FCFF Stable Model

Base Year Operating Income

Average of the last 5 years

Base Year Tax Rate

(in currency)

Effective tax rate: LTM

If yes, enter the after-tax return on capital in perpetuity =

Average of the last 5 years

Debt ratio =

23.21%

( in percent)

Inputs for cost of equity and capital

Beta of the stock =

1.2915

Riskfree rate =

2.50%

(in percent)

Risk Premium=

Country of incorporation

(in percent)

Pre-tax cost of debt =

7.00%

Marginal tax rate =

20.00%

Expected Growth Rate =

2.00%

Total Debt outstanding at the firm =

This is a pre-tax cost of borrowing.

(in percent)
$11,645.00

Cash and Marketable Securities =

$2,551.00

Number of shares outstanding =

850.56

Curreent Stock Price =

$45.30

Valuation Output
EBIT

$12,744.20
Page 1

FCFF Stable Model

Effective tax rate

26.00%

EBIT (1- tax rate) =

$9,430.71

- Reinvestment

$1,317.40

Free Cashflow to Firm =

$8,113.31

ERP used in valuation =

9.50%

Cost of Equity =

14.77%

Cost of Debt =

5.60%

Cost of Capital =

12.64%

Expected Growth rate =

2.00%

Value of Operating Assets

$77,771.67

+ Cash & Marketable Securities

$2,551.00

- Total Debt

$11,645.00

Estimated value of equity =

$68,677.67

Estimated value per share =

$80.74

Actual price per share (ADR, in US dollars) =

$45.30

Page 2

FCFF Stable Model

Operating Income Choices
2014 Estimate

$11,803.00

Last fiscal year

$12,808.00

Average of the last 5 years

$12,744.20

10% below 2014 Estimate

$10,622.70

20% below 2014 Estimate

$9,442.40

Return on capital Choices

is a pre-tax cost of borrowing.

Estimated Operating Income

12.15% Will vary with operating income

Last fiscal year

12.04%

Average of the last 5 years

14.32%

Equal to cost of capital

12.64%

Tax rate choices

Effective tax rate: LTM

26.00%

Effective tax rate: Last 5 years

27.07%

Marginal tax rate

20.00%

Equity Risk Premium

Return on capital =

Country of incorporation

9.50%

Reserves-based ERP

9.35%

Revenue-based ERP

7.50%

14.32%
Page 3

FCFF Stable Model

Reinvestment Rate =

13.97%

Page 4

FCFF Stable Model

Will vary with operating income

Page 5

Year
2009
2010
2011
2012
2013
Average

Operating Income ($)

$10,159
$11,896
$14,818
$14,040
$12,808
$12,744

Effective tax rate

22.00%
20.50%
25.10%
20.39%
27.07%
23.01%

BV of Debt BV of Equity
$9,809
$51,010
$11,323
$56,379
$11,194
$59,608
$9,092
$67,466
$6,621
$74,188

Cash Invested capital

Return on capital
$2,744
$58,075
13.64%
$2,349
$65,353
14.47%
$2,536
$68,266
16.26%
$2,910
$73,648
15.18%
$3,200
$77,609
12.04%
14.32%

Lukoil: Historical Data

$160,000

$140,000

$90,000

$80,000

$70,000

$60,000
$100,000
$50,000
$80,000
$40,000
$60,000

$30,000

Market Cap / Enterprise Value

Revenues/ EBITDA/ Operating Income

$120,000

$40,000
$20,000

$20,000

$0

$10,000

$0
Revenues
EBITDA
Operating
Income
Market
Cap
Enterprise
Value
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(Est)

Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 (Est)

Revenues
EBITDA
Operating Income
Market Cap Total Debt Cash
$13,210
$4,917
$4,079
$6,989
$2,312
$1,366
$11,970
$3,851
$2,965
$10,300
$3,428
$1,388
$13,338
$3,454
$2,630
$13,051
$4,193
$1,530
$19,164
$4,265
$3,345
$19,714
$4,811
$1,686
$28,597
$7,109
$6,034
$25,534
$3,877
$1,406
$45,843
$10,210
$8,895
$50,443
$4,990
$1,761
$54,114
$12,051
$10,200
$73,760
$6,184
$796
$66,858
$15,366
$13,194
$72,082
$7,043
$889
$86,340
$17,092
$14,134
$27,817
$9,809
$2,744
$68,025
$14,096
$10,159
$48,014
$11,323
$2,349
$86,078
$16,050
$11,896
$48,191
$11,194
$2,536
$111,433
$19,291
$14,818
$45,098
$9,092
$2,910
$116,335
$18,872
$14,040
$56,287
$6,621
$3,200
$119,118
$18,564
$12,808
$52,590
$10,821
$2,075
$142,015
$20,266
$11,803
$38,700
$11,645
$2,551

Enterprise Value
$7,935
$12,340
$15,714
$22,839
$28,005
$53,672
$79,148
$78,236
$34,882
$56,988
$56,849
$51,280
$59,708
$61,336
$47,794

Unlevered Beta for Global Integrated Oil

D/E ratio
Marginal tax rate
Levered Beta
Risk free rate
Default spread for country
Default spread for company
Cost of debt (pre-tax)

1.04 January 2014 update (Damodaran.com)

30.22%
20.00%
1.29
2.50%
3.00%
1.50%
7.00%