Intrinsic value of Baytex Energy Corp. - BTE

Previous Close

$3.39

  Intrinsic Value

$2.10

stock screener

  Rating & Target

sell

-38%

  Value-price divergence*

0%

Previous close

$3.39

 
Intrinsic value

$2.10

 
Up/down potential

-38%

 
Rating

sell

 
Value-price divergence*

0%

*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 0.8

 

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
  39.90
  36.41
  33.27
  30.44
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.25
  7.03
  6.83
  6.64
Revenue, $m
  602
  842
  1,149
  1,531
  1,997
  2,554
  3,208
  3,964
  4,824
  5,790
  6,862
  8,040
  9,323
  10,708
  12,193
  13,776
  15,455
  17,227
  19,091
  21,046
  23,090
  25,224
  27,449
  29,764
  32,173
  34,678
  37,280
  39,985
  42,796
  45,717
  48,755
Variable operating expenses, $m
 
  2,107
  2,874
  3,831
  4,997
  6,391
  8,027
  9,918
  12,069
  14,486
  17,169
  20,116
  23,325
  26,791
  30,507
  34,468
  38,668
  43,102
  47,766
  52,656
  57,771
  63,111
  68,677
  74,471
  80,498
  86,763
  93,275
  100,043
  107,075
  114,384
  121,984
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
  2,107
  2,874
  3,831
  4,997
  6,391
  8,027
  9,918
  12,069
  14,486
  17,169
  20,116
  23,325
  26,791
  30,507
  34,468
  38,668
  43,102
  47,766
  52,656
  57,771
  63,111
  68,677
  74,471
  80,498
  86,763
  93,275
  100,043
  107,075
  114,384
  121,984
Operating income, $m
  -685
  -1,265
  -1,726
  -2,300
  -3,000
  -3,837
  -4,819
  -5,954
  -7,245
  -8,696
  -10,307
  -12,076
  -14,003
  -16,083
  -18,314
  -20,692
  -23,213
  -25,875
  -28,675
  -31,610
  -34,681
  -37,887
  -41,228
  -44,706
  -48,324
  -52,086
  -55,995
  -60,058
  -64,279
  -68,667
  -73,229
EBITDA, $m
  -177
  -552
  -753
  -1,003
  -1,309
  -1,674
  -2,102
  -2,597
  -3,161
  -3,793
  -4,496
  -5,268
  -6,108
  -7,016
  -7,989
  -9,026
  -10,126
  -11,287
  -12,509
  -13,789
  -15,129
  -16,527
  -17,985
  -19,502
  -21,081
  -22,721
  -24,427
  -26,199
  -28,041
  -29,955
  -31,945
Interest expense (income), $m
  104
  102
  163
  240
  336
  454
  595
  760
  950
  1,167
  1,411
  1,682
  1,979
  2,303
  2,652
  3,027
  3,427
  3,850
  4,298
  4,768
  5,261
  5,777
  6,316
  6,877
  7,462
  8,070
  8,702
  9,358
  10,041
  10,750
  11,488
Earnings before tax, $m
  -758
  -1,367
  -1,888
  -2,540
  -3,336
  -4,291
  -5,414
  -6,714
  -8,196
  -9,863
  -11,718
  -13,758
  -15,982
  -18,386
  -20,966
  -23,719
  -26,640
  -29,725
  -32,972
  -36,378
  -39,942
  -43,664
  -47,544
  -51,583
  -55,786
  -60,155
  -64,697
  -69,416
  -74,320
  -79,418
  -84,717
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
  -1,367
  -1,888
  -2,540
  -3,336
  -4,291
  -5,414
  -6,714
  -8,196
  -9,863
  -11,718
  -13,758
  -15,982
  -18,386
  -20,966
  -23,719
  -26,640
  -29,725
  -32,972
  -36,378
  -39,942
  -43,664
  -47,544
  -51,583
  -55,786
  -60,155
  -64,697
  -69,416
  -74,320
  -79,418
  -84,717

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
  6,429
  8,770
  11,687
  15,245
  19,498
  24,492
  30,259
  36,823
  44,196
  52,381
  61,374
  71,165
  81,738
  93,076
  105,161
  117,975
  131,503
  145,732
  160,653
  176,259
  192,551
  209,532
  227,210
  245,598
  264,715
  284,583
  305,229
  326,685
  348,986
  372,172
Adjusted assets (=assets-cash), $m
  4,591
  6,429
  8,770
  11,687
  15,245
  19,498
  24,492
  30,259
  36,823
  44,196
  52,381
  61,374
  71,165
  81,738
  93,076
  105,161
  117,975
  131,503
  145,732
  160,653
  176,259
  192,551
  209,532
  227,210
  245,598
  264,715
  284,583
  305,229
  326,685
  348,986
  372,172
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
  6,204
  8,464
  11,279
  14,713
  18,817
  23,636
  29,202
  35,537
  42,652
  50,552
  59,231
  68,680
  78,883
  89,825
  101,488
  113,855
  126,911
  140,643
  155,042
  170,104
  185,827
  202,214
  219,275
  237,021
  255,470
  274,645
  294,570
  315,276
  336,799
  359,175
Working capital, $m
  -34
  -51
  -70
  -93
  -122
  -156
  -196
  -242
  -294
  -353
  -419
  -490
  -569
  -653
  -744
  -840
  -943
  -1,051
  -1,165
  -1,284
  -1,408
  -1,539
  -1,674
  -1,816
  -1,963
  -2,115
  -2,274
  -2,439
  -2,611
  -2,789
  -2,974
Total debt, $m
  1,754
  2,804
  4,138
  5,801
  7,829
  10,253
  13,099
  16,386
  20,128
  24,331
  28,996
  34,122
  39,703
  45,729
  52,192
  59,081
  66,385
  74,096
  82,206
  90,711
  99,607
  108,893
  118,572
  128,648
  139,130
  150,027
  161,351
  173,120
  185,350
  198,061
  211,277
Total liabilities, $m
  2,615
  3,665
  4,999
  6,662
  8,690
  11,114
  13,960
  17,247
  20,989
  25,192
  29,857
  34,983
  40,564
  46,590
  53,053
  59,942
  67,246
  74,957
  83,067
  91,572
  100,468
  109,754
  119,433
  129,509
  139,991
  150,888
  162,212
  173,981
  186,211
  198,922
  212,138
Total equity, $m
  1,979
  2,764
  3,771
  5,026
  6,555
  8,384
  10,531
  13,011
  15,834
  19,004
  22,524
  26,391
  30,601
  35,147
  40,023
  45,219
  50,729
  56,546
  62,665
  69,081
  75,792
  82,797
  90,099
  97,700
  105,607
  113,827
  122,371
  131,249
  140,475
  150,064
  160,034
Total liabilities and equity, $m
  4,594
  6,429
  8,770
  11,688
  15,245
  19,498
  24,491
  30,258
  36,823
  44,196
  52,381
  61,374
  71,165
  81,737
  93,076
  105,161
  117,975
  131,503
  145,732
  160,653
  176,260
  192,551
  209,532
  227,209
  245,598
  264,715
  284,583
  305,230
  326,686
  348,986
  372,172
Debt-to-equity ratio
  0.886
  1.010
  1.100
  1.150
  1.190
  1.220
  1.240
  1.260
  1.270
  1.280
  1.290
  1.290
  1.300
  1.300
  1.300
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
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
  -1,367
  -1,888
  -2,540
  -3,336
  -4,291
  -5,414
  -6,714
  -8,196
  -9,863
  -11,718
  -13,758
  -15,982
  -18,386
  -20,966
  -23,719
  -26,640
  -29,725
  -32,972
  -36,378
  -39,942
  -43,664
  -47,544
  -51,583
  -55,786
  -60,155
  -64,697
  -69,416
  -74,320
  -79,418
  -84,717
Depreciation, amort., depletion, $m
  508
  713
  973
  1,296
  1,691
  2,163
  2,717
  3,357
  4,085
  4,903
  5,811
  6,808
  7,894
  9,067
  10,325
  11,665
  13,087
  14,587
  16,166
  17,821
  19,552
  21,359
  23,243
  25,204
  27,244
  29,364
  31,568
  33,859
  36,239
  38,712
  41,284
Funds from operations, $m
  722
  -654
  -915
  -1,243
  -1,645
  -2,128
  -2,697
  -3,357
  -4,111
  -4,961
  -5,907
  -6,950
  -8,087
  -9,319
  -10,641
  -12,053
  -13,553
  -15,138
  -16,806
  -18,557
  -20,390
  -22,305
  -24,301
  -26,379
  -28,542
  -30,791
  -33,128
  -35,557
  -38,082
  -40,705
  -43,432
Change in working capital, $m
  475
  -15
  -19
  -23
  -28
  -34
  -40
  -46
  -52
  -59
  -65
  -72
  -78
  -84
  -91
  -97
  -102
  -108
  -114
  -119
  -125
  -130
  -136
  -141
  -147
  -153
  -159
  -165
  -171
  -178
  -185
Cash from operations, $m
  247
  -639
  -897
  -1,220
  -1,617
  -2,094
  -2,657
  -3,311
  -4,059
  -4,902
  -5,842
  -6,878
  -8,009
  -9,234
  -10,551
  -11,957
  -13,450
  -15,030
  -16,693
  -18,438
  -20,266
  -22,174
  -24,165
  -26,238
  -28,395
  -30,638
  -32,970
  -35,392
  -37,910
  -40,527
  -43,247
Maintenance CAPEX, $m
  0
  -510
  -713
  -973
  -1,296
  -1,691
  -2,163
  -2,717
  -3,357
  -4,085
  -4,903
  -5,811
  -6,808
  -7,894
  -9,067
  -10,325
  -11,665
  -13,087
  -14,587
  -16,166
  -17,821
  -19,552
  -21,359
  -23,243
  -25,204
  -27,244
  -29,364
  -31,568
  -33,859
  -36,239
  -38,712
New CAPEX, $m
  -225
  -1,769
  -2,259
  -2,816
  -3,434
  -4,105
  -4,819
  -5,566
  -6,335
  -7,116
  -7,900
  -8,679
  -9,449
  -10,204
  -10,942
  -11,663
  -12,367
  -13,056
  -13,732
  -14,399
  -15,062
  -15,723
  -16,388
  -17,061
  -17,746
  -18,449
  -19,174
  -19,925
  -20,707
  -21,522
  -22,376
Cash from investing activities, $m
  -292
  -2,279
  -2,972
  -3,789
  -4,730
  -5,796
  -6,982
  -8,283
  -9,692
  -11,201
  -12,803
  -14,490
  -16,257
  -18,098
  -20,009
  -21,988
  -24,032
  -26,143
  -28,319
  -30,565
  -32,883
  -35,275
  -37,747
  -40,304
  -42,950
  -45,693
  -48,538
  -51,493
  -54,566
  -57,761
  -61,088
Free cash flow, $m
  -45
  -2,918
  -3,869
  -5,008
  -6,347
  -7,889
  -9,639
  -11,593
  -13,750
  -16,102
  -18,644
  -21,368
  -24,266
  -27,332
  -30,560
  -33,944
  -37,483
  -41,172
  -45,012
  -49,003
  -53,148
  -57,449
  -61,912
  -66,542
  -71,345
  -76,331
  -81,508
  -86,886
  -92,475
  -98,288
  -104,336
Issuance/(repayment) of debt, $m
  -61
  1,050
  1,334
  1,663
  2,028
  2,424
  2,846
  3,287
  3,741
  4,203
  4,666
  5,126
  5,581
  6,027
  6,463
  6,888
  7,304
  7,711
  8,111
  8,505
  8,896
  9,286
  9,679
  10,076
  10,481
  10,897
  11,325
  11,768
  12,230
  12,712
  13,216
Issuance/(repurchase) of shares, $m
  110
  2,155
  2,895
  3,794
  4,866
  6,119
  7,561
  9,193
  11,018
  13,034
  15,238
  17,625
  20,192
  22,932
  25,841
  28,915
  32,150
  35,542
  39,091
  42,794
  46,653
  50,669
  54,845
  59,185
  63,693
  68,376
  73,240
  78,294
  83,546
  89,007
  94,687
Cash from financing (excl. dividends), $m  
  49
  3,205
  4,229
  5,457
  6,894
  8,543
  10,407
  12,480
  14,759
  17,237
  19,904
  22,751
  25,773
  28,959
  32,304
  35,803
  39,454
  43,253
  47,202
  51,299
  55,549
  59,955
  64,524
  69,261
  74,174
  79,273
  84,565
  90,062
  95,776
  101,719
  107,903
Total cash flow (excl. dividends), $m
  2
  287
  360
  449
  547
  654
  768
  887
  1,010
  1,134
  1,259
  1,384
  1,506
  1,627
  1,744
  1,859
  1,971
  2,081
  2,189
  2,295
  2,401
  2,506
  2,612
  2,720
  2,829
  2,941
  3,057
  3,176
  3,301
  3,431
  3,567
Retained Cash Flow (-), $m
  435
  -2,155
  -2,895
  -3,794
  -4,866
  -6,119
  -7,561
  -9,193
  -11,018
  -13,034
  -15,238
  -17,625
  -20,192
  -22,932
  -25,841
  -28,915
  -32,150
  -35,542
  -39,091
  -42,794
  -46,653
  -50,669
  -54,845
  -59,185
  -63,693
  -68,376
  -73,240
  -78,294
  -83,546
  -89,007
  -94,687
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
 
  -1,866
  -2,535
  -3,345
  -4,319
  -5,465
  -6,793
  -8,306
  -10,008
  -11,900
  -13,978
  -16,241
  -18,685
  -21,305
  -24,097
  -27,056
  -30,178
  -33,461
  -36,902
  -40,499
  -44,252
  -48,163
  -52,233
  -56,465
  -60,864
  -65,435
  -70,183
  -75,118
  -80,245
  -85,576
  -91,120
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
 
  -1,704
  -2,096
  -2,481
  -2,845
  -3,165
  -3,418
  -3,590
  -3,668
  -3,649
  -3,535
  -3,336
  -3,068
  -2,749
  -2,399
  -2,039
  -1,688
  -1,359
  -1,064
  -810
  -599
  -429
  -298
  -201
  -131
  -82
  -50
  -29
  -16
  -9
  -5
Current shareholders' claim on cash, %
  100
  39.1
  15.7
  6.4
  2.7
  1.2
  0.5
  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
  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 -1.6
Price to Sales 1.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.2
Price to Free Cash Flow 36
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 39.9% 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 235.45 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 $0.8 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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