Intrinsic value of Newfield Exploration - NFX

Previous Close

$14.58

  Intrinsic Value

$1.76

stock screener

  Rating & Target

str. sell

-88%

Previous close

$14.58

 
Intrinsic value

$1.76

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of NFX 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 2.9

 

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
  2,827
  4,368
  6,532
  9,478
  13,372
  18,384
  24,676
  32,402
  41,693
  52,662
  65,394
  79,951
  96,367
  114,658
  134,818
  156,825
  180,650
  206,252
  233,591
  262,626
  293,318
  325,636
  359,555
  395,060
  432,145
  470,815
  511,087
  552,987
  596,553
  641,835
Variable operating expenses, $m
  4,591
  7,094
  10,609
  15,393
  21,717
  29,855
  40,075
  52,621
  67,710
  85,523
  106,200
  129,840
  156,501
  186,205
  218,944
  254,684
  293,375
  334,953
  379,352
  426,504
  476,349
  528,833
  583,918
  641,577
  701,803
  764,604
  830,005
  898,050
  968,803
  1,042,340
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
  4,591
  7,094
  10,609
  15,393
  21,717
  29,855
  40,075
  52,621
  67,710
  85,523
  106,200
  129,840
  156,501
  186,205
  218,944
  254,684
  293,375
  334,953
  379,352
  426,504
  476,349
  528,833
  583,918
  641,577
  701,803
  764,604
  830,005
  898,050
  968,803
  1,042,340
Operating income, $m
  -1,764
  -2,726
  -4,076
  -5,914
  -8,344
  -11,472
  -15,398
  -20,219
  -26,017
  -32,861
  -40,806
  -49,889
  -60,133
  -71,547
  -84,126
  -97,859
  -112,725
  -128,701
  -145,761
  -163,879
  -183,031
  -203,197
  -224,362
  -246,517
  -269,658
  -293,789
  -318,918
  -345,064
  -372,249
  -400,505
EBITDA, $m
  -1,014
  -1,567
  -2,343
  -3,400
  -4,796
  -6,594
  -8,851
  -11,622
  -14,955
  -18,889
  -23,456
  -28,677
  -34,565
  -41,126
  -48,357
  -56,251
  -64,796
  -73,979
  -83,785
  -94,200
  -105,208
  -116,800
  -128,967
  -141,701
  -155,003
  -168,874
  -183,318
  -198,347
  -213,974
  -230,216
Interest expense (income), $m
  97
  151
  283
  475
  745
  1,113
  1,598
  2,223
  3,008
  3,971
  5,130
  6,497
  8,085
  9,900
  11,947
  14,228
  16,742
  19,486
  22,457
  25,650
  29,059
  32,679
  36,506
  40,536
  44,766
  49,193
  53,818
  58,640
  63,661
  68,886
  74,319
Earnings before tax, $m
  -1,915
  -3,009
  -4,552
  -6,660
  -9,457
  -13,070
  -17,621
  -23,226
  -29,988
  -37,991
  -47,303
  -57,974
  -70,033
  -83,494
  -98,354
  -114,601
  -132,212
  -151,158
  -171,410
  -192,937
  -215,710
  -239,703
  -264,899
  -291,283
  -318,852
  -347,606
  -377,558
  -408,725
  -441,135
  -474,824
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
  -1,915
  -3,009
  -4,552
  -6,660
  -9,457
  -13,070
  -17,621
  -23,226
  -29,988
  -37,991
  -47,303
  -57,974
  -70,033
  -83,494
  -98,354
  -114,601
  -132,212
  -151,158
  -171,410
  -192,937
  -215,710
  -239,703
  -264,899
  -291,283
  -318,852
  -347,606
  -377,558
  -408,725
  -441,135
  -474,824

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
  7,942
  12,270
  18,349
  26,624
  37,563
  51,640
  69,316
  91,016
  117,116
  147,927
  183,692
  224,580
  270,695
  322,074
  378,701
  440,521
  507,443
  579,360
  656,155
  737,713
  823,928
  914,708
  1,009,987
  1,109,719
  1,213,890
  1,322,514
  1,435,637
  1,553,333
  1,675,711
  1,802,908
Adjusted assets (=assets-cash), $m
  7,942
  12,270
  18,349
  26,624
  37,563
  51,640
  69,316
  91,016
  117,116
  147,927
  183,692
  224,580
  270,695
  322,074
  378,701
  440,521
  507,443
  579,360
  656,155
  737,713
  823,928
  914,708
  1,009,987
  1,109,719
  1,213,890
  1,322,514
  1,435,637
  1,553,333
  1,675,711
  1,802,908
Revenue / Adjusted assets
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
Average production assets, $m
  5,926
  9,155
  13,692
  19,866
  28,028
  38,533
  51,722
  67,914
  87,389
  110,379
  137,066
  167,577
  201,986
  240,324
  282,578
  328,706
  378,642
  432,304
  489,607
  550,464
  614,795
  682,533
  753,628
  828,046
  905,775
  986,828
  1,071,238
  1,159,060
  1,250,376
  1,345,286
Working capital, $m
  -724
  -1,118
  -1,672
  -2,426
  -3,423
  -4,706
  -6,317
  -8,295
  -10,673
  -13,481
  -16,741
  -20,467
  -24,670
  -29,352
  -34,513
  -40,147
  -46,246
  -52,801
  -59,799
  -67,232
  -75,089
  -83,363
  -92,046
  -101,135
  -110,629
  -120,529
  -130,838
  -141,565
  -152,718
  -164,310
Total debt, $m
  4,567
  7,666
  12,019
  17,944
  25,776
  35,855
  48,511
  64,049
  82,736
  104,797
  130,404
  159,681
  192,699
  229,486
  270,031
  314,294
  362,210
  413,703
  468,688
  527,084
  588,813
  653,812
  722,031
  793,440
  868,026
  945,801
  1,026,797
  1,111,068
  1,198,690
  1,289,763
Total liabilities, $m
  5,686
  8,785
  13,138
  19,063
  26,895
  36,974
  49,630
  65,168
  83,855
  105,916
  131,523
  160,800
  193,818
  230,605
  271,150
  315,413
  363,329
  414,822
  469,807
  528,203
  589,932
  654,931
  723,150
  794,559
  869,145
  946,920
  1,027,916
  1,112,187
  1,199,809
  1,290,882
Total equity, $m
  2,255
  3,485
  5,211
  7,561
  10,668
  14,666
  19,686
  25,849
  33,261
  42,011
  52,168
  63,781
  76,877
  91,469
  107,551
  125,108
  144,114
  164,538
  186,348
  209,511
  233,995
  259,777
  286,836
  315,160
  344,745
  375,594
  407,721
  441,147
  475,902
  512,026
Total liabilities and equity, $m
  7,941
  12,270
  18,349
  26,624
  37,563
  51,640
  69,316
  91,017
  117,116
  147,927
  183,691
  224,581
  270,695
  322,074
  378,701
  440,521
  507,443
  579,360
  656,155
  737,714
  823,927
  914,708
  1,009,986
  1,109,719
  1,213,890
  1,322,514
  1,435,637
  1,553,334
  1,675,711
  1,802,908
Debt-to-equity ratio
  2.020
  2.200
  2.310
  2.370
  2.420
  2.440
  2.460
  2.480
  2.490
  2.490
  2.500
  2.500
  2.510
  2.510
  2.510
  2.510
  2.510
  2.510
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
Adjusted equity ratio
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,915
  -3,009
  -4,552
  -6,660
  -9,457
  -13,070
  -17,621
  -23,226
  -29,988
  -37,991
  -47,303
  -57,974
  -70,033
  -83,494
  -98,354
  -114,601
  -132,212
  -151,158
  -171,410
  -192,937
  -215,710
  -239,703
  -264,899
  -291,283
  -318,852
  -347,606
  -377,558
  -408,725
  -441,135
  -474,824
Depreciation, amort., depletion, $m
  750
  1,159
  1,733
  2,515
  3,548
  4,878
  6,547
  8,597
  11,062
  13,972
  17,350
  21,212
  25,568
  30,421
  35,769
  41,608
  47,929
  54,722
  61,976
  69,679
  77,822
  86,397
  95,396
  104,816
  114,655
  124,915
  135,600
  146,716
  158,275
  170,289
Funds from operations, $m
  -1,165
  -1,850
  -2,818
  -4,145
  -5,909
  -8,192
  -11,074
  -14,630
  -18,926
  -24,019
  -29,953
  -36,762
  -44,466
  -53,073
  -62,585
  -72,993
  -84,282
  -96,436
  -109,435
  -123,258
  -137,888
  -153,307
  -169,503
  -186,467
  -204,196
  -222,691
  -241,958
  -262,009
  -282,860
  -304,534
Change in working capital, $m
  -271
  -394
  -554
  -754
  -997
  -1,283
  -1,611
  -1,978
  -2,379
  -2,808
  -3,259
  -3,726
  -4,203
  -4,682
  -5,161
  -5,634
  -6,099
  -6,554
  -6,999
  -7,433
  -7,857
  -8,273
  -8,683
  -9,089
  -9,494
  -9,900
  -10,310
  -10,726
  -11,153
  -11,592
Cash from operations, $m
  -894
  -1,455
  -2,264
  -3,391
  -4,912
  -6,909
  -9,463
  -12,652
  -16,547
  -21,211
  -26,694
  -33,036
  -40,263
  -48,391
  -57,424
  -67,359
  -78,183
  -89,882
  -102,436
  -115,825
  -130,030
  -145,033
  -160,820
  -177,378
  -194,703
  -212,792
  -231,648
  -251,282
  -271,707
  -292,942
Maintenance CAPEX, $m
  -469
  -750
  -1,159
  -1,733
  -2,515
  -3,548
  -4,878
  -6,547
  -8,597
  -11,062
  -13,972
  -17,350
  -21,212
  -25,568
  -30,421
  -35,769
  -41,608
  -47,929
  -54,722
  -61,976
  -69,679
  -77,822
  -86,397
  -95,396
  -104,816
  -114,655
  -124,915
  -135,600
  -146,716
  -158,275
New CAPEX, $m
  -2,223
  -3,230
  -4,536
  -6,174
  -8,162
  -10,504
  -13,189
  -16,192
  -19,475
  -22,990
  -26,687
  -30,510
  -34,410
  -38,337
  -42,254
  -46,128
  -49,936
  -53,663
  -57,303
  -60,857
  -64,331
  -67,738
  -71,094
  -74,418
  -77,730
  -81,053
  -84,409
  -87,823
  -91,316
  -94,911
Cash from investing activities, $m
  -2,692
  -3,980
  -5,695
  -7,907
  -10,677
  -14,052
  -18,067
  -22,739
  -28,072
  -34,052
  -40,659
  -47,860
  -55,622
  -63,905
  -72,675
  -81,897
  -91,544
  -101,592
  -112,025
  -122,833
  -134,010
  -145,560
  -157,491
  -169,814
  -182,546
  -195,708
  -209,324
  -223,423
  -238,032
  -253,186
Free cash flow, $m
  -3,585
  -5,435
  -7,960
  -11,298
  -15,589
  -20,961
  -27,530
  -35,391
  -44,619
  -55,263
  -67,353
  -80,896
  -95,885
  -112,296
  -130,099
  -149,256
  -169,727
  -191,474
  -214,461
  -238,658
  -264,040
  -290,594
  -318,311
  -347,192
  -377,249
  -408,500
  -440,973
  -474,704
  -509,739
  -546,128
Issuance/(repayment) of debt, $m
  2,133
  3,099
  4,353
  5,925
  7,832
  10,079
  12,656
  15,537
  18,687
  22,061
  25,608
  29,276
  33,018
  36,787
  40,545
  44,263
  47,916
  51,493
  54,985
  58,396
  61,730
  64,999
  68,219
  71,408
  74,586
  77,775
  80,996
  84,271
  87,623
  91,072
Issuance/(repurchase) of shares, $m
  2,762
  4,238
  6,278
  9,010
  12,563
  17,068
  22,641
  29,389
  37,400
  46,741
  57,461
  69,587
  83,130
  98,086
  114,437
  132,158
  151,217
  171,583
  193,220
  216,100
  240,195
  265,485
  291,958
  319,607
  348,436
  378,455
  409,685
  442,151
  475,891
  510,948
Cash from financing (excl. dividends), $m  
  4,895
  7,337
  10,631
  14,935
  20,395
  27,147
  35,297
  44,926
  56,087
  68,802
  83,069
  98,863
  116,148
  134,873
  154,982
  176,421
  199,133
  223,076
  248,205
  274,496
  301,925
  330,484
  360,177
  391,015
  423,022
  456,230
  490,681
  526,422
  563,514
  602,020
Total cash flow (excl. dividends), $m
  1,311
  1,902
  2,671
  3,636
  4,807
  6,186
  7,767
  9,535
  11,468
  13,539
  15,715
  17,967
  20,263
  22,576
  24,883
  27,164
  29,406
  31,601
  33,745
  35,838
  37,884
  39,890
  41,866
  43,824
  45,774
  47,731
  49,707
  51,717
  53,774
  55,892
Retained Cash Flow (-), $m
  -2,762
  -4,238
  -6,278
  -9,010
  -12,563
  -17,068
  -22,641
  -29,389
  -37,400
  -46,741
  -57,461
  -69,587
  -83,130
  -98,086
  -114,437
  -132,158
  -151,217
  -171,583
  -193,220
  -216,100
  -240,195
  -265,485
  -291,958
  -319,607
  -348,436
  -378,455
  -409,685
  -442,151
  -475,891
  -510,948
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
  -1,452
  -2,336
  -3,607
  -5,374
  -7,757
  -10,882
  -14,874
  -19,854
  -25,931
  -33,202
  -41,745
  -51,620
  -62,867
  -75,509
  -89,554
  -104,993
  -121,811
  -139,982
  -159,476
  -180,262
  -202,311
  -225,595
  -250,091
  -275,784
  -302,662
  -330,725
  -359,977
  -390,434
  -422,116
  -455,056
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  -1,370
  -2,067
  -2,976
  -4,108
  -5,455
  -6,989
  -8,656
  -10,381
  -12,074
  -13,635
  -14,967
  -15,985
  -16,622
  -16,839
  -16,627
  -16,009
  -15,031
  -13,766
  -12,295
  -10,709
  -9,093
  -7,525
  -6,065
  -4,760
  -3,634
  -2,697
  -1,944
  -1,360
  -923
  -606
Current shareholders' claim on cash, %
  51.3
  26.9
  14.4
  7.8
  4.3
  2.5
  1.4
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  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
  0.0
  0.0

Newfield Exploration Company is an independent exploration and production company. It is engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. Its operating segments are the United States and China. Its the United States operations are onshore and focus primarily on large scale, liquids resource plays. Its principal areas of operation are the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota and the Uinta Basin of Utah. It has oil producing assets offshore China. As of December 31, 2016, its proved reserves of 513 million barrels of oil equivalents (MMBOE) consisted of 304 MMBOE proved developed producing, 10 MMBOE proved developed non-producing and 199 MMBOE proved undeveloped reserves. As of December 31, 2016, its proved liquids reserves were 285 million barrels of crude oil or other liquid hydrocarbons. As of December 31, 2016, 67% of its proved liquids reserves were crude oil or condensate.

FINANCIAL RATIOS  of  Newfield Exploration (NFX)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 2
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 3.5
Price to Free Cash Flow -5.3
Growth Rates
Sales Growth Rate -5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.4%
Cap. Spend. - 3 Yr. Gr. Rate -8.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 259.2%
Total Debt to Equity 259.2%
Interest Coverage -11
Management Effectiveness
Return On Assets -24.9%
Ret/ On Assets - 3 Yr. Avg. -20.1%
Return On Total Capital -34.1%
Ret/ On T. Cap. - 3 Yr. Avg. -28%
Return On Equity -106.2%
Return On Equity - 3 Yr. Avg. -69.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 80.6%
Gross Margin - 3 Yr. Avg. 80.1%
EBITDA Margin -36.6%
EBITDA Margin - 3 Yr. Avg. -65.6%
Operating Margin -62.4%
Oper. Margin - 3 Yr. Avg. -120.8%
Pre-Tax Margin -82.1%
Pre-Tax Margin - 3 Yr. Avg. -118.2%
Net Profit Margin -83.6%
Net Profit Margin - 3 Yr. Avg. -86.7%
Effective Tax Rate -1.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.4%
Payout Ratio 0%

NFX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NFX stock intrinsic value calculation we used $1767 million for the last fiscal year's total revenue generated by Newfield Exploration. The default revenue input number comes from 0001 income statement of Newfield Exploration. 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 NFX 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 6%, whose default value for NFX is calculated based on our internal credit rating of Newfield Exploration, 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 Newfield Exploration.
    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 NFX stock the variable cost ratio is equal to 162.4%.

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 NFX 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 6.2% for Newfield Exploration.

Corporate tax rate of 27% is the nominal tax rate for Newfield Exploration. 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 NFX 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 NFX are equal to 209.6%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Newfield Exploration 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 NFX is equal to -25.6%. 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 - $1408 million for Newfield Exploration - 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 199.857 million for Newfield Exploration 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 Newfield Exploration at the current share price and the inputted number of shares is $2.9 billion.

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