Intrinsic value of Occidental Petroleum - OXY

Previous Close

$77.63

  Intrinsic Value

$7.02

stock screener

  Rating & Target

str. sell

-91%

Previous close

$77.63

 
Intrinsic value

$7.02

 
Up/down potential

-91%

 
Rating

str. sell

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

We calculate the intrinsic value of OXY 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -19.07
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  10,196
  11,695
  13,301
  15,011
  16,823
  18,734
  20,744
  22,851
  25,053
  27,352
  29,748
  32,241
  34,834
  37,530
  40,332
  43,244
  46,270
  49,415
  52,685
  56,086
  59,626
  63,310
  67,148
  71,146
  75,315
  79,664
  84,202
  88,940
  93,888
  99,059
  104,465
Variable operating expenses, $m
 
  20,641
  23,475
  26,494
  29,692
  33,066
  36,613
  40,331
  44,219
  48,276
  52,504
  56,905
  61,483
  66,241
  71,187
  76,326
  81,666
  87,217
  92,989
  98,993
  105,239
  111,742
  118,515
  125,573
  132,932
  140,607
  148,616
  156,978
  165,713
  174,840
  184,380
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
  11,951
  20,641
  23,475
  26,494
  29,692
  33,066
  36,613
  40,331
  44,219
  48,276
  52,504
  56,905
  61,483
  66,241
  71,187
  76,326
  81,666
  87,217
  92,989
  98,993
  105,239
  111,742
  118,515
  125,573
  132,932
  140,607
  148,616
  156,978
  165,713
  174,840
  184,380
Operating income, $m
  -1,755
  -8,947
  -10,175
  -11,483
  -12,869
  -14,332
  -15,869
  -17,481
  -19,166
  -20,924
  -22,757
  -24,664
  -26,648
  -28,711
  -30,854
  -33,082
  -35,396
  -37,802
  -40,304
  -42,906
  -45,614
  -48,432
  -51,368
  -54,427
  -57,616
  -60,943
  -64,414
  -68,039
  -71,824
  -75,780
  -79,916
EBITDA, $m
  2,513
  -4,055
  -4,612
  -5,205
  -5,833
  -6,496
  -7,193
  -7,923
  -8,687
  -9,484
  -10,314
  -11,179
  -12,078
  -13,013
  -13,985
  -14,994
  -16,043
  -17,134
  -18,268
  -19,447
  -20,674
  -21,952
  -23,282
  -24,669
  -26,114
  -27,622
  -29,196
  -30,838
  -32,554
  -34,347
  -36,221
Interest expense (income), $m
  312
  344
  457
  576
  703
  838
  980
  1,130
  1,286
  1,450
  1,621
  1,799
  1,985
  2,177
  2,378
  2,586
  2,803
  3,028
  3,262
  3,505
  3,758
  4,021
  4,295
  4,580
  4,878
  5,187
  5,511
  5,848
  6,201
  6,569
  6,953
Earnings before tax, $m
  -1,845
  -9,290
  -10,632
  -12,059
  -13,573
  -15,170
  -16,849
  -18,610
  -20,452
  -22,374
  -24,378
  -26,464
  -28,633
  -30,888
  -33,232
  -35,668
  -38,199
  -40,830
  -43,566
  -46,411
  -49,371
  -52,453
  -55,663
  -59,007
  -62,494
  -66,130
  -69,925
  -73,887
  -78,025
  -82,349
  -86,869
Tax expense, $m
  -662
  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
  -574
  -9,290
  -10,632
  -12,059
  -13,573
  -15,170
  -16,849
  -18,610
  -20,452
  -22,374
  -24,378
  -26,464
  -28,633
  -30,888
  -33,232
  -35,668
  -38,199
  -40,830
  -43,566
  -46,411
  -49,371
  -52,453
  -55,663
  -59,007
  -62,494
  -66,130
  -69,925
  -73,887
  -78,025
  -82,349
  -86,869

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,233
  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
  43,109
  46,967
  53,416
  60,283
  67,560
  75,238
  83,309
  91,769
  100,616
  109,848
  119,468
  129,482
  139,897
  150,725
  161,977
  173,671
  185,823
  198,454
  211,587
  225,247
  239,461
  254,257
  269,669
  285,728
  302,471
  319,935
  338,160
  357,187
  377,061
  397,828
  419,537
Adjusted assets (=assets-cash), $m
  40,876
  46,967
  53,416
  60,283
  67,560
  75,238
  83,309
  91,769
  100,616
  109,848
  119,468
  129,482
  139,897
  150,725
  161,977
  173,671
  185,823
  198,454
  211,587
  225,247
  239,461
  254,257
  269,669
  285,728
  302,471
  319,935
  338,160
  357,187
  377,061
  397,828
  419,537
Revenue / Adjusted assets
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
Average production assets, $m
  31,988
  36,687
  41,724
  47,088
  52,772
  58,769
  65,074
  71,682
  78,592
  85,803
  93,318
  101,140
  109,276
  117,733
  126,523
  135,656
  145,148
  155,015
  165,273
  175,943
  187,046
  198,604
  210,642
  223,186
  236,264
  249,905
  264,141
  279,003
  294,527
  310,749
  327,706
Working capital, $m
  2,066
  -187
  -213
  -240
  -269
  -300
  -332
  -366
  -401
  -438
  -476
  -516
  -557
  -600
  -645
  -692
  -740
  -791
  -843
  -897
  -954
  -1,013
  -1,074
  -1,138
  -1,205
  -1,275
  -1,347
  -1,423
  -1,502
  -1,585
  -1,671
Total debt, $m
  9,819
  13,053
  16,464
  20,097
  23,946
  28,008
  32,278
  36,753
  41,433
  46,316
  51,406
  56,703
  62,213
  67,940
  73,893
  80,079
  86,507
  93,189
  100,136
  107,363
  114,882
  122,709
  130,862
  139,357
  148,214
  157,453
  167,094
  177,159
  187,672
  198,658
  210,142
Total liabilities, $m
  21,612
  24,846
  28,257
  31,890
  35,739
  39,801
  44,071
  48,546
  53,226
  58,109
  63,199
  68,496
  74,006
  79,733
  85,686
  91,872
  98,300
  104,982
  111,929
  119,156
  126,675
  134,502
  142,655
  151,150
  160,007
  169,246
  178,887
  188,952
  199,465
  210,451
  221,935
Total equity, $m
  21,497
  22,122
  25,159
  28,393
  31,821
  35,437
  39,239
  43,223
  47,390
  51,738
  56,269
  60,986
  65,892
  70,991
  76,291
  81,799
  87,522
  93,472
  99,657
  106,091
  112,786
  119,755
  127,014
  134,578
  142,464
  150,689
  159,273
  168,235
  177,596
  187,377
  197,602
Total liabilities and equity, $m
  43,109
  46,968
  53,416
  60,283
  67,560
  75,238
  83,310
  91,769
  100,616
  109,847
  119,468
  129,482
  139,898
  150,724
  161,977
  173,671
  185,822
  198,454
  211,586
  225,247
  239,461
  254,257
  269,669
  285,728
  302,471
  319,935
  338,160
  357,187
  377,061
  397,828
  419,537
Debt-to-equity ratio
  0.457
  0.590
  0.650
  0.710
  0.750
  0.790
  0.820
  0.850
  0.870
  0.900
  0.910
  0.930
  0.940
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
  1.040
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
Adjusted equity ratio
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -574
  -9,290
  -10,632
  -12,059
  -13,573
  -15,170
  -16,849
  -18,610
  -20,452
  -22,374
  -24,378
  -26,464
  -28,633
  -30,888
  -33,232
  -35,668
  -38,199
  -40,830
  -43,566
  -46,411
  -49,371
  -52,453
  -55,663
  -59,007
  -62,494
  -66,130
  -69,925
  -73,887
  -78,025
  -82,349
  -86,869
Depreciation, amort., depletion, $m
  4,268
  4,892
  5,563
  6,278
  7,036
  7,836
  8,677
  9,558
  10,479
  11,440
  12,442
  13,485
  14,570
  15,698
  16,870
  18,088
  19,353
  20,669
  22,036
  23,459
  24,939
  26,481
  28,086
  29,758
  31,502
  33,321
  35,219
  37,200
  39,270
  41,433
  43,694
Funds from operations, $m
  2,533
  -4,399
  -5,069
  -5,781
  -6,536
  -7,334
  -8,173
  -9,053
  -9,973
  -10,934
  -11,936
  -12,978
  -14,063
  -15,191
  -16,362
  -17,580
  -18,846
  -20,162
  -21,529
  -22,952
  -24,432
  -25,973
  -27,577
  -29,249
  -30,992
  -32,810
  -34,706
  -36,687
  -38,755
  -40,916
  -43,174
Change in working capital, $m
  -850
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -86
Cash from operations, $m
  3,383
  -4,375
  -5,043
  -5,754
  -6,507
  -7,303
  -8,141
  -9,019
  -9,938
  -10,897
  -11,897
  -12,938
  -14,021
  -15,147
  -16,318
  -17,534
  -18,798
  -20,111
  -21,477
  -22,897
  -24,375
  -25,914
  -27,516
  -29,185
  -30,925
  -32,740
  -34,634
  -36,611
  -38,676
  -40,833
  -43,088
Maintenance CAPEX, $m
  0
  -4,265
  -4,892
  -5,563
  -6,278
  -7,036
  -7,836
  -8,677
  -9,558
  -10,479
  -11,440
  -12,442
  -13,485
  -14,570
  -15,698
  -16,870
  -18,088
  -19,353
  -20,669
  -22,036
  -23,459
  -24,939
  -26,481
  -28,086
  -29,758
  -31,502
  -33,321
  -35,219
  -37,200
  -39,270
  -41,433
New CAPEX, $m
  -4,761
  -4,699
  -5,037
  -5,364
  -5,684
  -5,997
  -6,305
  -6,608
  -6,910
  -7,211
  -7,515
  -7,822
  -8,136
  -8,457
  -8,789
  -9,134
  -9,492
  -9,866
  -10,258
  -10,670
  -11,103
  -11,558
  -12,038
  -12,544
  -13,078
  -13,641
  -14,236
  -14,862
  -15,524
  -16,222
  -16,957
Cash from investing activities, $m
  -4,742
  -8,964
  -9,929
  -10,927
  -11,962
  -13,033
  -14,141
  -15,285
  -16,468
  -17,690
  -18,955
  -20,264
  -21,621
  -23,027
  -24,487
  -26,004
  -27,580
  -29,219
  -30,927
  -32,706
  -34,562
  -36,497
  -38,519
  -40,630
  -42,836
  -45,143
  -47,557
  -50,081
  -52,724
  -55,492
  -58,390
Free cash flow, $m
  -1,359
  -13,338
  -14,972
  -16,681
  -18,470
  -20,337
  -22,281
  -24,304
  -26,405
  -28,587
  -30,852
  -33,203
  -35,642
  -38,175
  -40,805
  -43,537
  -46,377
  -49,331
  -52,404
  -55,604
  -58,937
  -62,411
  -66,034
  -69,815
  -73,761
  -77,883
  -82,190
  -86,692
  -91,400
  -96,325
  -101,478
Issuance/(repayment) of debt, $m
  1,493
  3,234
  3,411
  3,633
  3,850
  4,061
  4,270
  4,475
  4,680
  4,884
  5,089
  5,297
  5,510
  5,728
  5,953
  6,186
  6,428
  6,682
  6,947
  7,226
  7,519
  7,828
  8,153
  8,495
  8,857
  9,238
  9,641
  10,065
  10,513
  10,986
  11,484
Issuance/(repurchase) of shares, $m
  14
  12,148
  13,669
  15,294
  17,000
  18,786
  20,651
  22,595
  24,619
  26,723
  28,909
  31,180
  33,539
  35,988
  38,532
  41,175
  43,923
  46,780
  49,751
  52,845
  56,066
  59,422
  62,922
  66,571
  70,380
  74,356
  78,509
  82,849
  87,386
  92,130
  97,094
Cash from financing (excl. dividends), $m  
  2,700
  15,382
  17,080
  18,927
  20,850
  22,847
  24,921
  27,070
  29,299
  31,607
  33,998
  36,477
  39,049
  41,716
  44,485
  47,361
  50,351
  53,462
  56,698
  60,071
  63,585
  67,250
  71,075
  75,066
  79,237
  83,594
  88,150
  92,914
  97,899
  103,116
  108,578
Total cash flow (excl. dividends), $m
  1,341
  2,043
  2,109
  2,246
  2,380
  2,511
  2,639
  2,767
  2,893
  3,019
  3,146
  3,275
  3,406
  3,541
  3,680
  3,824
  3,974
  4,131
  4,295
  4,467
  4,648
  4,839
  5,040
  5,252
  5,475
  5,711
  5,960
  6,222
  6,499
  6,791
  7,099
Retained Cash Flow (-), $m
  2,853
  -12,148
  -13,669
  -15,294
  -17,000
  -18,786
  -20,651
  -22,595
  -24,619
  -26,723
  -28,909
  -31,180
  -33,539
  -35,988
  -38,532
  -41,175
  -43,923
  -46,780
  -49,751
  -52,845
  -56,066
  -59,422
  -62,922
  -66,571
  -70,380
  -74,356
  -78,509
  -82,849
  -87,386
  -92,130
  -97,094
Prev. year cash balance distribution, $m
 
  2,233
  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
 
  -7,872
  -11,560
  -13,048
  -14,620
  -16,275
  -18,012
  -19,828
  -21,726
  -23,704
  -25,763
  -27,905
  -30,133
  -32,447
  -34,852
  -37,352
  -39,949
  -42,649
  -45,457
  -48,378
  -51,418
  -54,584
  -57,882
  -61,319
  -64,904
  -68,645
  -72,549
  -76,627
  -80,887
  -85,339
  -89,994
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  -7,533
  -10,541
  -11,284
  -11,933
  -12,471
  -12,884
  -13,161
  -13,294
  -13,281
  -13,120
  -12,816
  -12,377
  -11,815
  -11,144
  -10,383
  -9,552
  -8,672
  -7,767
  -6,858
  -5,966
  -5,110
  -4,306
  -3,567
  -2,903
  -2,319
  -1,816
  -1,393
  -1,046
  -767
  -550
Current shareholders' claim on cash, %
  100
  81.4
  66.6
  54.6
  44.8
  37.0
  30.5
  25.3
  20.9
  17.4
  14.5
  12.1
  10.1
  8.4
  7.0
  5.9
  4.9
  4.1
  3.5
  2.9
  2.4
  2.0
  1.7
  1.4
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5
  0.4

Occidental Petroleum Corporation (Occidental) is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. The Company also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities. Occidental's domestic upstream oil and gas operations are located in New Mexico and Texas. Its international operations are located in Bolivia, Colombia, Oman, Qatar and the United Arab Emirates (UAE).

FINANCIAL RATIOS  of  Occidental Petroleum (OXY)

Valuation Ratios
P/E Ratio -103.4
Price to Sales 5.8
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 17.5
Price to Free Cash Flow -43.1
Growth Rates
Sales Growth Rate -19.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.5%
Cap. Spend. - 3 Yr. Gr. Rate -9.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 45.7%
Total Debt to Equity 45.7%
Interest Coverage -5
Management Effectiveness
Return On Assets -0.9%
Ret/ On Assets - 3 Yr. Avg. -5.1%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity -2.5%
Return On Equity - 3 Yr. Avg. -9.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.1%
Gross Margin - 3 Yr. Avg. 56%
EBITDA Margin 26.8%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin -17.2%
Oper. Margin - 3 Yr. Avg. -33.3%
Pre-Tax Margin -18.1%
Pre-Tax Margin - 3 Yr. Avg. -29.6%
Net Profit Margin -5.6%
Net Profit Margin - 3 Yr. Avg. -21.5%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 62.4%
Payout Ratio -402.3%

OXY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OXY stock intrinsic value calculation we used $10196 million for the last fiscal year's total revenue generated by Occidental Petroleum. The default revenue input number comes from 2016 income statement of Occidental Petroleum. 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 OXY stock valuation model: a) initial revenue growth rate of 14.7% 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 4.5%, whose default value for OXY is calculated based on our internal credit rating of Occidental Petroleum, 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 Occidental Petroleum.
    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 OXY stock the variable cost ratio is equal to 176.5%.

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 OXY 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 3.5% for Occidental Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Occidental Petroleum. 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 OXY 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 OXY are equal to 313.7%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Occidental Petroleum 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 OXY is equal to -1.6%. 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 - $21497 million for Occidental Petroleum - 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 765.68 million for Occidental Petroleum 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 Occidental Petroleum at the current share price and the inputted number of shares is $59.4 billion.

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Financial statements of OXY
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