Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Apache Corp., FCFF calculation
US$ in millions
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).
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The financial performance over the five-year period is characterized by a significant divergence between operational cash generation and free cash flow to the firm (FCFF). While the company maintained substantial positive cash flows from operations for the majority of the period, the FCFF shifted to a sustained negative trajectory starting in 2012, indicating that capital expenditures consistently exceeded operating cash inflows.
- Operating Cash Flow Trends
- Net cash provided by operating activities remained relatively stable between 2011 and 2014, fluctuating within a range of 8,379 million to 9,953 million US dollars. However, a sharp decline is observed in 2015, where operating cash flow dropped to 2,834 million US dollars, representing a decrease of approximately 66% from the 2014 level.
- Free Cash Flow to the Firm (FCFF) Trajectory
- FCFF exhibited a stark reversal after 2011. After starting with a positive value of 3,534 million US dollars, the metric turned negative in 2012 and remained in deficit for the remainder of the period. The negative trend intensified toward the end of the sequence, reaching a low of -1,328 million US dollars by December 31, 2015.
- Analysis of Cash Flow Divergence
- Between 2012 and 2014, the company maintained strong positive operating cash flows while reporting negative FCFF. This pattern suggests an aggressive capital investment strategy where expenditures on long-term assets significantly outweighed the cash generated from core operations. By 2015, the simultaneous collapse in operating cash flow and the continued negative FCFF indicate a severe compression of the company's ability to self-fund its investments and maintain liquidity.
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Interest Paid, Net of Tax
Apache Corp., interest paid, net of tax calculation
US$ in millions
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).
1 2015 Calculation
EITR = 100 × Income tax expense ÷ EBT
= 100 × -5,469 ÷ -28,226 = 19.38%
2 2015 Calculation
Interest paid, net of capitalized interest, tax = Interest paid, net of capitalized interest × EITR
= 246 × 19.38% = 48
3 2015 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 227 × 19.38% = 44
Between 2011 and 2015, there was a notable increase in net interest obligations and significant volatility in capitalized interest and effective income tax rates. The period is characterized by a substantial peak in both expensed and capitalized interest in 2014, coinciding with an anomalous negative effective income tax rate.
- Interest Paid, Net of Capitalized Interest and Tax
- A general upward trend is observed in interest paid, which rose from 88 million US dollars in 2011 to 198 million US dollars by 2015. While there was a brief decline to 60 million US dollars in 2012, expenses grew aggressively thereafter, peaking at 209 million US dollars in 2014. This trajectory suggests an increase in the company's net debt burden or an increase in the cost of borrowing over the five-year period.
- Capitalized Interest, Net of Tax
- Capitalized interest exhibited extreme volatility, particularly in 2014. After remaining relatively stable between 2011 and 2013, capitalized interest spiked to 567 million US dollars in 2014, representing a nearly threefold increase from the previous year. This figure subsequently retracted sharply to 183 million US dollars in 2015. Such a spike typically indicates a period of intensified capital expenditure or the development of major long-term assets.
- Effective Income Tax Rate (EITR) Fluctuations
- The effective income tax rate demonstrated significant instability, fluctuating from a high of 58.97% in 2012 to a negative 56.33% in 2014. The negative tax rate in 2014 is a critical outlier that aligns with the peak in both net interest paid and capitalized interest, potentially reflecting significant tax credits or losses used to offset income during a year of high investment and financing costs. By 2015, the rate normalized to 19.38%.
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Enterprise Value to FCFF Ratio, Current
Apache Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 28,012) |
| Free cash flow to the firm (FCFF) | (1,328) |
| Valuation Ratio | |
| EV/FCFF | — |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Chevron Corp. | 25.80 |
| ConocoPhillips | 21.39 |
| Exxon Mobil Corp. | 28.27 |
Based on: 10-K (reporting date: 2015-12-31).
1 Click competitor name to see calculations.
If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.
Enterprise Value to FCFF Ratio, Historical
Apache Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 23,904) | 37,486) | 41,114) | 42,304) | 49,628) | |
| Free cash flow to the firm (FCFF)2 | (1,328) | (1,254) | (771) | (803) | 3,534) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | — | — | — | — | 14.04 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
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).
3 2015 Calculation
EV/FCFF = EV ÷ FCFF
= 23,904 ÷ -1,328 = —
4 Click competitor name to see calculations.
Between 2011 and 2015, a consistent contraction in both corporate valuation and cash generation occurred. The Enterprise Value experienced a steady downward trajectory, declining from 49,628 million US dollars in 2011 to 23,904 million US dollars by 2015, representing a total decrease of approximately 51.8% over the five-year period.
- Free Cash Flow to the Firm (FCFF) Analysis
- A significant shift in cash flow dynamics is observed after 2011. The firm transitioned from a positive FCFF of 3,534 million US dollars in 2011 to sustained negative values from 2012 through 2015. This negative trend intensified toward the end of the period, with the cash outflow widening to 1,328 million US dollars by December 31, 2015.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio stood at 14.04 in 2011, providing a baseline valuation multiple. For the subsequent years, the ratio becomes mathematically non-meaningful for valuation purposes as the FCFF remained negative. This indicates that the entity was not generating sufficient free cash flow to cover its capital providers, coinciding with the precipitous drop in Enterprise Value.
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