Intrinsic value of Baytex Energy Corp. - BTE

Previous Close

$4.04

  Intrinsic Value

$2.10

stock screener

  Rating & Target

sell

-48%

Previous close

$4.04

 
Intrinsic value

$2.10

 
Up/down potential

-48%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BTE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -31.59
  30.90
  28.31
  25.98
  23.88
  21.99
  20.29
  18.76
  17.39
  16.15
  15.03
  14.03
  13.13
  12.31
  11.58
  10.93
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
Revenue, $m
  602
  788
  1,011
  1,274
  1,578
  1,925
  2,316
  2,750
  3,228
  3,750
  4,313
  4,919
  5,564
  6,250
  6,974
  7,735
  8,535
  9,371
  10,244
  11,155
  12,103
  13,089
  14,115
  15,180
  16,288
  17,439
  18,635
  19,878
  21,172
  22,517
  23,918
Variable operating expenses, $m
 
  1,972
  2,530
  3,187
  3,948
  4,816
  5,794
  6,881
  8,077
  9,382
  10,792
  12,307
  13,922
  15,637
  17,448
  19,354
  21,354
  23,447
  25,632
  27,910
  30,282
  32,749
  35,315
  37,981
  40,752
  43,632
  46,624
  49,736
  52,972
  56,338
  59,843
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,287
  1,972
  2,530
  3,187
  3,948
  4,816
  5,794
  6,881
  8,077
  9,382
  10,792
  12,307
  13,922
  15,637
  17,448
  19,354
  21,354
  23,447
  25,632
  27,910
  30,282
  32,749
  35,315
  37,981
  40,752
  43,632
  46,624
  49,736
  52,972
  56,338
  59,843
Operating income, $m
  -685
  -1,184
  -1,519
  -1,913
  -2,370
  -2,891
  -3,478
  -4,131
  -4,849
  -5,632
  -6,479
  -7,388
  -8,358
  -9,387
  -10,474
  -11,619
  -12,819
  -14,075
  -15,387
  -16,755
  -18,179
  -19,660
  -21,200
  -22,801
  -24,464
  -26,193
  -27,990
  -29,857
  -31,800
  -33,821
  -35,925
EBITDA, $m
  -177
  -516
  -662
  -835
  -1,034
  -1,261
  -1,517
  -1,802
  -2,115
  -2,457
  -2,826
  -3,223
  -3,646
  -4,095
  -4,569
  -5,068
  -5,592
  -6,140
  -6,712
  -7,309
  -7,930
  -8,576
  -9,248
  -9,946
  -10,672
  -11,426
  -12,210
  -13,025
  -13,872
  -14,754
  -15,671
Interest expense (income), $m
  104
  102
  149
  205
  272
  348
  436
  534
  644
  765
  896
  1,039
  1,191
  1,354
  1,527
  1,710
  1,902
  2,104
  2,315
  2,535
  2,765
  3,004
  3,253
  3,512
  3,781
  4,061
  4,351
  4,653
  4,967
  5,293
  5,633
Earnings before tax, $m
  -758
  -1,285
  -1,668
  -2,118
  -2,642
  -3,240
  -3,914
  -4,665
  -5,493
  -6,397
  -7,375
  -8,427
  -9,549
  -10,741
  -12,002
  -13,329
  -14,721
  -16,179
  -17,702
  -19,290
  -20,944
  -22,664
  -24,453
  -26,313
  -28,245
  -30,253
  -32,341
  -34,510
  -36,767
  -39,114
  -41,557
Tax expense, $m
  -273
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -485
  -1,285
  -1,668
  -2,118
  -2,642
  -3,240
  -3,914
  -4,665
  -5,493
  -6,397
  -7,375
  -8,427
  -9,549
  -10,741
  -12,002
  -13,329
  -14,721
  -16,179
  -17,702
  -19,290
  -20,944
  -22,664
  -24,453
  -26,313
  -28,245
  -30,253
  -32,341
  -34,510
  -36,767
  -39,114
  -41,557

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,594
  6,015
  7,718
  9,724
  12,046
  14,695
  17,677
  20,994
  24,644
  28,624
  32,927
  37,547
  42,477
  47,708
  53,234
  59,050
  65,151
  71,535
  78,202
  85,152
  92,389
  99,917
  107,745
  115,880
  124,334
  133,120
  142,251
  151,744
  161,616
  171,888
  182,579
Adjusted assets (=assets-cash), $m
  4,591
  6,015
  7,718
  9,724
  12,046
  14,695
  17,677
  20,994
  24,644
  28,624
  32,927
  37,547
  42,477
  47,708
  53,234
  59,050
  65,151
  71,535
  78,202
  85,152
  92,389
  99,917
  107,745
  115,880
  124,334
  133,120
  142,251
  151,744
  161,616
  171,888
  182,579
Revenue / Adjusted assets
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
Average production assets, $m
  4,435
  5,805
  7,449
  9,384
  11,625
  14,182
  17,060
  20,261
  23,784
  27,624
  31,778
  36,236
  40,993
  46,041
  51,375
  56,987
  62,876
  69,037
  75,471
  82,178
  89,162
  96,428
  103,982
  111,833
  119,992
  128,471
  137,283
  146,444
  155,972
  165,885
  176,203
Working capital, $m
  -34
  -48
  -62
  -78
  -96
  -117
  -141
  -168
  -197
  -229
  -263
  -300
  -339
  -381
  -425
  -472
  -521
  -572
  -625
  -680
  -738
  -798
  -861
  -926
  -994
  -1,064
  -1,137
  -1,213
  -1,291
  -1,374
  -1,459
Total debt, $m
  1,754
  2,568
  3,538
  4,681
  6,005
  7,515
  9,215
  11,105
  13,186
  15,455
  17,908
  20,541
  23,351
  26,332
  29,482
  32,797
  36,275
  39,914
  43,714
  47,676
  51,801
  56,092
  60,554
  65,191
  70,010
  75,017
  80,222
  85,633
  91,260
  97,115
  103,209
Total liabilities, $m
  2,615
  3,429
  4,399
  5,542
  6,866
  8,376
  10,076
  11,966
  14,047
  16,316
  18,769
  21,402
  24,212
  27,193
  30,343
  33,658
  37,136
  40,775
  44,575
  48,537
  52,662
  56,953
  61,415
  66,052
  70,871
  75,878
  81,083
  86,494
  92,121
  97,976
  104,070
Total equity, $m
  1,979
  2,587
  3,319
  4,181
  5,180
  6,319
  7,601
  9,027
  10,597
  12,308
  14,159
  16,145
  18,265
  20,514
  22,890
  25,391
  28,015
  30,760
  33,627
  36,615
  39,727
  42,964
  46,330
  49,829
  53,464
  57,241
  61,168
  65,250
  69,495
  73,912
  78,509
Total liabilities and equity, $m
  4,594
  6,016
  7,718
  9,723
  12,046
  14,695
  17,677
  20,993
  24,644
  28,624
  32,928
  37,547
  42,477
  47,707
  53,233
  59,049
  65,151
  71,535
  78,202
  85,152
  92,389
  99,917
  107,745
  115,881
  124,335
  133,119
  142,251
  151,744
  161,616
  171,888
  182,579
Debt-to-equity ratio
  0.886
  0.990
  1.070
  1.120
  1.160
  1.190
  1.210
  1.230
  1.240
  1.260
  1.260
  1.270
  1.280
  1.280
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
  1.300
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
Adjusted equity ratio
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -485
  -1,285
  -1,668
  -2,118
  -2,642
  -3,240
  -3,914
  -4,665
  -5,493
  -6,397
  -7,375
  -8,427
  -9,549
  -10,741
  -12,002
  -13,329
  -14,721
  -16,179
  -17,702
  -19,290
  -20,944
  -22,664
  -24,453
  -26,313
  -28,245
  -30,253
  -32,341
  -34,510
  -36,767
  -39,114
  -41,557
Depreciation, amort., depletion, $m
  508
  667
  856
  1,079
  1,336
  1,630
  1,961
  2,329
  2,734
  3,175
  3,653
  4,165
  4,712
  5,292
  5,905
  6,550
  7,227
  7,935
  8,675
  9,446
  10,249
  11,084
  11,952
  12,854
  13,792
  14,767
  15,780
  16,833
  17,928
  19,067
  20,253
Funds from operations, $m
  722
  -618
  -811
  -1,040
  -1,305
  -1,610
  -1,953
  -2,336
  -2,759
  -3,222
  -3,723
  -4,261
  -4,837
  -5,449
  -6,097
  -6,778
  -7,494
  -8,244
  -9,027
  -9,844
  -10,695
  -11,581
  -12,501
  -13,459
  -14,453
  -15,487
  -16,561
  -17,678
  -18,839
  -20,047
  -21,304
Change in working capital, $m
  475
  -11
  -14
  -16
  -19
  -21
  -24
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
Cash from operations, $m
  247
  -607
  -798
  -1,024
  -1,287
  -1,588
  -1,929
  -2,310
  -2,730
  -3,190
  -3,688
  -4,225
  -4,798
  -5,407
  -6,052
  -6,732
  -7,446
  -8,193
  -8,974
  -9,789
  -10,637
  -11,521
  -12,439
  -13,394
  -14,386
  -15,416
  -16,488
  -17,602
  -18,760
  -19,965
  -21,219
Maintenance CAPEX, $m
  0
  -510
  -667
  -856
  -1,079
  -1,336
  -1,630
  -1,961
  -2,329
  -2,734
  -3,175
  -3,653
  -4,165
  -4,712
  -5,292
  -5,905
  -6,550
  -7,227
  -7,935
  -8,675
  -9,446
  -10,249
  -11,084
  -11,952
  -12,854
  -13,792
  -14,767
  -15,780
  -16,833
  -17,928
  -19,067
New CAPEX, $m
  -225
  -1,370
  -1,643
  -1,935
  -2,241
  -2,557
  -2,878
  -3,201
  -3,523
  -3,841
  -4,153
  -4,459
  -4,757
  -5,048
  -5,333
  -5,613
  -5,888
  -6,161
  -6,434
  -6,707
  -6,984
  -7,266
  -7,554
  -7,851
  -8,159
  -8,479
  -8,812
  -9,161
  -9,528
  -9,913
  -10,318
Cash from investing activities, $m
  -292
  -1,880
  -2,310
  -2,791
  -3,320
  -3,893
  -4,508
  -5,162
  -5,852
  -6,575
  -7,328
  -8,112
  -8,922
  -9,760
  -10,625
  -11,518
  -12,438
  -13,388
  -14,369
  -15,382
  -16,430
  -17,515
  -18,638
  -19,803
  -21,013
  -22,271
  -23,579
  -24,941
  -26,361
  -27,841
  -29,385
Free cash flow, $m
  -45
  -2,487
  -3,109
  -3,815
  -4,606
  -5,481
  -6,437
  -7,472
  -8,582
  -9,764
  -11,017
  -12,336
  -13,720
  -15,168
  -16,678
  -18,250
  -19,884
  -21,582
  -23,343
  -25,171
  -27,067
  -29,035
  -31,077
  -33,197
  -35,399
  -37,687
  -40,067
  -42,543
  -45,120
  -47,805
  -50,604
Issuance/(repayment) of debt, $m
  -61
  814
  971
  1,143
  1,324
  1,510
  1,700
  1,891
  2,081
  2,268
  2,453
  2,633
  2,810
  2,982
  3,150
  3,315
  3,478
  3,639
  3,800
  3,962
  4,125
  4,291
  4,462
  4,637
  4,819
  5,008
  5,205
  5,411
  5,627
  5,855
  6,094
Issuance/(repurchase) of shares, $m
  110
  1,896
  2,400
  2,981
  3,640
  4,379
  5,196
  6,092
  7,063
  8,108
  9,226
  10,413
  11,669
  12,991
  14,378
  15,829
  17,345
  18,925
  20,569
  22,279
  24,056
  25,902
  27,819
  29,811
  31,881
  34,031
  36,267
  38,592
  41,012
  43,531
  46,155
Cash from financing (excl. dividends), $m  
  49
  2,710
  3,371
  4,124
  4,964
  5,889
  6,896
  7,983
  9,144
  10,376
  11,679
  13,046
  14,479
  15,973
  17,528
  19,144
  20,823
  22,564
  24,369
  26,241
  28,181
  30,193
  32,281
  34,448
  36,700
  39,039
  41,472
  44,003
  46,639
  49,386
  52,249
Total cash flow (excl. dividends), $m
  2
  223
  262
  308
  357
  408
  459
  510
  562
  612
  662
  711
  758
  805
  850
  895
  939
  982
  1,026
  1,069
  1,113
  1,158
  1,204
  1,252
  1,301
  1,352
  1,405
  1,460
  1,519
  1,580
  1,645
Retained Cash Flow (-), $m
  435
  -1,896
  -2,400
  -2,981
  -3,640
  -4,379
  -5,196
  -6,092
  -7,063
  -8,108
  -9,226
  -10,413
  -11,669
  -12,991
  -14,378
  -15,829
  -17,345
  -18,925
  -20,569
  -22,279
  -24,056
  -25,902
  -27,819
  -29,811
  -31,881
  -34,031
  -36,267
  -38,592
  -41,012
  -43,531
  -46,155
Prev. year cash balance distribution, $m
 
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -1,670
  -2,138
  -2,672
  -3,283
  -3,971
  -4,738
  -5,581
  -6,501
  -7,496
  -8,564
  -9,702
  -10,910
  -12,186
  -13,528
  -14,935
  -16,406
  -17,942
  -19,543
  -21,209
  -22,942
  -24,743
  -26,615
  -28,560
  -30,580
  -32,680
  -34,862
  -37,132
  -39,493
  -41,951
  -44,510
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  -1,525
  -1,768
  -1,982
  -2,163
  -2,299
  -2,384
  -2,412
  -2,383
  -2,299
  -2,166
  -1,993
  -1,791
  -1,572
  -1,347
  -1,126
  -918
  -729
  -564
  -424
  -310
  -220
  -152
  -101
  -66
  -41
  -25
  -14
  -8
  -4
  -2
Current shareholders' claim on cash, %
  100
  42.2
  18.1
  7.9
  3.5
  1.6
  0.7
  0.3
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Baytex Energy Corp. (Baytex) is engaged in the business of acquiring, developing, exploiting and holding interests in petroleum and natural gas properties and related assets in Canada (Alberta and Saskatchewan) and in the United States (Texas). The Company's crude oil and natural gas operations are organized into four business units: Lloydminster, Peace River, Conventional and United States. Each business unit has a portfolio of mineral leases, operated and non-operated properties and development prospects. The Company's subsidiaries include Baytex Energy Ltd. and Baytex Energy USA, Inc. Baytex Energy Ltd. is engaged in the business of oil and natural gas exploration, exploitation, development, acquisition and production in Canada. Baytex Energy USA, Inc. is engaged in the business of oil and natural gas exploration, exploitation, development, acquisition and production in the United States. It holds all of the operating assets in the United States.

FINANCIAL RATIOS  of  Baytex Energy Corp. (BTE)

Valuation Ratios
P/E Ratio -1.9
Price to Sales 1.6
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow 42.9
Growth Rates
Sales Growth Rate -31.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57%
Cap. Spend. - 3 Yr. Gr. Rate -16.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 88.6%
Total Debt to Equity 88.6%
Interest Coverage -6
Management Effectiveness
Return On Assets -8.3%
Ret/ On Assets - 3 Yr. Avg. -48.1%
Return On Total Capital -12.1%
Ret/ On T. Cap. - 3 Yr. Avg. -14%
Return On Equity -22.1%
Return On Equity - 3 Yr. Avg. -25.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 60%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin -24.3%
EBITDA Margin - 3 Yr. Avg. -22.1%
Operating Margin -113.8%
Oper. Margin - 3 Yr. Avg. -90.2%
Pre-Tax Margin -125.9%
Pre-Tax Margin - 3 Yr. Avg. -98.3%
Net Profit Margin -80.6%
Net Profit Margin - 3 Yr. Avg. -73%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 2269.7%
Payout Ratio 0%

BTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BTE stock intrinsic value calculation we used $602 million for the last fiscal year's total revenue generated by Baytex Energy Corp.. The default revenue input number comes from 2016 income statement of Baytex Energy Corp.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BTE stock valuation model: a) initial revenue growth rate of 30.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.5%, whose default value for BTE is calculated based on our internal credit rating of Baytex Energy Corp., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Baytex Energy Corp..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BTE stock the variable cost ratio is equal to 250.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BTE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.8% for Baytex Energy Corp..

Corporate tax rate of 27% is the nominal tax rate for Baytex Energy Corp.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BTE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BTE are equal to 736.7%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Baytex Energy Corp. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BTE is equal to -6.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1979 million for Baytex Energy Corp. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 235.451 million for Baytex Energy Corp. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Baytex Energy Corp. at the current share price and the inputted number of shares is $1.0 billion.

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Financial statements of BTE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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