Stock Analysis on Net
Stock Analysis on Net

Anadarko Petroleum Corp. (NYSE:APC)

This company has been moved to the archive! The financial data has not been updated since October 31, 2017.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Anadarko Petroleum Corp., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.26%
01 FCFF0 206
1 FCFF1 201 = 206 × (1 + -2.73%) 179
2 FCFF2 202 = 201 × (1 + 0.89%) 161
3 FCFF3 211 = 202 × (1 + 4.50%) 150
4 FCFF4 229 = 211 × (1 + 8.12%) 144
5 FCFF5 256 = 229 × (1 + 11.73%) 143
5 Terminal value (TV5) 54,650 = 256 × (1 + 11.73%) ÷ (12.26% – 11.73%) 30,657
Intrinsic value of Anadarko Petroleum Corp. capital 31,433
Less: Debt (fair value) 17,100
Intrinsic value of Anadarko Petroleum Corp. common stock 14,333
 
Intrinsic value of Anadarko Petroleum Corp. common stock (per share) $26.20
Current share price $49.37

Based on: 10-K (reporting date: 2016-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Anadarko Petroleum Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 27,013 0.61 17.62%
Debt (fair value) 17,100 0.39 3.78% = 5.87% × (1 – 35.60%)

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 547,157,557 × $49.37
= $27,013,168,589.09

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (27.00% + 30.00% + 35.00% + 55.00% + 31.00%) ÷ 5
= 35.60%

WACC = 12.26%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Anadarko Petroleum Corp., PRAT model

Microsoft Excel
Average Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (US$ in millions)
Interest expense 890 825 772 686 742
Net income (loss) attributable to common stockholders (3,071) (6,692) (1,750) 801 2,391
 
Effective income tax rate (EITR)1 27.00% 30.00% 35.00% 55.00% 31.00%
 
Interest expense, after tax2 650 578 502 309 512
Add: Dividends, common stock 105 553 505 274 181
Interest expense (after tax) and dividends 755 1,131 1,007 583 693
 
EBIT(1 – EITR)3 (2,421) (6,115) (1,248) 1,110 2,903
 
Short-term debt 42 33 — 500 —
Long-term debt, excluding current portion 15,281 15,718 15,092 13,065 13,269
Stockholders’ equity 12,212 12,819 19,725 21,857 20,629
Total capital 27,535 28,570 34,817 35,422 33,898
Financial Ratios
Retention rate (RR)4 — — — 0.47 0.76
Return on invested capital (ROIC)5 -8.79% -21.40% -3.59% 3.13% 8.56%
Averages
RR 0.62
ROIC -4.42%
 
FCFF growth rate (g)6 -2.73%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

1 See details »

2016 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 890 × (1 – 27.00%)
= 650

3 EBIT(1 – EITR) = Net income (loss) attributable to common stockholders + Interest expense, after tax
= -3,071 + 650
= -2,421

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [-2,421 – 755] ÷ -2,421
= —

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × -2,421 ÷ 27,535
= -8.79%

6 g = RR × ROIC
= 0.62 × -4.42%
= -2.73%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (44,113 × 12.26% – 206) ÷ (44,113 + 206)
= 11.73%

where:

Total capital, fair value0 = current fair value of Anadarko Petroleum Corp. debt and equity (US$ in millions)
FCFF0 = the last year Anadarko Petroleum Corp. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Anadarko Petroleum Corp. capital

FCFF growth rate (g) forecast

Anadarko Petroleum Corp., H-model

Microsoft Excel
Year Value gt
1 g1 -2.73%
2 g2 0.89%
3 g3 4.50%
4 g4 8.12%
5 and thereafter g5 11.73%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -2.73% + (11.73% – -2.73%) × (2 – 1) ÷ (5 – 1)
= 0.89%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -2.73% + (11.73% – -2.73%) × (3 – 1) ÷ (5 – 1)
= 4.50%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -2.73% + (11.73% – -2.73%) × (4 – 1) ÷ (5 – 1)
= 8.12%