Stock Analysis on Net

EOG Resources Inc. (NYSE:EOG)

This company has been moved to the archive! The financial data has not been updated since February 27, 2020.

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

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

EOG Resources Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 15.59%
01 FCFF0 1,914,094
1 FCFF1 1,945,506 = 1,914,094 × (1 + 1.64%) 1,683,065
2 FCFF2 2,019,881 = 1,945,506 × (1 + 3.82%) 1,511,689
3 FCFF3 2,141,168 = 2,019,881 × (1 + 6.00%) 1,386,295
4 FCFF4 2,316,454 = 2,141,168 × (1 + 8.19%) 1,297,469
5 FCFF5 2,556,629 = 2,316,454 × (1 + 10.37%) 1,238,824
5 Terminal value (TV5) 54,006,018 = 2,556,629 × (1 + 10.37%) ÷ (15.59%10.37%) 26,168,807
Intrinsic value of EOG Resources Inc. capital 33,286,150
Less: Long-term debt and finance leases (fair value) 5,509,900
Intrinsic value of EOG Resources Inc. common stock 27,776,250
 
Intrinsic value of EOG Resources Inc. common stock (per share) $47.72
Current share price $60.00

Based on: 10-K (reporting date: 2019-12-31).

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)

EOG Resources Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 34,923,267 0.86 17.65%
Long-term debt and finance leases (fair value) 5,509,900 0.14 2.56% = 3.62% × (1 – 29.31%)

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 582,054,451 × $60.00
= $34,923,267,060.00

   Long-term debt and finance leases (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
= (22.86% + 21.98% + 37.50% + 29.59% + 34.63%) ÷ 5
= 29.31%

WACC = 15.59%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

EOG Resources Inc., PRAT model

Microsoft Excel
Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Net interest expense 185,129 245,052 274,372 281,681 237,393
Net income (loss) 2,734,910 3,419,040 2,582,579 (1,096,686) (4,524,515)
 
Effective income tax rate (EITR)1 22.86% 21.98% 37.50% 29.59% 34.63%
 
Net interest expense, after tax2 142,809 191,190 171,483 198,332 155,184
Add: Common stock dividends declared 629,169 469,443 387,164 376,012 367,767
Interest expense (after tax) and dividends 771,978 660,633 558,647 574,344 522,951
 
EBIT(1 – EITR)3 2,877,719 3,610,230 2,754,062 (898,354) (4,369,331)
 
Current portion of long-term debt 1,014,524 913,093 356,235 6,579 6,579
Long-term debt, excluding current portion 4,160,919 5,170,169 6,030,836 6,979,779 6,653,685
Stockholders’ equity 21,640,716 19,364,188 16,283,273 13,981,581 12,943,035
Total capital 26,816,159 25,447,450 22,670,344 20,967,939 19,603,299
Financial Ratios
Retention rate (RR)4 0.73 0.82 0.80
Return on invested capital (ROIC)5 10.73% 14.19% 12.15% -4.28% -22.29%
Averages
RR 0.78
ROIC 2.10%
 
FCFF growth rate (g)6 1.64%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 See details »

2019 Calculations

2 Net interest expense, after tax = Net interest expense × (1 – EITR)
= 185,129 × (1 – 22.86%)
= 142,809

3 EBIT(1 – EITR) = Net income (loss) + Net interest expense, after tax
= 2,734,910 + 142,809
= 2,877,719

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,877,719771,978] ÷ 2,877,719
= 0.73

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,877,719 ÷ 26,816,159
= 10.73%

6 g = RR × ROIC
= 0.78 × 2.10%
= 1.64%


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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (40,433,167 × 15.59%1,914,094) ÷ (40,433,167 + 1,914,094)
= 10.37%

where:

Total capital, fair value0 = current fair value of EOG Resources Inc. debt and equity (US$ in thousands)
FCFF0 = the last year EOG Resources Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of EOG Resources Inc. capital


FCFF growth rate (g) forecast

EOG Resources Inc., H-model

Microsoft Excel
Year Value gt
1 g1 1.64%
2 g2 3.82%
3 g3 6.00%
4 g4 8.19%
5 and thereafter g5 10.37%

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 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 1.64% + (10.37%1.64%) × (2 – 1) ÷ (5 – 1)
= 3.82%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 1.64% + (10.37%1.64%) × (3 – 1) ÷ (5 – 1)
= 6.00%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 1.64% + (10.37%1.64%) × (4 – 1) ÷ (5 – 1)
= 8.19%