payout Ratio 0%

KOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KOS stock intrinsic value calculation we used $902 million for the last fiscal year's total revenue generated by Kosmos Energy Ltd.. The default revenue input number comes from 0001 income statement of Kosmos Energy Ltd.. 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 KOS 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 9.5%, whose default value for KOS is calculated based on our internal credit rating of Kosmos Energy Ltd., 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 Kosmos Energy Ltd..
    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 KOS stock the variable cost ratio is equal to 105.3%.

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 KOS 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 5.9% for Kosmos Energy Ltd..

Corporate tax rate of 27% is the nominal tax rate for Kosmos Energy Ltd.. 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 KOS 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 KOS are equal to 320.3%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Kosmos Energy Ltd. 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 KOS is equal to -6.7%. 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 - $941.478 million for Kosmos Energy Ltd. - 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 401.349 million for Kosmos Energy Ltd. 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 Kosmos Energy Ltd. at the current share price and the inputted number of shares is $2.3 billion.

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