Intrinsic value of WPX Energy - WPX

Previous Close

$18.78

  Intrinsic Value

$2.61

stock screener

  Rating & Target

str. sell

-86%

Previous close

$18.78

 
Intrinsic value

$2.61

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of WPX 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 7.4

 

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, %
  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
  2,138
  3,303
  4,939
  7,166
  10,111
  13,900
  18,657
  24,498
  31,524
  39,817
  49,443
  60,449
  72,862
  86,691
  101,933
  118,573
  136,586
  155,944
  176,615
  198,567
  221,773
  246,208
  271,854
  298,698
  326,738
  355,976
  386,424
  418,104
  451,044
  485,281
Variable operating expenses, $m
  4,341
  6,708
  10,031
  14,555
  20,535
  28,230
  37,893
  49,756
  64,024
  80,868
  100,420
  122,773
  147,982
  176,070
  207,027
  240,822
  277,407
  316,722
  358,704
  403,290
  450,421
  500,049
  552,135
  606,656
  663,604
  722,986
  784,828
  849,170
  916,071
  985,606
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
  4,341
  6,708
  10,031
  14,555
  20,535
  28,230
  37,893
  49,756
  64,024
  80,868
  100,420
  122,773
  147,982
  176,070
  207,027
  240,822
  277,407
  316,722
  358,704
  403,290
  450,421
  500,049
  552,135
  606,656
  663,604
  722,986
  784,828
  849,170
  916,071
  985,606
Operating income, $m
  -2,204
  -3,405
  -5,092
  -7,388
  -10,424
  -14,331
  -19,236
  -25,258
  -32,501
  -41,051
  -50,976
  -62,323
  -75,121
  -89,379
  -105,093
  -122,249
  -140,820
  -160,778
  -182,090
  -204,723
  -228,648
  -253,841
  -280,281
  -307,958
  -336,867
  -367,011
  -398,403
  -431,065
  -465,027
  -500,325
EBITDA, $m
  -1,115
  -1,723
  -2,576
  -3,738
  -5,274
  -7,250
  -9,732
  -12,778
  -16,443
  -20,768
  -25,790
  -31,530
  -38,005
  -45,218
  -53,168
  -61,848
  -71,243
  -81,340
  -92,122
  -103,573
  -115,677
  -128,422
  -141,799
  -155,801
  -170,426
  -185,677
  -201,559
  -218,083
  -235,265
  -253,123
Interest expense (income), $m
  0
  188
  366
  625
  989
  1,485
  2,141
  2,984
  4,043
  5,343
  6,907
  8,753
  10,895
  13,345
  16,108
  19,186
  22,579
  26,282
  30,292
  34,601
  39,201
  44,088
  49,253
  54,692
  60,400
  66,375
  72,616
  79,124
  85,902
  92,953
  100,285
Earnings before tax, $m
  -2,392
  -3,771
  -5,717
  -8,378
  -11,909
  -16,471
  -22,220
  -29,301
  -37,844
  -47,958
  -59,729
  -73,219
  -88,466
  -105,487
  -124,280
  -144,828
  -167,103
  -191,070
  -216,690
  -243,924
  -272,736
  -303,094
  -334,973
  -368,358
  -403,242
  -439,627
  -477,528
  -516,967
  -557,980
  -600,610
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
  -2,392
  -3,771
  -5,717
  -8,378
  -11,909
  -16,471
  -22,220
  -29,301
  -37,844
  -47,958
  -59,729
  -73,219
  -88,466
  -105,487
  -124,280
  -144,828
  -167,103
  -191,070
  -216,690
  -243,924
  -272,736
  -303,094
  -334,973
  -368,358
  -403,242
  -439,627
  -477,528
  -516,967
  -557,980
  -600,610

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
  13,114
  20,261
  30,301
  43,965
  62,028
  85,274
  114,463
  150,297
  193,396
  244,275
  303,334
  370,855
  447,005
  531,848
  625,359
  727,442
  837,952
  956,711
  1,083,525
  1,218,204
  1,360,572
  1,510,480
  1,667,815
  1,832,505
  2,004,526
  2,183,899
  2,370,701
  2,565,057
  2,767,143
  2,977,185
Adjusted assets (=assets-cash), $m
  13,114
  20,261
  30,301
  43,965
  62,028
  85,274
  114,463
  150,297
  193,396
  244,275
  303,334
  370,855
  447,005
  531,848
  625,359
  727,442
  837,952
  956,711
  1,083,525
  1,218,204
  1,360,572
  1,510,480
  1,667,815
  1,832,505
  2,004,526
  2,183,899
  2,370,701
  2,565,057
  2,767,143
  2,977,185
Revenue / Adjusted assets
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
Average production assets, $m
  10,889
  16,823
  25,159
  36,505
  51,503
  70,805
  95,041
  124,795
  160,581
  202,827
  251,865
  307,929
  371,158
  441,605
  519,249
  604,011
  695,770
  794,378
  899,674
  1,011,501
  1,129,712
  1,254,185
  1,384,824
  1,521,570
  1,664,402
  1,813,340
  1,968,445
  2,129,823
  2,297,619
  2,472,022
Working capital, $m
  -643
  -994
  -1,487
  -2,157
  -3,043
  -4,184
  -5,616
  -7,374
  -9,489
  -11,985
  -14,882
  -18,195
  -21,931
  -26,094
  -30,682
  -35,690
  -41,112
  -46,939
  -53,161
  -59,769
  -66,754
  -74,109
  -81,828
  -89,908
  -98,348
  -107,149
  -116,314
  -125,849
  -135,764
  -146,070
Total debt, $m
  5,013
  8,565
  13,554
  20,346
  29,323
  40,876
  55,383
  73,193
  94,613
  119,900
  149,252
  182,810
  220,657
  262,823
  309,298
  360,034
  414,957
  473,980
  537,007
  603,942
  674,699
  749,203
  827,399
  909,250
  994,744
  1,083,893
  1,176,733
  1,273,328
  1,373,765
  1,478,156
Total liabilities, $m
  6,518
  10,070
  15,059
  21,851
  30,828
  42,381
  56,888
  74,698
  96,118
  121,405
  150,757
  184,315
  222,162
  264,328
  310,803
  361,539
  416,462
  475,485
  538,512
  605,447
  676,204
  750,708
  828,904
  910,755
  996,249
  1,085,398
  1,178,238
  1,274,833
  1,375,270
  1,479,661
Total equity, $m
  6,596
  10,191
  15,241
  22,114
  31,200
  42,893
  57,575
  75,600
  97,278
  122,870
  152,577
  186,540
  224,844
  267,519
  314,555
  365,903
  421,490
  481,226
  545,013
  612,756
  684,367
  759,771
  838,911
  921,750
  1,008,276
  1,098,501
  1,192,463
  1,290,224
  1,391,873
  1,497,524
Total liabilities and equity, $m
  13,114
  20,261
  30,300
  43,965
  62,028
  85,274
  114,463
  150,298
  193,396
  244,275
  303,334
  370,855
  447,006
  531,847
  625,358
  727,442
  837,952
  956,711
  1,083,525
  1,218,203
  1,360,571
  1,510,479
  1,667,815
  1,832,505
  2,004,525
  2,183,899
  2,370,701
  2,565,057
  2,767,143
  2,977,185
Debt-to-equity ratio
  0.760
  0.840
  0.890
  0.920
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
Adjusted equity ratio
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,392
  -3,771
  -5,717
  -8,378
  -11,909
  -16,471
  -22,220
  -29,301
  -37,844
  -47,958
  -59,729
  -73,219
  -88,466
  -105,487
  -124,280
  -144,828
  -167,103
  -191,070
  -216,690
  -243,924
  -272,736
  -303,094
  -334,973
  -368,358
  -403,242
  -439,627
  -477,528
  -516,967
  -557,980
  -600,610
Depreciation, amort., depletion, $m
  1,089
  1,682
  2,516
  3,651
  5,150
  7,081
  9,504
  12,480
  16,058
  20,283
  25,187
  30,793
  37,116
  44,160
  51,925
  60,401
  69,577
  79,438
  89,967
  101,150
  112,971
  125,418
  138,482
  152,157
  166,440
  181,334
  196,845
  212,982
  229,762
  247,202
Funds from operations, $m
  -1,303
  -2,089
  -3,201
  -4,727
  -6,759
  -9,391
  -12,716
  -16,821
  -21,786
  -27,675
  -34,542
  -42,426
  -51,350
  -61,326
  -72,355
  -84,426
  -97,526
  -111,632
  -126,723
  -142,774
  -159,765
  -177,675
  -196,491
  -216,201
  -236,802
  -258,293
  -280,683
  -303,985
  -328,218
  -353,407
Change in working capital, $m
  -241
  -351
  -493
  -670
  -886
  -1,141
  -1,432
  -1,758
  -2,115
  -2,496
  -2,898
  -3,313
  -3,736
  -4,163
  -4,588
  -5,009
  -5,422
  -5,827
  -6,222
  -6,608
  -6,985
  -7,355
  -7,719
  -8,080
  -8,440
  -8,801
  -9,165
  -9,536
  -9,915
  -10,305
Cash from operations, $m
  -1,062
  -1,738
  -2,709
  -4,057
  -5,873
  -8,250
  -11,284
  -15,063
  -19,671
  -25,179
  -31,645
  -39,113
  -47,614
  -57,163
  -67,767
  -79,418
  -92,104
  -105,806
  -120,501
  -136,166
  -152,780
  -170,320
  -188,771
  -208,121
  -228,362
  -249,493
  -271,518
  -294,449
  -318,303
  -343,102
Maintenance CAPEX, $m
  -681
  -1,089
  -1,682
  -2,516
  -3,651
  -5,150
  -7,081
  -9,504
  -12,480
  -16,058
  -20,283
  -25,187
  -30,793
  -37,116
  -44,160
  -51,925
  -60,401
  -69,577
  -79,438
  -89,967
  -101,150
  -112,971
  -125,418
  -138,482
  -152,157
  -166,440
  -181,334
  -196,845
  -212,982
  -229,762
New CAPEX, $m
  -4,083
  -5,934
  -8,336
  -11,346
  -14,998
  -19,302
  -24,236
  -29,754
  -35,786
  -42,246
  -49,038
  -56,064
  -63,229
  -70,447
  -77,644
  -84,762
  -91,759
  -98,608
  -105,296
  -111,827
  -118,211
  -124,472
  -130,639
  -136,746
  -142,832
  -148,938
  -155,106
  -161,378
  -167,796
  -174,402
Cash from investing activities, $m
  -4,764
  -7,023
  -10,018
  -13,862
  -18,649
  -24,452
  -31,317
  -39,258
  -48,266
  -58,304
  -69,321
  -81,251
  -94,022
  -107,563
  -121,804
  -136,687
  -152,160
  -168,185
  -184,734
  -201,794
  -219,361
  -237,443
  -256,057
  -275,228
  -294,989
  -315,378
  -336,440
  -358,223
  -380,778
  -404,164
Free cash flow, $m
  -5,826
  -8,761
  -12,727
  -17,919
  -24,521
  -32,702
  -42,600
  -54,321
  -67,937
  -83,483
  -100,966
  -120,364
  -141,636
  -164,726
  -189,571
  -216,105
  -244,264
  -273,990
  -305,235
  -337,961
  -372,141
  -407,764
  -444,829
  -483,349
  -523,351
  -564,871
  -607,958
  -652,671
  -699,081
  -747,267
Issuance/(repayment) of debt, $m
  2,438
  3,552
  4,990
  6,791
  8,977
  11,553
  14,507
  17,810
  21,420
  25,287
  29,352
  33,558
  37,847
  42,167
  46,475
  50,736
  54,924
  59,023
  63,027
  66,935
  70,757
  74,504
  78,196
  81,851
  85,494
  89,149
  92,841
  96,595
  100,437
  104,391
Issuance/(repurchase) of shares, $m
  4,861
  7,366
  10,767
  15,251
  20,995
  28,164
  36,902
  47,325
  59,523
  73,550
  89,436
  107,182
  126,769
  148,162
  171,315
  196,176
  222,690
  250,805
  280,478
  311,668
  344,347
  378,498
  414,113
  451,197
  489,768
  529,852
  571,489
  614,728
  659,629
  706,261
Cash from financing (excl. dividends), $m  
  7,299
  10,918
  15,757
  22,042
  29,972
  39,717
  51,409
  65,135
  80,943
  98,837
  118,788
  140,740
  164,616
  190,329
  217,790
  246,912
  277,614
  309,828
  343,505
  378,603
  415,104
  453,002
  492,309
  533,048
  575,262
  619,001
  664,330
  711,323
  760,066
  810,652
Total cash flow (excl. dividends), $m
  1,473
  2,157
  3,030
  4,123
  5,451
  7,015
  8,808
  10,814
  13,006
  15,354
  17,822
  20,376
  22,980
  25,603
  28,219
  30,806
  33,349
  35,838
  38,269
  40,642
  42,963
  45,238
  47,480
  49,699
  51,911
  54,130
  56,372
  58,651
  60,984
  63,385
Retained Cash Flow (-), $m
  -4,861
  -7,366
  -10,767
  -15,251
  -20,995
  -28,164
  -36,902
  -47,325
  -59,523
  -73,550
  -89,436
  -107,182
  -126,769
  -148,162
  -171,315
  -196,176
  -222,690
  -250,805
  -280,478
  -311,668
  -344,347
  -378,498
  -414,113
  -451,197
  -489,768
  -529,852
  -571,489
  -614,728
  -659,629
  -706,261
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
  32
  51
  79
  119
  172
  243
  334
  448
  588
  757
  956
  1,187
  1,451
  1,749
  2,081
  2,446
  2,846
  3,278
  3,743
  4,239
  4,766
  5,323
  5,909
  6,524
  7,169
  7,842
  8,543
  9,274
  10,035
  10,825
Cash available for distribution, $m
  -3,388
  -5,209
  -7,738
  -11,128
  -15,544
  -21,149
  -28,093
  -36,512
  -46,517
  -58,196
  -71,613
  -86,806
  -103,789
  -122,559
  -143,096
  -165,370
  -189,341
  -214,967
  -242,209
  -271,025
  -301,384
  -333,259
  -366,633
  -401,498
  -437,857
  -475,722
  -515,117
  -556,077
  -598,645
  -642,876
Discount rate, %
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
  -3,199
  -4,619
  -6,405
  -8,543
  -10,994
  -13,681
  -16,492
  -19,291
  -21,925
  -24,241
  -26,099
  -27,386
  -28,026
  -27,987
  -27,284
  -25,972
  -24,145
  -21,921
  -19,436
  -16,824
  -14,214
  -11,716
  -9,416
  -7,375
  -5,625
  -4,174
  -3,012
  -2,110
  -1,435
  -945
Current shareholders' claim on cash, %
  60.4
  37.3
  23.5
  15.1
  9.9
  6.6
  4.4
  3.0
  2.1
  1.5
  1.1
  0.8
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

WPX Energy, Inc. is an oil and natural gas exploration and production company. The Company is engaged in the exploitation and development of unconventional properties. It operates in the exploration and production segment of the oil and gas industry and its operations are conducted in the United States. It is focused on exploiting, developing and growing its oil positions in the Delaware (a subset of the Permian Basin) and San Juan Basins in the southwestern United States and the Williston Basin in North Dakota. As of December 31, 2016, it operated 642 wells in the Delaware Basin and also owned interests in 783 wells operated by others. As of December 31, 2016, it held approximately 98,000 acres in the Delaware Basin, with operations located in Eddy, Lea and Chaves Counties in New Mexico and Loving, Pecos, Reeves, Ward and Winkler Counties in Texas. Its activity in the Delaware Basin is focused on the Wolfcamp Shale formation, the Bone Spring interval and the Delaware sand interval.

FINANCIAL RATIOS  of  WPX Energy (WPX)

Valuation Ratios
P/E Ratio -10.8
Price to Sales 9.3
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 24.7
Price to Free Cash Flow -20.5
Growth Rates
Sales Growth Rate -49.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.6%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 74.3%
Total Debt to Equity 74.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.7%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital -9.4%
Ret/ On T. Cap. - 3 Yr. Avg. -10.9%
Return On Equity -17.2%
Return On Equity - 3 Yr. Avg. -19.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 70%
Gross Margin - 3 Yr. Avg. 70.7%
EBITDA Margin -44.2%
EBITDA Margin - 3 Yr. Avg. 25.4%
Operating Margin -105.6%
Oper. Margin - 3 Yr. Avg. -23.2%
Pre-Tax Margin -135.2%
Pre-Tax Margin - 3 Yr. Avg. -39.2%
Net Profit Margin -86.7%
Net Profit Margin - 3 Yr. Avg. -68.9%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. 63.8%
Payout Ratio -3%

WPX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WPX stock intrinsic value calculation we used $1336 million for the last fiscal year's total revenue generated by WPX Energy. The default revenue input number comes from 2017 income statement of WPX Energy. 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 WPX 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 5.9%, whose default value for WPX is calculated based on our internal credit rating of WPX Energy, 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 WPX Energy.
    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 WPX stock the variable cost ratio is equal to 203.1%.

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 WPX 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 7.3% for WPX Energy.

Corporate tax rate of 27% is the nominal tax rate for WPX Energy. 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 WPX stock is equal to 2.4%.

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 WPX are equal to 509.4%.

Life of production assets of 10 years is the average useful life of capital assets used in WPX Energy 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 WPX is equal to -30.1%. 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 - $4127 million for WPX Energy - 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 395 million for WPX Energy 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 WPX Energy at the current share price and the inputted number of shares is $7.4 billion.

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COMPANY NEWS

▶ Energy Earnings: 8 Stocks to Buy Now   [Jul-18-18 02:36PM  Barrons.com]
▶ 6 Oil Stocks to Benefit From Higher Prices: Goldman   [Jun-26-18 06:05AM  Investopedia]
▶ Goldman Touts Oil Stocks to Buy After OPEC Agreement   [Jun-25-18 10:00PM  TheStreet.com]
▶ 3 Energy Stocks to Play the Permian Bottleneck   [Jun-15-18 12:25PM  Barrons.com]
▶ WPX Energy Executives to Speak at June Conferences   [Jun-11-18 11:44AM  Business Wire]
▶ WPX Energy Announces Upsize and Pricing of Senior Notes   [May-09-18 07:00PM  Business Wire]
▶ WPX: 1Q Earnings Snapshot   [May-02-18 04:40PM  Associated Press]
▶ WPX Energy Reports 1Q 2018 Results   [04:15PM  Business Wire]
▶ WPX Energy to Host May 3 Webcast   [Apr-05-18 11:43AM  Business Wire]
▶ Why WPX Energy Inc's Stock Is Tumbling Today   [Apr-02-18 04:17PM  Motley Fool]
▶ WPX Energy Inc (NYSE:WPX): Is Breakeven Near?   [Mar-29-18 06:07PM  Simply Wall St.]
▶ Valerie M. Williams Joins WPX Energy Board of Directors   [Mar-15-18 04:15PM  Business Wire]
▶ Top 5 Positions in T. Boone Pickens' Portfolio   [Feb-28-18 01:54PM  Investopedia]
▶ WPX reports 4Q loss   [Feb-21-18 04:53PM  Associated Press]
▶ WPX Energy Declares Dividend on Preferred Stock   [Feb-20-18 08:28AM  Business Wire]
▶ WPX Energy Sells San Juan Gallup Holdings for $700 Million   [Feb-05-18 08:30AM  Business Wire]
▶ Whats Holding Back Natural-Gas-Weighted Stocks Returns?   [Jan-18-18 12:30PM  Market Realist]
▶ Could Natural Gas Rise after Inventory Data?   [04:00PM  Market Realist]
▶ Has Natural Gas Outperformed Natural GasWeighted Stocks?   [Jan-04-18 11:35AM  Market Realist]
▶ Natural Gas Inventories Could Boost Natural Gas Prices   [Jan-03-18 02:05PM  Market Realist]
▶ US Natural Gas Production Hit a Record in October   [Jan-02-18 11:30AM  Market Realist]
▶ Is Natural Gas Rising Less Than Natural GasWeighted Stocks?   [Dec-28-17 10:55AM  Market Realist]
▶ Will Fall in Inventories Boost Natural Gas Prices?   [Dec-27-17 09:02AM  Market Realist]
▶ Will US Natural Gas Futures End 2017 on a Low Note?   [Dec-22-17 12:20PM  Market Realist]
▶ WPX Closes $169 Million Non-Core Asset Sale   [Dec-21-17 01:21PM  Business Wire]
▶ WPX Energy Trying To Close In On Key Technical Benchmark   [Dec-15-17 03:00AM  Investor's Business Daily]
▶ WPX Energy to Host Feb. 22 Webcast   [Dec-14-17 12:56PM  Business Wire]
▶ What Does Wall Street Predict for WPX Energy?   [Dec-13-17 07:33AM  Market Realist]
▶ Whats WPX Energys Price Forecast for This Week?   [Dec-12-17 10:32AM  Market Realist]
▶ WPX Energy Earns Relative Strength Rating Upgrade; Hits Key Benchmark   [Dec-11-17 03:00AM  Investor's Business Daily]
▶ Unexpected Rise in US Natural Gas Inventories   [Dec-08-17 10:06AM  Market Realist]
▶ IBD Rating Upgrades: WPX Energy Shows Improved Price Strength   [03:00AM  Investor's Business Daily]
▶ Are Gas-Weighted Stocks Deviating from Natural Gas Prices?   [Dec-05-17 01:05PM  Market Realist]
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