Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Hess Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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The financial trajectory from 2018 through 2022 is characterized by an initial period of contraction and high volatility, followed by a significant and sustained recovery in cash generation capabilities. While operating cash flows experienced a gradual decline during the first three years of the period, free cash flow to the firm exhibited more extreme fluctuations, including deep negative values before returning to a strong positive position.
- Operating Cash Flow Trends
- Net cash provided by operating activities showed a downward trend from 2018 to 2020, decreasing from 1,939 million US$ to a low of 1,333 million US$. This decline was reversed sharply in 2021, with operating cash flow more than doubling to 2,890 million US$, and continuing its ascent to 3,944 million US$ by the end of 2022. This represents a substantial increase in the core ability to generate cash from primary business operations.
- Free Cash Flow to the Firm (FCFF) Volatility
- FCFF demonstrated significant instability compared to operating cash flows. After a marginal positive result in 2018, the figure dropped to a significant deficit of -1,020 million US$ in 2019 and remained negative at -140 million US$ in 2020. A pivot occurred in 2021, as FCFF transitioned to a positive 1,283 million US$, further increasing to 1,465 million US$ in 2022. This shift indicates a transition from a period of heavy cash consumption to one of significant value creation.
- Capital Expenditure and Investment Implications
- The divergence between operating cash flow and FCFF, particularly in 2019, suggests a period of aggressive capital investment. In 2019, despite generating 1,642 million US$ from operations, the FCFF was negative 1,020 million US$, implying that expenditures exceeded operating inflows by a substantial margin. The subsequent alignment of both metrics in 2021 and 2022 suggests a shift toward a more sustainable balance between operational earnings and capital reinvestment.
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Interest Paid, Net of Tax
Hess Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 486 × 31.00% = 151
3 2022 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 10 × 31.00% = 3
The analysis of interest expenditures net of tax reveals significant volatility between 2018 and 2022, with movements closely aligned with fluctuations in the effective income tax rate (EITR).
- Net Interest Expenditure Trends
- Interest paid, net of tax, remained relatively stable between 2018 and 2019, recording US$ 311 million and US$ 300 million respectively. A significant spike occurred in 2020, where costs reached a period peak of US$ 458 million. This was followed by a sharp decline to US$ 274 million in 2021, before rising again to US$ 335 million by the end of 2022.
- Correlation with Effective Income Tax Rate
- The volatility in net interest costs is strongly correlated with the EITR. The peak in net interest paid in 2020 coincides with a nominal EITR of 0.40%, which effectively eliminated the tax shield typically provided by interest expenses. Conversely, the lowest net interest expenditure in 2021 aligns with the highest EITR in the sequence (40.30%), which maximized the tax deductibility of interest payments.
- Capitalized Interest Observations
- Capitalized interest, net of tax, constitutes a marginal component of the total interest profile. Costs rose from US$ 16 million in 2018 to US$ 30 million in 2019, followed by a period of no reported capitalization in 2020 and 2021. A nominal amount of US$ 7 million was recorded in 2022, indicating a low level of interest capitalization relative to direct interest payments.
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Enterprise Value to FCFF Ratio, Current
Hess Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 52,021) |
| Free cash flow to the firm (FCFF) | 1,465) |
| Valuation Ratio | |
| EV/FCFF | 35.50 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Chevron Corp. | 25.80 |
| ConocoPhillips | 21.39 |
| Exxon Mobil Corp. | 28.27 |
| EV/FCFF, Sector | |
| Oil, Gas & Consumable Fuels | 10.79 |
| EV/FCFF, Industry | |
| Energy | 11.35 |
Based on: 10-K (reporting date: 2022-12-31).
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
Hess Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 49,180) | 38,098) | 27,881) | 26,579) | 22,717) | |
| Free cash flow to the firm (FCFF)2 | 1,465) | 1,283) | (140) | (1,020) | 86) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 33.56 | 29.69 | — | — | 263.97 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Chevron Corp. | 8.27 | 13.33 | — | — | — | |
| ConocoPhillips | 7.43 | 10.72 | — | — | — | |
| Exxon Mobil Corp. | 7.84 | 10.06 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Oil, Gas & Consumable Fuels | 7.91 | 11.15 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Energy | 8.54 | 11.54 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 49,180 ÷ 1,465 = 33.56
4 Click competitor name to see calculations.
A consistent upward trajectory is observed in the enterprise value from 2018 to 2022, while the free cash flow to the firm exhibited significant volatility during the same period. The divergence between these two metrics has led to a substantial normalization of the valuation multiple over the analyzed five-year window.
- Enterprise Value Trend
- The enterprise value grew steadily each year, rising from US$ 22,717 million in 2018 to US$ 49,180 million in 2022. This represents a continuous increase in the market valuation of the firm's operating assets, with the most significant acceleration occurring between 2020 and 2022.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF experienced a period of instability, transitioning from a marginal positive of US$ 86 million in 2018 to significant negative values in 2019 and 2020, peaking at a deficit of US$ 1,020 million. A robust recovery followed, with cash flows returning to positive territory in 2021 at US$ 1,283 million and further increasing to US$ 1,465 million by 2022.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio was exceptionally high in 2018 at 263.97, reflecting a disconnect between the enterprise value and the low cash flow generated at that time. Following two years of negative FCFF where the ratio was not applicable, the metric normalized to 29.69 in 2021 and 33.56 in 2022. This indicates that the recent growth in cash flow generation has outpaced the growth in enterprise value, resulting in a more compressed and sustainable valuation multiple compared to 2018.
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