Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
EOG Resources Inc., FCFF calculation
US$ in thousands
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).
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The financial trajectory from 2015 to 2019 is characterized by a significant recovery in cash generation capabilities, transitioning from a period of negative free cash flow to a state of sustainable positive returns. This evolution reflects a shift from heavy capital investment toward operational efficiency and value creation.
- Net Cash Provided by Operating Activities
- Operating cash flows exhibited a general upward trajectory over the five-year period. After a contraction in 2016 to 2,359,063 thousand US$, a period of consistent and aggressive growth ensued. By December 31, 2019, operating cash flow reached 8,163,180 thousand US$, demonstrating a substantial increase in the ability of the entity to generate liquidity from its core business operations.
- Free Cash Flow to the Firm (FCFF)
- FCFF underwent a complete turnaround, moving from a deficit of 1,245,468 thousand US$ in 2015 to positive territory by 2017. The most significant growth occurred between 2017 and 2018, where FCFF rose from 330,303 thousand US$ to 1,901,052 thousand US$. The figures remained stable through December 31, 2019, closing at 1,914,094 thousand US$, indicating that the firm had successfully shifted from a cash-consuming investment phase to a cash-generating phase.
- Analysis of Capital Allocation and Cash Conversion
- A notable divergence is observed between operating cash flows and FCFF during the 2015-2016 period. Despite positive operating cash flows, FCFF remained negative, which implies that capital expenditures during those years exceeded the cash generated by operations. As the trend progressed toward 2019, the widening gap between the growth of operating cash flows and the stabilization of FCFF suggests a more disciplined approach to capital spending and an improved capacity to convert operational performance into free cash flow for the firm.
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Interest Paid, Net of Tax
EOG Resources Inc., interest paid, net of tax calculation
US$ in thousands
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).
2 2019 Calculation
Net cash paid for interest, net of capitalized interest, tax = Net cash paid for interest, net of capitalized interest × EITR
= 186,546 × 22.86% = 42,644
3 2019 Calculation
Interest expense, capitalized, tax = Interest expense, capitalized × EITR
= 38,292 × 22.86% = 8,754
The financial data for the period from 2015 through 2019 indicates fluctuating trends in interest expenditures and the corporate tax environment. A significant shift in the treatment of interest costs is observable in 2019, characterized by a decrease in cash outflows and an increase in capitalized expenses.
- Net Cash Paid for Interest
- Cash outflows for interest, net of capitalized interest and tax, trended upward from 145.18 million in 2015 to a peak of 189.81 million in 2018. This growth was followed by a sharp decline in 2019, where payments dropped to 143.90 million, representing the lowest value in the five-year period.
- Capitalized Interest Expense
- Interest capitalized, net of tax, showed variability, reaching a minimum of 17.14 million in 2017. A reversal of this trend occurred in 2019, with capitalized interest rising to a period high of 29.54 million. The simultaneous decrease in cash paid for interest and the increase in capitalized interest during 2019 suggest a shift toward greater capital investment projects.
- Effective Income Tax Rate (EITR)
- The effective income tax rate demonstrated significant volatility, peaking at 37.50% in 2017. A substantial reduction is observed starting in 2018, with the rate falling to 21.98% and remaining relatively stable at 22.86% in 2019. This downward adjustment in the EITR likely influenced the net-of-tax values reported for interest payments and capitalization.
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Enterprise Value to FCFF Ratio, Current
EOG Resources Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 38,070,738) |
| Free cash flow to the firm (FCFF) | 1,914,094) |
| Valuation Ratio | |
| EV/FCFF | 19.89 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Chevron Corp. | 28.96 |
| ConocoPhillips | 24.82 |
| Exxon Mobil Corp. | 31.90 |
Based on: 10-K (reporting date: 2019-12-31).
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
EOG Resources Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 38,070,738) | 59,000,426) | 67,432,214) | 61,864,092) | 43,608,770) | |
| Free cash flow to the firm (FCFF)2 | 1,914,094) | 1,901,052) | 330,303) | (23,986) | (1,245,468) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 19.89 | 31.04 | 204.15 | — | — | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
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).
3 2019 Calculation
EV/FCFF = EV ÷ FCFF
= 38,070,738 ÷ 1,914,094 = 19.89
4 Click competitor name to see calculations.
A comprehensive analysis of the financial metrics from 2015 to 2019 reveals a stark transition in the company's valuation and cash flow profile. The period began with negative cash flows and ended with a stabilized, positive cash generation capacity alongside a lower enterprise valuation.
- Enterprise Value (EV) Dynamics
- Enterprise value exhibited a growth phase from 2015 to 2017, rising from 43,608,770 thousand US$ to a peak of 67,432,214 thousand US$. Subsequently, a contraction occurred, with the value declining to 38,070,738 thousand US$ by the end of 2019, representing a significant reduction from the 2017 peak.
- Free Cash Flow to the Firm (FCFF) Recovery
- The firm's cash flow generation underwent a substantial recovery. In 2015, FCFF was negative at -1,245,468 thousand US$. This deficit narrowed in 2016 before turning positive in 2017. By 2018 and 2019, FCFF stabilized at approximately 1.9 billion US$, marking a complete reversal from the losses observed in the first two years of the period.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio provides a clear indicator of improving efficiency in value creation. The ratio was not calculable during the initial years of negative FCFF. Once cash flow became positive in 2017, the ratio stood at an elevated 204.15. This figure declined sharply to 31.04 in 2018 and further to 19.89 in 2019. This downward trend reflects a convergence where the enterprise value decreased while the cash flow generation increased, suggesting a more sustainable valuation relative to actual cash performance.
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