Intrinsic value of Whitecap Resources Inc. - WCP

Previous Close

$8.76

  Intrinsic Value

$2.03

stock screener

  Rating & Target

str. sell

-77%

Previous close

$8.76

 
Intrinsic value

$2.03

 
Up/down potential

-77%

 
Rating

str. sell

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

We calculate the intrinsic value of WCP 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 3.2

 

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, %
  11.20
  23.70
  21.83
  20.15
  18.63
  17.27
  16.04
  14.94
  13.94
  13.05
  12.24
  11.52
  10.87
  10.28
  9.75
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
  7.05
  6.84
  6.66
  6.49
  6.34
  6.21
  6.09
  5.98
  5.88
Revenue, $m
  536
  663
  808
  971
  1,151
  1,350
  1,567
  1,801
  2,052
  2,320
  2,604
  2,904
  3,219
  3,550
  3,897
  4,258
  4,635
  5,027
  5,435
  5,860
  6,301
  6,759
  7,235
  7,730
  8,245
  8,780
  9,337
  9,917
  10,520
  11,149
  11,805
Variable operating expenses, $m
 
  1,496
  1,820
  2,184
  2,589
  3,034
  3,519
  4,043
  4,605
  5,204
  5,840
  6,499
  7,205
  7,946
  8,721
  9,530
  10,373
  11,251
  12,165
  13,114
  14,101
  15,127
  16,193
  17,301
  18,452
  19,650
  20,897
  22,194
  23,545
  24,953
  26,420
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
  296
  1,496
  1,820
  2,184
  2,589
  3,034
  3,519
  4,043
  4,605
  5,204
  5,840
  6,499
  7,205
  7,946
  8,721
  9,530
  10,373
  11,251
  12,165
  13,114
  14,101
  15,127
  16,193
  17,301
  18,452
  19,650
  20,897
  22,194
  23,545
  24,953
  26,420
Operating income, $m
  240
  -833
  -1,012
  -1,214
  -1,438
  -1,684
  -1,952
  -2,242
  -2,553
  -2,884
  -3,236
  -3,595
  -3,986
  -4,395
  -4,824
  -5,272
  -5,738
  -6,224
  -6,729
  -7,255
  -7,801
  -8,368
  -8,958
  -9,570
  -10,208
  -10,870
  -11,560
  -12,277
  -13,025
  -13,803
  -14,615
EBITDA, $m
  261
  -644
  -784
  -942
  -1,118
  -1,310
  -1,521
  -1,748
  -1,992
  -2,252
  -2,527
  -2,818
  -3,125
  -3,446
  -3,782
  -4,133
  -4,499
  -4,880
  -5,276
  -5,688
  -6,116
  -6,560
  -7,023
  -7,503
  -8,003
  -8,522
  -9,063
  -9,625
  -10,211
  -10,822
  -11,458
Interest expense (income), $m
  36
  34
  55
  79
  106
  136
  169
  204
  243
  284
  329
  375
  425
  477
  532
  589
  648
  711
  775
  843
  913
  985
  1,061
  1,140
  1,221
  1,306
  1,395
  1,486
  1,582
  1,682
  1,786
Earnings before tax, $m
  240
  -867
  -1,068
  -1,293
  -1,544
  -1,820
  -2,121
  -2,446
  -2,796
  -3,169
  -3,564
  -3,970
  -4,411
  -4,872
  -5,356
  -5,860
  -6,387
  -6,935
  -7,505
  -8,097
  -8,713
  -9,353
  -10,019
  -10,710
  -11,429
  -12,176
  -12,954
  -13,764
  -14,607
  -15,485
  -16,401
Tax expense, $m
  69
  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
  171
  -867
  -1,068
  -1,293
  -1,544
  -1,820
  -2,121
  -2,446
  -2,796
  -3,169
  -3,564
  -3,970
  -4,411
  -4,872
  -5,356
  -5,860
  -6,387
  -6,935
  -7,505
  -8,097
  -8,713
  -9,353
  -10,019
  -10,710
  -11,429
  -12,176
  -12,954
  -13,764
  -14,607
  -15,485
  -16,401

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
  0
Total assets, $m
  5,135
  6,375
  7,767
  9,332
  11,071
  12,982
  15,065
  17,315
  19,730
  22,305
  25,036
  27,920
  30,954
  34,137
  37,466
  40,943
  44,566
  48,339
  52,263
  56,343
  60,584
  64,990
  69,569
  74,329
  79,277
  84,424
  89,778
  95,352
  101,156
  107,204
  113,509
Adjusted assets (=assets-cash), $m
  5,135
  6,375
  7,767
  9,332
  11,071
  12,982
  15,065
  17,315
  19,730
  22,305
  25,036
  27,920
  30,954
  34,137
  37,466
  40,943
  44,566
  48,339
  52,263
  56,343
  60,584
  64,990
  69,569
  74,329
  79,277
  84,424
  89,778
  95,352
  101,156
  107,204
  113,509
Revenue / Adjusted assets
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
Average production assets, $m
  4,301
  5,320
  6,481
  7,786
  9,237
  10,832
  12,570
  14,448
  16,463
  18,611
  20,890
  23,296
  25,828
  28,484
  31,262
  34,162
  37,186
  40,333
  43,608
  47,012
  50,550
  54,227
  58,048
  62,020
  66,148
  70,443
  74,910
  79,561
  84,404
  89,450
  94,711
Working capital, $m
  -120
  -149
  -181
  -217
  -258
  -302
  -351
  -403
  -460
  -520
  -583
  -650
  -721
  -795
  -873
  -954
  -1,038
  -1,126
  -1,218
  -1,313
  -1,411
  -1,514
  -1,621
  -1,732
  -1,847
  -1,967
  -2,091
  -2,221
  -2,357
  -2,497
  -2,644
Total debt, $m
  773
  1,256
  1,799
  2,409
  3,088
  3,833
  4,645
  5,523
  6,465
  7,469
  8,534
  9,659
  10,842
  12,083
  13,382
  14,738
  16,151
  17,622
  19,153
  20,744
  22,398
  24,116
  25,902
  27,758
  29,688
  31,695
  33,784
  35,957
  38,221
  40,580
  43,038
Total liabilities, $m
  2,003
  2,486
  3,029
  3,639
  4,318
  5,063
  5,875
  6,753
  7,695
  8,699
  9,764
  10,889
  12,072
  13,313
  14,612
  15,968
  17,381
  18,852
  20,383
  21,974
  23,628
  25,346
  27,132
  28,988
  30,918
  32,925
  35,014
  37,187
  39,451
  41,810
  44,268
Total equity, $m
  3,132
  3,889
  4,738
  5,692
  6,753
  7,919
  9,190
  10,562
  12,035
  13,606
  15,272
  17,031
  18,882
  20,824
  22,855
  24,975
  27,185
  29,487
  31,880
  34,369
  36,956
  39,644
  42,437
  45,341
  48,359
  51,499
  54,765
  58,165
  61,705
  65,395
  69,240
Total liabilities and equity, $m
  5,135
  6,375
  7,767
  9,331
  11,071
  12,982
  15,065
  17,315
  19,730
  22,305
  25,036
  27,920
  30,954
  34,137
  37,467
  40,943
  44,566
  48,339
  52,263
  56,343
  60,584
  64,990
  69,569
  74,329
  79,277
  84,424
  89,779
  95,352
  101,156
  107,205
  113,508
Debt-to-equity ratio
  0.247
  0.320
  0.380
  0.420
  0.460
  0.480
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  171
  -867
  -1,068
  -1,293
  -1,544
  -1,820
  -2,121
  -2,446
  -2,796
  -3,169
  -3,564
  -3,970
  -4,411
  -4,872
  -5,356
  -5,860
  -6,387
  -6,935
  -7,505
  -8,097
  -8,713
  -9,353
  -10,019
  -10,710
  -11,429
  -12,176
  -12,954
  -13,764
  -14,607
  -15,485
  -16,401
Depreciation, amort., depletion, $m
  21
  190
  228
  272
  320
  373
  431
  494
  561
  633
  709
  777
  861
  949
  1,042
  1,139
  1,240
  1,344
  1,454
  1,567
  1,685
  1,808
  1,935
  2,067
  2,205
  2,348
  2,497
  2,652
  2,813
  2,982
  3,157
Funds from operations, $m
  350
  -678
  -839
  -1,021
  -1,224
  -1,446
  -1,689
  -1,952
  -2,235
  -2,536
  -2,856
  -3,194
  -3,550
  -3,923
  -4,314
  -4,722
  -5,147
  -5,590
  -6,051
  -6,530
  -7,028
  -7,546
  -8,084
  -8,643
  -9,224
  -9,828
  -10,457
  -11,112
  -11,793
  -12,503
  -13,244
Change in working capital, $m
  -15
  -28
  -32
  -36
  -41
  -45
  -49
  -52
  -56
  -60
  -64
  -67
  -71
  -74
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -147
Cash from operations, $m
  365
  -649
  -807
  -985
  -1,183
  -1,402
  -1,641
  -1,900
  -2,178
  -2,476
  -2,792
  -3,127
  -3,479
  -3,849
  -4,236
  -4,641
  -5,063
  -5,502
  -5,960
  -6,435
  -6,930
  -7,443
  -7,977
  -8,532
  -9,109
  -9,708
  -10,332
  -10,982
  -11,658
  -12,362
  -13,097
Maintenance CAPEX, $m
  0
  -143
  -177
  -216
  -260
  -308
  -361
  -419
  -482
  -549
  -620
  -696
  -777
  -861
  -949
  -1,042
  -1,139
  -1,240
  -1,344
  -1,454
  -1,567
  -1,685
  -1,808
  -1,935
  -2,067
  -2,205
  -2,348
  -2,497
  -2,652
  -2,813
  -2,982
New CAPEX, $m
  -787
  -1,019
  -1,161
  -1,306
  -1,451
  -1,595
  -1,738
  -1,878
  -2,015
  -2,148
  -2,279
  -2,407
  -2,532
  -2,656
  -2,778
  -2,900
  -3,023
  -3,148
  -3,275
  -3,404
  -3,538
  -3,677
  -3,821
  -3,971
  -4,129
  -4,294
  -4,468
  -4,651
  -4,843
  -5,046
  -5,260
Cash from investing activities, $m
  -675
  -1,162
  -1,338
  -1,522
  -1,711
  -1,903
  -2,099
  -2,297
  -2,497
  -2,697
  -2,899
  -3,103
  -3,309
  -3,517
  -3,727
  -3,942
  -4,162
  -4,388
  -4,619
  -4,858
  -5,105
  -5,362
  -5,629
  -5,906
  -6,196
  -6,499
  -6,816
  -7,148
  -7,495
  -7,859
  -8,242
Free cash flow, $m
  -310
  -1,811
  -2,145
  -2,506
  -2,893
  -3,305
  -3,740
  -4,197
  -4,675
  -5,173
  -5,691
  -6,230
  -6,787
  -7,365
  -7,964
  -8,583
  -9,225
  -9,890
  -10,579
  -11,293
  -12,035
  -12,805
  -13,606
  -14,438
  -15,305
  -16,208
  -17,148
  -18,129
  -19,153
  -20,222
  -21,339
Issuance/(repayment) of debt, $m
  -103
  483
  543
  610
  678
  746
  812
  878
  942
  1,004
  1,065
  1,125
  1,183
  1,241
  1,298
  1,356
  1,413
  1,471
  1,531
  1,591
  1,654
  1,719
  1,786
  1,856
  1,930
  2,007
  2,088
  2,174
  2,264
  2,359
  2,459
Issuance/(repurchase) of shares, $m
  539
  1,624
  1,917
  2,248
  2,604
  2,986
  3,391
  3,819
  4,269
  4,739
  5,230
  5,730
  6,262
  6,814
  7,387
  7,981
  8,597
  9,236
  9,899
  10,586
  11,300
  12,041
  12,812
  13,613
  14,447
  15,316
  16,220
  17,164
  18,147
  19,174
  20,246
Cash from financing (excl. dividends), $m  
  427
  2,107
  2,460
  2,858
  3,282
  3,732
  4,203
  4,697
  5,211
  5,743
  6,295
  6,855
  7,445
  8,055
  8,685
  9,337
  10,010
  10,707
  11,430
  12,177
  12,954
  13,760
  14,598
  15,469
  16,377
  17,323
  18,308
  19,338
  20,411
  21,533
  22,705
Total cash flow (excl. dividends), $m
  117
  296
  314
  351
  389
  427
  464
  500
  536
  570
  604
  625
  658
  690
  722
  753
  785
  818
  850
  884
  919
  955
  992
  1,031
  1,072
  1,115
  1,160
  1,208
  1,258
  1,311
  1,366
Retained Cash Flow (-), $m
  -625
  -1,624
  -1,917
  -2,248
  -2,604
  -2,986
  -3,391
  -3,819
  -4,269
  -4,739
  -5,230
  -5,730
  -6,262
  -6,814
  -7,387
  -7,981
  -8,597
  -9,236
  -9,899
  -10,586
  -11,300
  -12,041
  -12,812
  -13,613
  -14,447
  -15,316
  -16,220
  -17,164
  -18,147
  -19,174
  -20,246
Prev. year cash balance distribution, $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 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
 
  -1,328
  -1,603
  -1,896
  -2,215
  -2,559
  -2,927
  -3,319
  -3,733
  -4,169
  -4,626
  -5,105
  -5,604
  -6,124
  -6,665
  -7,228
  -7,812
  -8,418
  -9,048
  -9,702
  -10,381
  -11,086
  -11,820
  -12,582
  -13,375
  -14,200
  -15,060
  -15,956
  -16,890
  -17,864
  -18,880
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  -1,271
  -1,461
  -1,640
  -1,808
  -1,961
  -2,094
  -2,203
  -2,284
  -2,336
  -2,356
  -2,344
  -2,302
  -2,230
  -2,131
  -2,009
  -1,868
  -1,712
  -1,546
  -1,375
  -1,204
  -1,038
  -879
  -732
  -598
  -480
  -377
  -290
  -218
  -161
  -115
Current shareholders' claim on cash, %
  100
  66.6
  45.1
  30.9
  21.5
  15.0
  10.6
  7.6
  5.5
  4.0
  2.9
  2.1
  1.6
  1.2
  0.9
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Whitecap Resources Inc is a Canada-based oil-weighted growth company focused on its existing assets enhanced by oil-based acquisitions. Its assets include Boundary Lake property, which is located in northeast British Columbia; Valhalla North property, which is located in the Peace River Arch area of Alberta and is characterized by shallow declines and a production base, and Deep Basin properties, which include Karr, Simonette, Kakwa, Elmworth and Wapiti, which are located southwest of Grande Prairie, Alberta. The primary reservoirs being developed are the Dunvegan and Cardium. Its Cardium producing areas are primarily located in the Pembina, Garrington, Ferrier and Willesden Green areas of West Central Alberta. Its Elnora producing property is located southeast of Red Deer, Alberta. Its Lucky Hills, Whiteside, Kerrobert, and Eagle Lake areas are located in West Central Saskatchewan. The primary reservoir that the Company is focused on developing is the Viking resource oil play.

FINANCIAL RATIOS  of  Whitecap Resources Inc. (WCP)

Valuation Ratios
P/E Ratio 18.9
Price to Sales 6
Price to Book 1
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow -7.6
Growth Rates
Sales Growth Rate 11.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 65.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 24.7%
Total Debt to Equity 24.7%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 3.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 70.1%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 55.4%
EBITDA Margin - 3 Yr. Avg. 62.6%
Operating Margin 44.8%
Oper. Margin - 3 Yr. Avg. -9.5%
Pre-Tax Margin 44.8%
Pre-Tax Margin - 3 Yr. Avg. -9.5%
Net Profit Margin 31.9%
Net Profit Margin - 3 Yr. Avg. -9.5%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 21.4%
Payout Ratio 68.4%

WCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WCP stock intrinsic value calculation we used $536 million for the last fiscal year's total revenue generated by Whitecap Resources Inc.. The default revenue input number comes from 2016 income statement of Whitecap 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 WCP stock valuation model: a) initial revenue growth rate of 23.7% 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 4.5%, whose default value for WCP is calculated based on our internal credit rating of Whitecap 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 Whitecap 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 WCP stock the variable cost ratio is equal to 226.1%.

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 WCP 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 4.4% for Whitecap Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Whitecap 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 WCP 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 WCP are equal to 802.3%.

Life of production assets of 210.6 years is the average useful life of capital assets used in Whitecap 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 WCP is equal to -22.4%. 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 - $3132 million for Whitecap 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 370.021 million for Whitecap 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 Whitecap Resources Inc. at the current share price and the inputted number of shares is $3.2 billion.

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Financial statements of WCP
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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