Intrinsic value of Newfield Exploration - NFX

Previous Close

$29.09

  Intrinsic Value

$1.77

stock screener

  Rating & Target

str. sell

-94%

Previous close

$29.09

 
Intrinsic value

$1.77

 
Up/down potential

-94%

 
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 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 5.8

 

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, %
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  2,120
  2,513
  2,944
  3,413
  3,919
  4,462
  5,041
  5,655
  6,303
  6,984
  7,699
  8,446
  9,226
  10,039
  10,885
  11,766
  12,681
  13,633
  14,621
  15,648
  16,716
  17,826
  18,981
  20,182
  21,433
  22,735
  24,093
  25,507
  26,983
  28,523
Variable operating expenses, $m
  3,444
  4,081
  4,780
  5,542
  6,365
  7,247
  8,187
  9,183
  10,236
  11,342
  12,502
  13,716
  14,983
  16,303
  17,678
  19,108
  20,594
  22,139
  23,745
  25,413
  27,147
  28,950
  30,825
  32,776
  34,807
  36,922
  39,126
  41,424
  43,820
  46,321
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
  3,444
  4,081
  4,780
  5,542
  6,365
  7,247
  8,187
  9,183
  10,236
  11,342
  12,502
  13,716
  14,983
  16,303
  17,678
  19,108
  20,594
  22,139
  23,745
  25,413
  27,147
  28,950
  30,825
  32,776
  34,807
  36,922
  39,126
  41,424
  43,820
  46,321
Operating income, $m
  -1,323
  -1,568
  -1,837
  -2,129
  -2,446
  -2,784
  -3,146
  -3,529
  -3,933
  -4,358
  -4,804
  -5,270
  -5,757
  -6,264
  -6,793
  -7,342
  -7,913
  -8,507
  -9,124
  -9,765
  -10,431
  -11,124
  -11,844
  -12,594
  -13,374
  -14,187
  -15,034
  -15,917
  -16,837
  -17,798
EBITDA, $m
  -879
  -1,041
  -1,220
  -1,414
  -1,624
  -1,849
  -2,089
  -2,343
  -2,612
  -2,894
  -3,190
  -3,500
  -3,823
  -4,160
  -4,511
  -4,876
  -5,255
  -5,649
  -6,059
  -6,485
  -6,927
  -7,387
  -7,866
  -8,364
  -8,882
  -9,422
  -9,984
  -10,570
  -11,182
  -11,820
Interest expense (income), $m
  97
  151
  195
  244
  298
  356
  419
  487
  559
  636
  717
  802
  891
  984
  1,081
  1,182
  1,288
  1,398
  1,512
  1,631
  1,754
  1,882
  2,015
  2,154
  2,297
  2,447
  2,603
  2,766
  2,935
  3,111
  3,295
Earnings before tax, $m
  -1,474
  -1,763
  -2,081
  -2,427
  -2,802
  -3,204
  -3,633
  -4,088
  -4,569
  -5,075
  -5,605
  -6,161
  -6,741
  -7,345
  -7,975
  -8,630
  -9,311
  -10,019
  -10,754
  -11,518
  -12,313
  -13,139
  -13,998
  -14,891
  -15,821
  -16,790
  -17,799
  -18,851
  -19,949
  -21,093
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
  -1,474
  -1,763
  -2,081
  -2,427
  -2,802
  -3,204
  -3,633
  -4,088
  -4,569
  -5,075
  -5,605
  -6,161
  -6,741
  -7,345
  -7,975
  -8,630
  -9,311
  -10,019
  -10,754
  -11,518
  -12,313
  -13,139
  -13,998
  -14,891
  -15,821
  -16,790
  -17,799
  -18,851
  -19,949
  -21,093

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
  5,956
  7,058
  8,269
  9,586
  11,009
  12,534
  14,160
  15,884
  17,704
  19,618
  21,625
  23,724
  25,916
  28,199
  30,577
  33,050
  35,621
  38,294
  41,070
  43,956
  46,956
  50,074
  53,317
  56,692
  60,205
  63,864
  67,676
  71,650
  75,795
  80,120
Adjusted assets (=assets-cash), $m
  5,956
  7,058
  8,269
  9,586
  11,009
  12,534
  14,160
  15,884
  17,704
  19,618
  21,625
  23,724
  25,916
  28,199
  30,577
  33,050
  35,621
  38,294
  41,070
  43,956
  46,956
  50,074
  53,317
  56,692
  60,205
  63,864
  67,676
  71,650
  75,795
  80,120
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
  4,444
  5,267
  6,170
  7,153
  8,215
  9,353
  10,566
  11,852
  13,210
  14,639
  16,136
  17,702
  19,338
  21,042
  22,816
  24,661
  26,580
  28,574
  30,646
  32,799
  35,037
  37,364
  39,784
  42,302
  44,924
  47,653
  50,498
  53,463
  56,556
  59,784
Working capital, $m
  -38
  -45
  -53
  -61
  -71
  -80
  -91
  -102
  -113
  -126
  -139
  -152
  -166
  -181
  -196
  -212
  -228
  -245
  -263
  -282
  -301
  -321
  -342
  -363
  -386
  -409
  -434
  -459
  -486
  -513
Total debt, $m
  3,146
  3,935
  4,801
  5,745
  6,763
  7,856
  9,020
  10,254
  11,557
  12,928
  14,365
  15,868
  17,437
  19,072
  20,774
  22,545
  24,386
  26,299
  28,287
  30,354
  32,501
  34,734
  37,056
  39,473
  41,988
  44,607
  47,337
  50,182
  53,150
  56,247
Total liabilities, $m
  4,265
  5,054
  5,920
  6,864
  7,882
  8,975
  10,139
  11,373
  12,676
  14,047
  15,484
  16,987
  18,556
  20,191
  21,893
  23,664
  25,505
  27,418
  29,406
  31,473
  33,620
  35,853
  38,175
  40,592
  43,107
  45,726
  48,456
  51,301
  54,269
  57,366
Total equity, $m
  1,692
  2,004
  2,348
  2,722
  3,127
  3,560
  4,022
  4,511
  5,028
  5,572
  6,142
  6,738
  7,360
  8,009
  8,684
  9,386
  10,116
  10,875
  11,664
  12,484
  13,335
  14,221
  15,142
  16,101
  17,098
  18,137
  19,220
  20,349
  21,526
  22,754
Total liabilities and equity, $m
  5,957
  7,058
  8,268
  9,586
  11,009
  12,535
  14,161
  15,884
  17,704
  19,619
  21,626
  23,725
  25,916
  28,200
  30,577
  33,050
  35,621
  38,293
  41,070
  43,957
  46,955
  50,074
  53,317
  56,693
  60,205
  63,863
  67,676
  71,650
  75,795
  80,120
Debt-to-equity ratio
  1.860
  1.960
  2.040
  2.110
  2.160
  2.210
  2.240
  2.270
  2.300
  2.320
  2.340
  2.360
  2.370
  2.380
  2.390
  2.400
  2.410
  2.420
  2.430
  2.430
  2.440
  2.440
  2.450
  2.450
  2.460
  2.460
  2.460
  2.470
  2.470
  2.470
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
  -1,474
  -1,763
  -2,081
  -2,427
  -2,802
  -3,204
  -3,633
  -4,088
  -4,569
  -5,075
  -5,605
  -6,161
  -6,741
  -7,345
  -7,975
  -8,630
  -9,311
  -10,019
  -10,754
  -11,518
  -12,313
  -13,139
  -13,998
  -14,891
  -15,821
  -16,790
  -17,799
  -18,851
  -19,949
  -21,093
Depreciation, amort., depletion, $m
  444
  527
  617
  715
  821
  935
  1,057
  1,185
  1,321
  1,464
  1,614
  1,770
  1,934
  2,104
  2,282
  2,466
  2,658
  2,857
  3,065
  3,280
  3,504
  3,736
  3,978
  4,230
  4,492
  4,765
  5,050
  5,346
  5,656
  5,978
Funds from operations, $m
  -1,030
  -1,236
  -1,464
  -1,712
  -1,980
  -2,268
  -2,576
  -2,903
  -3,248
  -3,611
  -3,992
  -4,391
  -4,807
  -5,241
  -5,693
  -6,164
  -6,653
  -7,161
  -7,690
  -8,239
  -8,809
  -9,402
  -10,019
  -10,661
  -11,329
  -12,025
  -12,750
  -13,505
  -14,293
  -15,115
Change in working capital, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -27
  -28
Cash from operations, $m
  -1,023
  -1,229
  -1,456
  -1,703
  -1,971
  -2,259
  -2,566
  -2,892
  -3,236
  -3,598
  -3,979
  -4,377
  -4,793
  -5,227
  -5,678
  -6,148
  -6,636
  -7,144
  -7,672
  -8,220
  -8,790
  -9,382
  -9,998
  -10,639
  -11,307
  -12,001
  -12,725
  -13,480
  -14,266
  -15,087
Maintenance CAPEX, $m
  -370
  -444
  -527
  -617
  -715
  -821
  -935
  -1,057
  -1,185
  -1,321
  -1,464
  -1,614
  -1,770
  -1,934
  -2,104
  -2,282
  -2,466
  -2,658
  -2,857
  -3,065
  -3,280
  -3,504
  -3,736
  -3,978
  -4,230
  -4,492
  -4,765
  -5,050
  -5,346
  -5,656
New CAPEX, $m
  -741
  -822
  -903
  -983
  -1,062
  -1,138
  -1,213
  -1,286
  -1,358
  -1,428
  -1,498
  -1,566
  -1,635
  -1,704
  -1,774
  -1,845
  -1,919
  -1,994
  -2,072
  -2,153
  -2,238
  -2,327
  -2,420
  -2,518
  -2,621
  -2,730
  -2,845
  -2,965
  -3,093
  -3,227
Cash from investing activities, $m
  -1,111
  -1,266
  -1,430
  -1,600
  -1,777
  -1,959
  -2,148
  -2,343
  -2,543
  -2,749
  -2,962
  -3,180
  -3,405
  -3,638
  -3,878
  -4,127
  -4,385
  -4,652
  -4,929
  -5,218
  -5,518
  -5,831
  -6,156
  -6,496
  -6,851
  -7,222
  -7,610
  -8,015
  -8,439
  -8,883
Free cash flow, $m
  -2,135
  -2,496
  -2,886
  -3,304
  -3,748
  -4,218
  -4,714
  -5,234
  -5,779
  -6,348
  -6,940
  -7,557
  -8,198
  -8,865
  -9,556
  -10,275
  -11,021
  -11,796
  -12,601
  -13,438
  -14,308
  -15,213
  -16,155
  -17,136
  -18,158
  -19,224
  -20,335
  -21,495
  -22,706
  -23,970
Issuance/(repayment) of debt, $m
  712
  789
  867
  943
  1,019
  1,092
  1,164
  1,234
  1,303
  1,370
  1,437
  1,503
  1,569
  1,635
  1,702
  1,771
  1,841
  1,913
  1,988
  2,066
  2,148
  2,233
  2,322
  2,416
  2,515
  2,620
  2,729
  2,845
  2,968
  3,097
Issuance/(repurchase) of shares, $m
  1,758
  2,076
  2,425
  2,801
  3,206
  3,637
  4,094
  4,577
  5,085
  5,618
  6,175
  6,757
  7,363
  7,994
  8,650
  9,332
  10,041
  10,778
  11,543
  12,338
  13,165
  14,024
  14,919
  15,850
  16,819
  17,829
  18,882
  19,980
  21,126
  22,322
Cash from financing (excl. dividends), $m  
  2,470
  2,865
  3,292
  3,744
  4,225
  4,729
  5,258
  5,811
  6,388
  6,988
  7,612
  8,260
  8,932
  9,629
  10,352
  11,103
  11,882
  12,691
  13,531
  14,404
  15,313
  16,257
  17,241
  18,266
  19,334
  20,449
  21,611
  22,825
  24,094
  25,419
Total cash flow (excl. dividends), $m
  334
  369
  405
  441
  476
  511
  544
  577
  609
  641
  672
  703
  734
  765
  796
  828
  861
  895
  930
  966
  1,004
  1,044
  1,086
  1,130
  1,176
  1,225
  1,276
  1,331
  1,388
  1,448
Retained Cash Flow (-), $m
  -1,758
  -2,076
  -2,425
  -2,801
  -3,206
  -3,637
  -4,094
  -4,577
  -5,085
  -5,618
  -6,175
  -6,757
  -7,363
  -7,994
  -8,650
  -9,332
  -10,041
  -10,778
  -11,543
  -12,338
  -13,165
  -14,024
  -14,919
  -15,850
  -16,819
  -17,829
  -18,882
  -19,980
  -21,126
  -22,322
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
  34
  40
  48
  56
  65
  74
  85
  96
  107
  120
  133
  146
  160
  175
  191
  207
  224
  241
  259
  278
  297
  318
  339
  361
  383
  407
  432
  458
  485
  513
Cash available for distribution, $m
  -1,423
  -1,707
  -2,019
  -2,360
  -2,729
  -3,126
  -3,550
  -4,000
  -4,476
  -4,977
  -5,503
  -6,054
  -6,629
  -7,229
  -7,854
  -8,504
  -9,180
  -9,883
  -10,613
  -11,372
  -12,160
  -12,980
  -13,833
  -14,720
  -15,643
  -16,604
  -17,606
  -18,649
  -19,738
  -20,874
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
  -1,343
  -1,511
  -1,666
  -1,804
  -1,920
  -2,008
  -2,066
  -2,092
  -2,084
  -2,044
  -1,973
  -1,875
  -1,753
  -1,612
  -1,458
  -1,297
  -1,133
  -972
  -818
  -676
  -547
  -433
  -335
  -254
  -188
  -135
  -95
  -65
  -43
  -28
Current shareholders' claim on cash, %
  76.7
  59.1
  45.6
  35.4
  27.5
  21.4
  16.8
  13.1
  10.3
  8.1
  6.4
  5.0
  4.0
  3.1
  2.5
  2.0
  1.6
  1.2
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1

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 -4.7
Price to Sales 3.9
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow -10.6
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 2017 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 20% 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 1.9%.

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 10 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 -1.8%. 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 - $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 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 $5.8 billion.

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