Intrinsic value of Parex Resources Inc. - PXT

Previous Close

$24.90

  Intrinsic Value

$1.41

stock screener

  Rating & Target

str. sell

-94%

Previous close

$24.90

 
Intrinsic value

$1.41

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of PXT 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 3.8

 

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, %
  23.80
  21.92
  20.23
  18.71
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
Revenue, $m
  688
  839
  1,009
  1,198
  1,405
  1,632
  1,876
  2,139
  2,419
  2,716
  3,030
  3,360
  3,706
  4,069
  4,447
  4,842
  5,252
  5,680
  6,124
  6,586
  7,065
  7,564
  8,082
  8,621
  9,181
  9,764
  10,371
  11,003
  11,661
  12,348
Variable operating expenses, $m
  486
  590
  707
  838
  981
  1,138
  1,307
  1,488
  1,682
  1,887
  2,094
  2,322
  2,562
  2,812
  3,074
  3,346
  3,630
  3,926
  4,233
  4,552
  4,884
  5,228
  5,586
  5,959
  6,346
  6,749
  7,168
  7,605
  8,060
  8,535
Fixed operating expenses, $m
  257
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  356
  363
  371
  380
  388
  396
  405
  414
  423
  432
  442
  452
  462
  472
  482
Total operating expenses, $m
  743
  852
  975
  1,112
  1,261
  1,424
  1,599
  1,787
  1,987
  2,199
  2,413
  2,648
  2,895
  3,152
  3,422
  3,702
  3,993
  4,297
  4,613
  4,940
  5,280
  5,633
  6,000
  6,382
  6,778
  7,191
  7,620
  8,067
  8,532
  9,017
Operating income, $m
  -54
  -13
  34
  86
  144
  208
  277
  352
  432
  517
  617
  712
  811
  916
  1,025
  1,140
  1,259
  1,383
  1,512
  1,646
  1,785
  1,931
  2,082
  2,239
  2,403
  2,573
  2,751
  2,936
  3,129
  3,331
EBITDA, $m
  126
  205
  293
  393
  502
  622
  752
  891
  1,040
  1,199
  1,367
  1,544
  1,729
  1,923
  2,126
  2,338
  2,559
  2,789
  3,028
  3,276
  3,535
  3,803
  4,083
  4,374
  4,676
  4,991
  5,319
  5,660
  6,017
  6,388
Interest expense (income), $m
  1
  0
  2
  5
  8
  11
  15
  19
  23
  28
  33
  38
  43
  49
  55
  61
  68
  75
  82
  90
  97
  105
  114
  122
  131
  141
  151
  161
  171
  182
  194
Earnings before tax, $m
  -54
  -15
  29
  78
  133
  193
  258
  329
  404
  484
  579
  668
  762
  861
  964
  1,072
  1,184
  1,300
  1,422
  1,549
  1,680
  1,817
  1,959
  2,108
  2,262
  2,423
  2,590
  2,765
  2,947
  3,137
Tax expense, $m
  0
  0
  8
  21
  36
  52
  70
  89
  109
  131
  156
  180
  206
  232
  260
  289
  320
  351
  384
  418
  454
  491
  529
  569
  611
  654
  699
  746
  796
  847
Net income, $m
  -54
  -15
  21
  57
  97
  141
  189
  240
  295
  353
  423
  488
  557
  629
  704
  782
  864
  949
  1,038
  1,130
  1,226
  1,326
  1,430
  1,539
  1,651
  1,769
  1,891
  2,018
  2,151
  2,290

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
  1,287
  1,569
  1,886
  2,239
  2,627
  3,050
  3,507
  3,998
  4,521
  5,076
  5,663
  6,280
  6,928
  7,605
  8,312
  9,050
  9,817
  10,616
  11,446
  12,309
  13,206
  14,138
  15,107
  16,114
  17,161
  18,251
  19,385
  20,566
  21,797
  23,080
Adjusted assets (=assets-cash), $m
  1,287
  1,569
  1,886
  2,239
  2,627
  3,050
  3,507
  3,998
  4,521
  5,076
  5,663
  6,280
  6,928
  7,605
  8,312
  9,050
  9,817
  10,616
  11,446
  12,309
  13,206
  14,138
  15,107
  16,114
  17,161
  18,251
  19,385
  20,566
  21,797
  23,080
Revenue / Adjusted assets
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
Average production assets, $m
  920
  1,122
  1,349
  1,601
  1,879
  2,181
  2,508
  2,859
  3,234
  3,631
  4,051
  4,492
  4,955
  5,440
  5,946
  6,473
  7,022
  7,594
  8,188
  8,805
  9,446
  10,113
  10,806
  11,526
  12,275
  13,055
  13,866
  14,711
  15,591
  16,509
Working capital, $m
  -94
  -115
  -138
  -164
  -193
  -224
  -257
  -293
  -331
  -372
  -415
  -460
  -508
  -557
  -609
  -663
  -720
  -778
  -839
  -902
  -968
  -1,036
  -1,107
  -1,181
  -1,258
  -1,338
  -1,421
  -1,507
  -1,598
  -1,692
Total debt, $m
  67
  142
  227
  321
  424
  537
  659
  790
  930
  1,078
  1,235
  1,400
  1,573
  1,754
  1,942
  2,139
  2,344
  2,557
  2,779
  3,010
  3,249
  3,498
  3,757
  4,025
  4,305
  4,596
  4,899
  5,214
  5,543
  5,885
Total liabilities, $m
  344
  419
  504
  598
  701
  814
  936
  1,067
  1,207
  1,355
  1,512
  1,677
  1,850
  2,031
  2,219
  2,416
  2,621
  2,834
  3,056
  3,287
  3,526
  3,775
  4,034
  4,302
  4,582
  4,873
  5,176
  5,491
  5,820
  6,162
Total equity, $m
  943
  1,150
  1,382
  1,641
  1,925
  2,235
  2,571
  2,930
  3,314
  3,721
  4,151
  4,603
  5,078
  5,574
  6,093
  6,633
  7,196
  7,782
  8,390
  9,023
  9,680
  10,363
  11,073
  11,812
  12,579
  13,378
  14,209
  15,075
  15,977
  16,918
Total liabilities and equity, $m
  1,287
  1,569
  1,886
  2,239
  2,626
  3,049
  3,507
  3,997
  4,521
  5,076
  5,663
  6,280
  6,928
  7,605
  8,312
  9,049
  9,817
  10,616
  11,446
  12,310
  13,206
  14,138
  15,107
  16,114
  17,161
  18,251
  19,385
  20,566
  21,797
  23,080
Debt-to-equity ratio
  0.070
  0.120
  0.160
  0.200
  0.220
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
Adjusted equity ratio
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -54
  -15
  21
  57
  97
  141
  189
  240
  295
  353
  423
  488
  557
  629
  704
  782
  864
  949
  1,038
  1,130
  1,226
  1,326
  1,430
  1,539
  1,651
  1,769
  1,891
  2,018
  2,151
  2,290
Depreciation, amort., depletion, $m
  180
  218
  260
  306
  358
  414
  474
  539
  609
  682
  750
  832
  918
  1,007
  1,101
  1,199
  1,300
  1,406
  1,516
  1,631
  1,749
  1,873
  2,001
  2,134
  2,273
  2,418
  2,568
  2,724
  2,887
  3,057
Funds from operations, $m
  126
  202
  281
  364
  455
  555
  663
  779
  904
  1,036
  1,173
  1,320
  1,474
  1,636
  1,805
  1,981
  2,165
  2,356
  2,554
  2,761
  2,976
  3,199
  3,431
  3,673
  3,924
  4,186
  4,459
  4,742
  5,038
  5,347
Change in working capital, $m
  -18
  -21
  -23
  -26
  -28
  -31
  -34
  -36
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
Cash from operations, $m
  145
  223
  304
  389
  483
  586
  697
  815
  942
  1,076
  1,216
  1,365
  1,522
  1,686
  1,857
  2,035
  2,221
  2,414
  2,615
  2,824
  3,042
  3,267
  3,502
  3,747
  4,001
  4,266
  4,542
  4,829
  5,129
  5,441
Maintenance CAPEX, $m
  -138
  -170
  -208
  -250
  -297
  -348
  -404
  -465
  -530
  -599
  -672
  -750
  -832
  -918
  -1,007
  -1,101
  -1,199
  -1,300
  -1,406
  -1,516
  -1,631
  -1,749
  -1,873
  -2,001
  -2,134
  -2,273
  -2,418
  -2,568
  -2,724
  -2,887
New CAPEX, $m
  -177
  -202
  -227
  -252
  -278
  -303
  -327
  -351
  -374
  -397
  -420
  -442
  -463
  -485
  -506
  -527
  -549
  -571
  -594
  -617
  -641
  -667
  -693
  -720
  -749
  -779
  -811
  -845
  -880
  -918
Cash from investing activities, $m
  -315
  -372
  -435
  -502
  -575
  -651
  -731
  -816
  -904
  -996
  -1,092
  -1,192
  -1,295
  -1,403
  -1,513
  -1,628
  -1,748
  -1,871
  -2,000
  -2,133
  -2,272
  -2,416
  -2,566
  -2,721
  -2,883
  -3,052
  -3,229
  -3,413
  -3,604
  -3,805
Free cash flow, $m
  -170
  -149
  -131
  -113
  -91
  -65
  -34
  0
  38
  80
  124
  173
  227
  283
  343
  407
  473
  542
  615
  691
  769
  851
  937
  1,025
  1,118
  1,213
  1,313
  1,416
  1,524
  1,636
Issuance/(repayment) of debt, $m
  67
  75
  85
  94
  104
  113
  122
  131
  140
  148
  157
  165
  173
  181
  189
  197
  205
  213
  222
  230
  239
  249
  259
  269
  280
  291
  303
  315
  329
  343
Issuance/(repurchase) of shares, $m
  235
  222
  212
  201
  187
  169
  147
  120
  89
  54
  7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  302
  297
  297
  295
  291
  282
  269
  251
  229
  202
  164
  165
  173
  181
  189
  197
  205
  213
  222
  230
  239
  249
  259
  269
  280
  291
  303
  315
  329
  343
Total cash flow (excl. dividends), $m
  132
  148
  166
  183
  200
  217
  234
  251
  267
  282
  288
  338
  400
  464
  532
  603
  678
  756
  837
  921
  1,009
  1,100
  1,195
  1,294
  1,397
  1,504
  1,616
  1,732
  1,853
  1,979
Retained Cash Flow (-), $m
  -235
  -222
  -233
  -259
  -284
  -310
  -335
  -360
  -384
  -407
  -430
  -452
  -475
  -497
  -518
  -540
  -563
  -585
  -609
  -633
  -657
  -683
  -710
  -738
  -768
  -799
  -831
  -866
  -902
  -940
Prev. year cash balance distribution, $m
  202
  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
  99
  -74
  -67
  -76
  -84
  -93
  -101
  -109
  -117
  -125
  -142
  -114
  -75
  -32
  14
  63
  115
  170
  228
  289
  352
  417
  485
  556
  629
  705
  784
  866
  951
  1,038
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  95
  -68
  -58
  -62
  -65
  -67
  -68
  -68
  -67
  -65
  -68
  -49
  -29
  -11
  4
  16
  25
  31
  35
  37
  36
  35
  32
  28
  24
  21
  17
  13
  10
  8
Current shareholders' claim on cash, %
  92.8
  87.6
  83.7
  80.7
  78.5
  76.8
  75.5
  74.7
  74.1
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8

Parex Resources, Inc. is a Canada-based oil and gas company. The Company is engaged in crude oil exploration, development and production in Colombia. The Company's segments include Canada and Colombia. The Company, through its foreign subsidiaries, holds interests in onshore exploration and production blocks totaling approximately 1,870,120 gross acres. The Company's annual oil production is approximately 27,430 barrels per day. The Company's principal land holdings and interests in exploration and production blocks held by its subsidiaries include LLA-16, 20, 29 and 30; LLA-57; Los Ocarros; El Eden; Cabrestero; LLA-40; LLA-24; LLA-26; Cebucan; LLA-32; LLA-10, which are located in Colombia Llanos Basin; VMM-11; Morpho; VIM-1, and VMM-9, which are located in Colombia Magdalena Basin. Its subsidiaries include Parex Resources Colombia, Ltd., Ramshorn International Limited and Parex Resources (Trinidad), Ltd., which are engaged in oil and natural gas exploration and development.

FINANCIAL RATIOS  of  Parex Resources Inc. (PXT)

Valuation Ratios
P/E Ratio -60.5
Price to Sales 6.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 66.8
Growth Rates
Sales Growth Rate -14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate -13.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage -95
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. -6.7%
Return On Total Capital -6.4%
Ret/ On T. Cap. - 3 Yr. Avg. -10%
Return On Equity -6.4%
Return On Equity - 3 Yr. Avg. -10.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 52.7%
Gross Margin - 3 Yr. Avg. 49%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 19.3%
Operating Margin -14.9%
Oper. Margin - 3 Yr. Avg. -8.6%
Pre-Tax Margin -17.3%
Pre-Tax Margin - 3 Yr. Avg. -11.9%
Net Profit Margin -11.3%
Net Profit Margin - 3 Yr. Avg. -12.3%
Effective Tax Rate 34.4%
Eff/ Tax Rate - 3 Yr. Avg. -4.7%
Payout Ratio 0%

PXT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PXT stock intrinsic value calculation we used $556 million for the last fiscal year's total revenue generated by Parex Resources Inc.. The default revenue input number comes from 2016 income statement of Parex Resources 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 PXT stock valuation model: a) initial revenue growth rate of 23.8% 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 4.3%, whose default value for PXT is calculated based on our internal credit rating of Parex Resources 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 Parex Resources 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 PXT stock the variable cost ratio is equal to 70.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $251 million in the base year in the intrinsic value calculation for PXT 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 3.5% for Parex Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Parex Resources 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 PXT 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 PXT are equal to 133.7%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Parex Resources 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 PXT is equal to -13.7%. 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 - $964 million for Parex Resources 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 153.634 million for Parex Resources 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 Parex Resources Inc. at the current share price and the inputted number of shares is $3.8 billion.

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