Stock Analysis on Net
Stock Analysis on Net

Apache Corp. (NYSE:APA)

This company has been moved to the archive! The financial data has not been updated since August 4, 2016.

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

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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)

Apache 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 13.84%
01 FCFF0 -1,328
1 FCFF1 — = -1,328 × (1 + 0.00%) —
2 FCFF2 — = — × (1 + 0.00%) —
3 FCFF3 — = — × (1 + 0.00%) —
4 FCFF4 — = — × (1 + 0.00%) —
5 FCFF5 — = — × (1 + 0.00%) —
5 Terminal value (TV5) — = — × (1 + 0.00%) ÷ (13.84% – 0.00%) —
Intrinsic value of Apache Corp. capital —
Less: Preferred stock, no par value, 6% Cumulative Mandatory Convertible, Series D, $1,000 per share liquidation preference (book value) 0
Less: Debt (fair value) 8,330
Intrinsic value of Apache Corp. common stock —
 
Intrinsic value of Apache Corp. common stock (per share) $—
Current share price $50.18

Based on: 10-K (reporting date: 2015-12-31).

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)

Apache Corp., cost of capital

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Value1 Weight Required rate of return2 Calculation
Equity (fair value) 19,039 0.70 18.17%
Preferred stock, no par value, 6% Cumulative Mandatory Convertible, Series D, $1,000 per share liquidation preference (book value) 0 0.00 0.00%
Debt (fair value) 8,330 0.30 3.94% = 5.06% × (1 – 22.22%)

Based on: 10-K (reporting date: 2015-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 379,423,069 × $50.18
= $19,039,449,602.42

   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
= (19.38% + -56.33% + 45.73% + 58.97% + 43.36%) ÷ 5
= 22.22%

WACC = 13.84%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Apache Corp., PRAT model

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Average Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Selected Financial Data (US$ in millions)
Interest expense, net of capitalized interest 259 136 197 175 170
Net income (loss) attributable to Apache shareholders (23,119) (5,403) 2,232 2,001 4,584
Add: Net income attributable to noncontrolling interest (409) 343 56 — —
Less: Net loss from discontinued operations, net of tax (771) (517) — — —
Add: Income tax expense (5,469) 1,637 1,928 2,876 3,509
Earnings before tax (EBT) (28,226) (2,906) 4,216 4,877 8,093
 
Effective income tax rate (EITR)1 19.38% -56.33% 45.73% 58.97% 43.36%
 
Interest expense, net of capitalized interest, after tax2 209 213 107 72 96
Add: Cash dividends, preferred — — 44 76 76
Add: Common dividends 378 380 317 264 231
Interest expense (after tax) and dividends 587 593 468 412 403
 
EBIT(1 – EITR)3 (22,139) (4,673) 2,339 2,073 4,680
 
Current debt 1 — 53 990 431
Long-term debt, excluding current maturities 8,777 11,245 9,672 11,355 6,785
Total Apache shareholders’ equity 2,566 25,937 33,396 31,331 28,993
Total capital 11,344 37,182 43,121 43,676 36,209
Financial Ratios
Retention rate (RR)4 — — 0.80 0.80 0.91
Return on invested capital (ROIC)5 -195.16% -12.57% 5.42% 4.75% 12.93%
Averages
RR 0.84
ROIC -36.93%
 
FCFF growth rate (g)6 0.00%

Based on: 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), 10-K (reporting date: 2011-12-31).

2015 Calculations

1 EITR = 100 × Income tax expense ÷ EBT
= 100 × -5,469 ÷ -28,226
= 19.38%

2 Interest expense, net of capitalized interest, after tax = Interest expense, net of capitalized interest × (1 – EITR)
= 259 × (1 – 19.38%)
= 209

3 EBIT(1 – EITR) = Net income (loss) attributable to Apache shareholders – Net loss from discontinued operations, net of tax + Interest expense, net of capitalized interest, after tax
= -23,119 – -771 + 209
= -22,139

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [-22,139 – 587] ÷ -22,139
= —

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × -22,139 ÷ 11,344
= -195.16%

6 g = RR × ROIC
= 0.84 × -36.93%
= 0.00%

FCFF growth rate (g) forecast

Apache Corp., H-model

Microsoft Excel
Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

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)
= 0.00% + (0.00% – 0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%