Intrinsic value of Gran Tierra Energy Inc. - GTE

Previous Close

$4.44

  Intrinsic Value

$0.65

stock screener

  Rating & Target

str. sell

-85%

Previous close

$4.44

 
Intrinsic value

$0.65

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of GTE 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 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  50.50
  45.95
  41.86
  38.17
  34.85
  31.87
  29.18
  26.76
  24.59
  22.63
  20.86
  19.28
  17.85
  16.57
  15.41
  14.37
  13.43
  12.59
  11.83
  11.15
  10.53
  9.98
  9.48
  9.03
  8.63
  8.27
  7.94
  7.65
  7.38
  7.14
Revenue, $m
  588
  859
  1,218
  1,683
  2,270
  2,993
  3,867
  4,902
  6,107
  7,489
  9,051
  10,796
  12,724
  14,831
  17,117
  19,576
  22,205
  25,001
  27,958
  31,074
  34,347
  37,774
  41,356
  45,091
  48,982
  53,031
  57,242
  61,618
  66,166
  70,893
Variable operating expenses, $m
  1,369
  1,991
  2,819
  3,890
  5,241
  6,906
  8,917
  11,300
  14,075
  17,257
  20,840
  24,858
  29,295
  34,148
  39,410
  45,073
  51,127
  57,563
  64,372
  71,547
  79,082
  86,973
  95,219
  103,820
  112,779
  122,102
  131,796
  141,873
  152,345
  163,227
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
  1,369
  1,991
  2,819
  3,890
  5,241
  6,906
  8,917
  11,300
  14,075
  17,257
  20,840
  24,858
  29,295
  34,148
  39,410
  45,073
  51,127
  57,563
  64,372
  71,547
  79,082
  86,973
  95,219
  103,820
  112,779
  122,102
  131,796
  141,873
  152,345
  163,227
Operating income, $m
  -780
  -1,133
  -1,601
  -2,206
  -2,971
  -3,913
  -5,050
  -6,398
  -7,968
  -9,768
  -11,789
  -14,062
  -16,572
  -19,317
  -22,294
  -25,497
  -28,921
  -32,562
  -36,414
  -40,473
  -44,735
  -49,199
  -53,863
  -58,729
  -63,797
  -69,070
  -74,554
  -80,255
  -86,179
  -92,334
EBITDA, $m
  -587
  -857
  -1,216
  -1,680
  -2,265
  -2,987
  -3,859
  -4,891
  -6,094
  -7,473
  -9,032
  -10,773
  -12,696
  -14,799
  -17,080
  -19,534
  -22,158
  -24,947
  -27,898
  -31,007
  -34,273
  -37,693
  -41,267
  -44,994
  -48,877
  -52,917
  -57,119
  -61,486
  -66,024
  -70,740
Interest expense (income), $m
  8
  16
  36
  64
  100
  148
  207
  281
  370
  475
  598
  738
  897
  1,075
  1,271
  1,486
  1,718
  1,968
  2,236
  2,520
  2,821
  3,139
  3,472
  3,820
  4,185
  4,565
  4,961
  5,373
  5,802
  6,247
  6,710
Earnings before tax, $m
  -796
  -1,169
  -1,664
  -2,307
  -3,118
  -4,120
  -5,331
  -6,768
  -8,443
  -10,366
  -12,527
  -14,959
  -17,647
  -20,588
  -23,779
  -27,215
  -30,890
  -34,798
  -38,934
  -43,294
  -47,874
  -52,671
  -57,684
  -62,914
  -68,362
  -74,031
  -79,928
  -86,056
  -92,426
  -99,044
Tax expense, $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
Net income, $m
  -796
  -1,169
  -1,664
  -2,307
  -3,118
  -4,120
  -5,331
  -6,768
  -8,443
  -10,366
  -12,527
  -14,959
  -17,647
  -20,588
  -23,779
  -27,215
  -30,890
  -34,798
  -38,934
  -43,294
  -47,874
  -52,671
  -57,684
  -62,914
  -68,362
  -74,031
  -79,928
  -86,056
  -92,426
  -99,044

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  2,724
  3,976
  5,640
  7,793
  10,509
  13,859
  17,903
  22,694
  28,273
  34,671
  41,905
  49,983
  58,906
  68,664
  79,244
  90,630
  102,802
  115,743
  129,435
  143,862
  159,013
  174,881
  191,461
  208,755
  226,769
  245,515
  265,008
  285,270
  306,326
  328,208
Adjusted assets (=assets-cash), $m
  2,724
  3,976
  5,640
  7,793
  10,509
  13,859
  17,903
  22,694
  28,273
  34,671
  41,905
  49,983
  58,906
  68,664
  79,244
  90,630
  102,802
  115,743
  129,435
  143,862
  159,013
  174,881
  191,461
  208,755
  226,769
  245,515
  265,008
  285,270
  306,326
  328,208
Revenue / Adjusted assets
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
Average production assets, $m
  896
  1,308
  1,856
  2,564
  3,457
  4,559
  5,889
  7,465
  9,301
  11,406
  13,785
  16,443
  19,378
  22,588
  26,069
  29,814
  33,819
  38,076
  42,580
  47,326
  52,310
  57,530
  62,984
  68,674
  74,600
  80,766
  87,179
  93,845
  100,772
  107,970
Working capital, $m
  -98
  -143
  -202
  -279
  -377
  -497
  -642
  -814
  -1,014
  -1,243
  -1,503
  -1,792
  -2,112
  -2,462
  -2,841
  -3,250
  -3,686
  -4,150
  -4,641
  -5,158
  -5,702
  -6,271
  -6,865
  -7,485
  -8,131
  -8,803
  -9,502
  -10,229
  -10,984
  -11,768
Total debt, $m
  623
  1,097
  1,728
  2,544
  3,573
  4,842
  6,375
  8,191
  10,306
  12,730
  15,472
  18,534
  21,915
  25,614
  29,623
  33,939
  38,552
  43,457
  48,646
  54,114
  59,856
  65,870
  72,154
  78,708
  85,535
  92,640
  100,028
  107,707
  115,688
  123,981
Total liabilities, $m
  1,033
  1,507
  2,138
  2,954
  3,983
  5,252
  6,785
  8,601
  10,716
  13,140
  15,882
  18,944
  22,325
  26,024
  30,033
  34,349
  38,962
  43,867
  49,056
  54,524
  60,266
  66,280
  72,564
  79,118
  85,945
  93,050
  100,438
  108,117
  116,098
  124,391
Total equity, $m
  1,692
  2,469
  3,503
  4,840
  6,526
  8,606
  11,117
  14,093
  17,558
  21,531
  26,023
  31,040
  36,580
  42,640
  49,210
  56,281
  63,840
  71,877
  80,379
  89,338
  98,747
  108,601
  118,897
  129,637
  140,823
  152,465
  164,570
  177,153
  190,229
  203,817
Total liabilities and equity, $m
  2,725
  3,976
  5,641
  7,794
  10,509
  13,858
  17,902
  22,694
  28,274
  34,671
  41,905
  49,984
  58,905
  68,664
  79,243
  90,630
  102,802
  115,744
  129,435
  143,862
  159,013
  174,881
  191,461
  208,755
  226,768
  245,515
  265,008
  285,270
  306,327
  328,208
Debt-to-equity ratio
  0.370
  0.440
  0.490
  0.530
  0.550
  0.560
  0.570
  0.580
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
Adjusted equity ratio
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -796
  -1,169
  -1,664
  -2,307
  -3,118
  -4,120
  -5,331
  -6,768
  -8,443
  -10,366
  -12,527
  -14,959
  -17,647
  -20,588
  -23,779
  -27,215
  -30,890
  -34,798
  -38,934
  -43,294
  -47,874
  -52,671
  -57,684
  -62,914
  -68,362
  -74,031
  -79,928
  -86,056
  -92,426
  -99,044
Depreciation, amort., depletion, $m
  193
  276
  385
  527
  705
  926
  1,192
  1,507
  1,874
  2,295
  2,757
  3,289
  3,876
  4,518
  5,214
  5,963
  6,764
  7,615
  8,516
  9,465
  10,462
  11,506
  12,597
  13,735
  14,920
  16,153
  17,436
  18,769
  20,154
  21,594
Funds from operations, $m
  -603
  -893
  -1,279
  -1,780
  -2,413
  -3,194
  -4,139
  -5,261
  -6,569
  -8,071
  -9,770
  -11,671
  -13,771
  -16,071
  -18,565
  -21,252
  -24,126
  -27,183
  -30,418
  -33,829
  -37,412
  -41,165
  -45,087
  -49,179
  -53,442
  -57,878
  -62,492
  -67,287
  -72,271
  -77,450
Change in working capital, $m
  -33
  -45
  -60
  -77
  -97
  -120
  -145
  -172
  -200
  -229
  -259
  -290
  -320
  -350
  -379
  -408
  -436
  -464
  -491
  -517
  -543
  -569
  -594
  -620
  -646
  -672
  -699
  -727
  -755
  -785
Cash from operations, $m
  -570
  -848
  -1,220
  -1,703
  -2,315
  -3,074
  -3,994
  -5,089
  -6,369
  -7,841
  -9,511
  -11,381
  -13,451
  -15,721
  -18,186
  -20,844
  -23,690
  -26,719
  -29,927
  -33,312
  -36,868
  -40,596
  -44,493
  -48,559
  -52,796
  -57,206
  -61,793
  -66,561
  -71,516
  -76,666
Maintenance CAPEX, $m
  -119
  -179
  -262
  -371
  -513
  -691
  -912
  -1,178
  -1,493
  -1,860
  -2,281
  -2,757
  -3,289
  -3,876
  -4,518
  -5,214
  -5,963
  -6,764
  -7,615
  -8,516
  -9,465
  -10,462
  -11,506
  -12,597
  -13,735
  -14,920
  -16,153
  -17,436
  -18,769
  -20,154
New CAPEX, $m
  -301
  -412
  -547
  -708
  -894
  -1,102
  -1,330
  -1,576
  -1,835
  -2,105
  -2,380
  -2,658
  -2,935
  -3,210
  -3,481
  -3,746
  -4,004
  -4,257
  -4,504
  -4,746
  -4,984
  -5,220
  -5,454
  -5,689
  -5,926
  -6,167
  -6,413
  -6,666
  -6,927
  -7,198
Cash from investing activities, $m
  -420
  -591
  -809
  -1,079
  -1,407
  -1,793
  -2,242
  -2,754
  -3,328
  -3,965
  -4,661
  -5,415
  -6,224
  -7,086
  -7,999
  -8,960
  -9,967
  -11,021
  -12,119
  -13,262
  -14,449
  -15,682
  -16,960
  -18,286
  -19,661
  -21,087
  -22,566
  -24,102
  -25,696
  -27,352
Free cash flow, $m
  -990
  -1,439
  -2,029
  -2,782
  -3,722
  -4,867
  -6,237
  -7,843
  -9,697
  -11,806
  -14,172
  -16,796
  -19,675
  -22,806
  -26,184
  -29,803
  -33,657
  -37,740
  -42,047
  -46,574
  -51,318
  -56,278
  -61,453
  -66,845
  -72,457
  -78,293
  -84,359
  -90,662
  -97,212
  -104,018
Issuance/(repayment) of debt, $m
  346
  474
  631
  816
  1,029
  1,269
  1,533
  1,816
  2,115
  2,425
  2,742
  3,062
  3,382
  3,698
  4,010
  4,315
  4,613
  4,905
  5,189
  5,468
  5,742
  6,014
  6,284
  6,554
  6,827
  7,105
  7,388
  7,679
  7,980
  8,293
Issuance/(repurchase) of shares, $m
  1,361
  1,946
  2,698
  3,644
  4,805
  6,200
  7,843
  9,743
  11,908
  14,338
  17,020
  19,976
  23,188
  26,648
  30,350
  34,286
  38,449
  42,834
  47,437
  52,253
  57,283
  62,524
  67,980
  73,653
  79,549
  85,673
  92,033
  98,639
  105,502
  112,632
Cash from financing (excl. dividends), $m  
  1,707
  2,420
  3,329
  4,460
  5,834
  7,469
  9,376
  11,559
  14,023
  16,763
  19,762
  23,038
  26,570
  30,346
  34,360
  38,601
  43,062
  47,739
  52,626
  57,721
  63,025
  68,538
  74,264
  80,207
  86,376
  92,778
  99,421
  106,318
  113,482
  120,925
Total cash flow (excl. dividends), $m
  716
  981
  1,300
  1,677
  2,113
  2,602
  3,139
  3,716
  4,325
  4,957
  5,590
  6,242
  6,894
  7,540
  8,175
  8,798
  9,406
  9,999
  10,579
  11,148
  11,707
  12,260
  12,811
  13,363
  13,919
  14,484
  15,062
  15,656
  16,270
  16,907
Retained Cash Flow (-), $m
  -1,361
  -1,946
  -2,698
  -3,644
  -4,805
  -6,200
  -7,843
  -9,743
  -11,908
  -14,338
  -17,020
  -19,976
  -23,188
  -26,648
  -30,350
  -34,286
  -38,449
  -42,834
  -47,437
  -52,253
  -57,283
  -62,524
  -67,980
  -73,653
  -79,549
  -85,673
  -92,033
  -98,639
  -105,502
  -112,632
Prev. year cash balance distribution, $m
  34
  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
  -611
  -965
  -1,398
  -1,966
  -2,692
  -3,598
  -4,704
  -6,027
  -7,583
  -9,381
  -11,430
  -13,734
  -16,293
  -19,108
  -22,174
  -25,488
  -29,043
  -32,835
  -36,858
  -41,106
  -45,576
  -50,264
  -55,169
  -60,291
  -65,629
  -71,188
  -76,971
  -82,983
  -89,232
  -95,725
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  -585
  -882
  -1,213
  -1,612
  -2,075
  -2,592
  -3,150
  -3,728
  -4,302
  -4,847
  -5,338
  -5,750
  -6,062
  -6,260
  -6,334
  -6,282
  -6,109
  -5,824
  -5,445
  -4,991
  -4,484
  -3,949
  -3,406
  -2,877
  -2,379
  -1,923
  -1,520
  -1,173
  -884
  -649
Current shareholders' claim on cash, %
  55.4
  31.4
  18.2
  10.7
  6.5
  4.0
  2.5
  1.6
  1.0
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  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

Gran Tierra Energy Inc. is an energy company engaged in oil and gas acquisition, exploration, development and production. The Company focuses on onshore oil and gas properties in Colombia, and also own rights to oil and gas properties in Brazil and Peru. Its segments are Colombia, Peru and Brazil based on geographic organization. It operates principally in the Putumayo Basin in Colombia, and has properties in other basins, including the Catatumbo, Cauca, Llanos, Sinu-San Jacinto, Middle Magdalena and Lower Magdalena Basins. It has interests in over 30 blocks in Colombia and it is the operator on over 20 of these blocks. Its blocks and fields include Chaza-Costayaco and Moqueta Fields, Guayuyaco-Guayuyaco and Juanambu Fields, Garibay-Jilguero Field and over 11 Other Blocks. Blocks REC-T-129, REC-T-142, REC-T-155 and REC-T-224 are located over 70 kilometers northeast of Salvador, Brazil in the Reconcavo Basin. Its blocks in Peru include Block 123, Block 129, Block 107 and Block 133.

FINANCIAL RATIOS  of  Gran Tierra Energy Inc. (GTE)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 4.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow -23.8
Growth Rates
Sales Growth Rate 4.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.1%
Cap. Spend. - 3 Yr. Gr. Rate -15.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 23.9%
Total Debt to Equity 23.9%
Interest Coverage -109
Management Effectiveness
Return On Assets -36.7%
Ret/ On Assets - 3 Yr. Avg. -21.6%
Return On Total Capital -45.1%
Ret/ On T. Cap. - 3 Yr. Avg. -27.1%
Return On Equity -50%
Return On Equity - 3 Yr. Avg. -28.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 89%
Gross Margin - 3 Yr. Avg. 90.1%
EBITDA Margin -174.4%
EBITDA Margin - 3 Yr. Avg. -71.2%
Operating Margin -225.6%
Oper. Margin - 3 Yr. Avg. -121%
Pre-Tax Margin -224.8%
Pre-Tax Margin - 3 Yr. Avg. -120.4%
Net Profit Margin -160.9%
Net Profit Margin - 3 Yr. Avg. -96.2%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. -230.7%
Payout Ratio 0%

GTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GTE stock intrinsic value calculation we used $391 million for the last fiscal year's total revenue generated by Gran Tierra Energy Inc.. The default revenue input number comes from 2016 income statement of Gran Tierra Energy Inc.. 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 GTE stock valuation model: a) initial revenue growth rate of 50.5% 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 4.4%, whose default value for GTE is calculated based on our internal credit rating of Gran Tierra Energy Inc., 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 Gran Tierra Energy Inc..
    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 GTE stock the variable cost ratio is equal to 233.8%.

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 GTE 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 Gran Tierra Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Gran Tierra Energy Inc.. 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 GTE 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 GTE are equal to 152.3%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Gran Tierra Energy Inc. 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 GTE is equal to -16.6%. 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 - $1161 million for Gran Tierra Energy Inc. - 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 392.962 million for Gran Tierra Energy Inc. 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 Gran Tierra Energy Inc. at the current share price and the inputted number of shares is $1.7 billion.

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