Intrinsic value of Tourmaline Oil Corp. - TOU

Previous Close

$23.45

  Intrinsic Value

$6.21

stock screener

  Rating & Target

str. sell

-74%

Previous close

$23.45

 
Intrinsic value

$6.21

 
Up/down potential

-74%

 
Rating

str. sell

We calculate the intrinsic value of TOU 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -14.54
  31.10
  28.49
  26.14
  24.03
  22.12
  20.41
  18.87
  17.48
  16.24
  15.11
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
Revenue, $m
  1,093
  1,433
  1,841
  2,322
  2,880
  3,518
  4,236
  5,035
  5,915
  6,876
  7,915
  9,031
  10,222
  11,487
  12,823
  14,230
  15,706
  17,251
  18,864
  20,547
  22,298
  24,121
  26,016
  27,985
  30,032
  32,159
  34,369
  36,667
  39,057
  41,544
  44,131
Variable operating expenses, $m
 
  1,202
  1,545
  1,949
  2,417
  2,951
  3,554
  4,224
  4,963
  5,769
  6,641
  7,577
  8,576
  9,637
  10,759
  11,939
  13,177
  14,474
  15,827
  17,239
  18,708
  20,237
  21,827
  23,480
  25,197
  26,981
  28,836
  30,764
  32,769
  34,855
  37,026
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
  1,080
  1,202
  1,545
  1,949
  2,417
  2,951
  3,554
  4,224
  4,963
  5,769
  6,641
  7,577
  8,576
  9,637
  10,759
  11,939
  13,177
  14,474
  15,827
  17,239
  18,708
  20,237
  21,827
  23,480
  25,197
  26,981
  28,836
  30,764
  32,769
  34,855
  37,026
Operating income, $m
  13
  231
  296
  374
  464
  566
  682
  811
  952
  1,107
  1,274
  1,454
  1,646
  1,849
  2,065
  2,291
  2,529
  2,777
  3,037
  3,308
  3,590
  3,883
  4,189
  4,506
  4,835
  5,178
  5,533
  5,903
  6,288
  6,689
  7,105
EBITDA, $m
  679
  1,107
  1,423
  1,794
  2,226
  2,718
  3,273
  3,890
  4,571
  5,313
  6,116
  6,978
  7,898
  8,875
  9,908
  10,995
  12,136
  13,329
  14,576
  15,876
  17,229
  18,637
  20,102
  21,623
  23,205
  24,848
  26,556
  28,332
  30,178
  32,099
  34,099
Interest expense (income), $m
  0
  49
  78
  112
  152
  199
  252
  312
  379
  453
  534
  621
  714
  814
  920
  1,032
  1,150
  1,273
  1,403
  1,538
  1,679
  1,825
  1,978
  2,137
  2,302
  2,473
  2,651
  2,836
  3,029
  3,229
  3,437
Earnings before tax, $m
  -36
  181
  219
  262
  312
  367
  430
  498
  573
  654
  741
  833
  932
  1,036
  1,145
  1,259
  1,379
  1,504
  1,635
  1,770
  1,911
  2,058
  2,211
  2,369
  2,533
  2,704
  2,882
  3,067
  3,259
  3,459
  3,668
Tax expense, $m
  -3
  49
  59
  71
  84
  99
  116
  135
  155
  177
  200
  225
  252
  280
  309
  340
  372
  406
  441
  478
  516
  556
  597
  640
  684
  730
  778
  828
  880
  934
  990
Net income, $m
  -32
  132
  160
  191
  227
  268
  314
  364
  418
  477
  541
  608
  680
  756
  836
  919
  1,007
  1,098
  1,193
  1,292
  1,395
  1,502
  1,614
  1,729
  1,849
  1,974
  2,104
  2,239
  2,379
  2,525
  2,677

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
  9,358
  12,247
  15,736
  19,850
  24,619
  30,066
  36,203
  43,035
  50,559
  58,768
  67,648
  77,187
  87,369
  98,177
  109,600
  121,623
  134,240
  147,445
  161,235
  175,613
  190,585
  206,162
  222,358
  239,191
  256,684
  274,862
  293,755
  313,396
  333,823
  355,073
  377,192
Adjusted assets (=assets-cash), $m
  9,358
  12,247
  15,736
  19,850
  24,619
  30,066
  36,203
  43,035
  50,559
  58,768
  67,648
  77,187
  87,369
  98,177
  109,600
  121,623
  134,240
  147,445
  161,235
  175,613
  190,585
  206,162
  222,358
  239,191
  256,684
  274,862
  293,755
  313,396
  333,823
  355,073
  377,192
Revenue / Adjusted assets
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
Average production assets, $m
  7,621
  9,992
  12,838
  16,195
  20,086
  24,529
  29,536
  35,110
  41,248
  47,945
  55,190
  62,972
  71,279
  80,097
  89,416
  99,225
  109,519
  120,292
  131,542
  143,272
  155,487
  168,196
  181,409
  195,142
  209,413
  224,243
  239,657
  255,682
  272,346
  289,683
  307,729
Working capital, $m
  -224
  -294
  -377
  -476
  -590
  -721
  -868
  -1,032
  -1,213
  -1,410
  -1,623
  -1,851
  -2,096
  -2,355
  -2,629
  -2,917
  -3,220
  -3,536
  -3,867
  -4,212
  -4,571
  -4,945
  -5,333
  -5,737
  -6,157
  -6,593
  -7,046
  -7,517
  -8,007
  -8,516
  -9,047
Total debt, $m
  1,407
  2,219
  3,196
  4,348
  5,683
  7,209
  8,927
  10,840
  12,947
  15,245
  17,732
  20,402
  23,253
  26,280
  29,478
  32,845
  36,377
  40,075
  43,936
  47,962
  52,154
  56,515
  61,050
  65,763
  70,661
  75,751
  81,041
  86,541
  92,260
  98,211
  104,404
Total liabilities, $m
  2,617
  3,429
  4,406
  5,558
  6,893
  8,419
  10,137
  12,050
  14,157
  16,455
  18,942
  21,612
  24,463
  27,490
  30,688
  34,055
  37,587
  41,285
  45,146
  49,172
  53,364
  57,725
  62,260
  66,973
  71,871
  76,961
  82,251
  87,751
  93,470
  99,421
  105,614
Total equity, $m
  6,741
  8,818
  11,330
  14,292
  17,726
  21,648
  26,066
  30,985
  36,403
  42,313
  48,707
  55,575
  62,905
  70,688
  78,912
  87,569
  96,653
  106,160
  116,089
  126,441
  137,221
  148,437
  160,098
  172,217
  184,812
  197,900
  211,503
  225,645
  240,352
  255,653
  271,578
Total liabilities and equity, $m
  9,358
  12,247
  15,736
  19,850
  24,619
  30,067
  36,203
  43,035
  50,560
  58,768
  67,649
  77,187
  87,368
  98,178
  109,600
  121,624
  134,240
  147,445
  161,235
  175,613
  190,585
  206,162
  222,358
  239,190
  256,683
  274,861
  293,754
  313,396
  333,822
  355,074
  377,192
Debt-to-equity ratio
  0.209
  0.250
  0.280
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
Adjusted equity ratio
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -32
  132
  160
  191
  227
  268
  314
  364
  418
  477
  541
  608
  680
  756
  836
  919
  1,007
  1,098
  1,193
  1,292
  1,395
  1,502
  1,614
  1,729
  1,849
  1,974
  2,104
  2,239
  2,379
  2,525
  2,677
Depreciation, amort., depletion, $m
  666
  876
  1,126
  1,421
  1,762
  2,152
  2,591
  3,080
  3,618
  4,206
  4,841
  5,524
  6,253
  7,026
  7,843
  8,704
  9,607
  10,552
  11,539
  12,568
  13,639
  14,754
  15,913
  17,118
  18,370
  19,670
  21,023
  22,428
  23,890
  25,411
  26,994
Funds from operations, $m
  662
  1,009
  1,286
  1,612
  1,989
  2,420
  2,905
  3,444
  4,037
  4,683
  5,382
  6,132
  6,933
  7,782
  8,679
  9,623
  10,614
  11,650
  12,732
  13,860
  15,035
  16,256
  17,527
  18,847
  20,219
  21,645
  23,127
  24,667
  26,269
  27,936
  29,671
Change in working capital, $m
  -35
  -70
  -84
  -99
  -114
  -131
  -147
  -164
  -180
  -197
  -213
  -229
  -244
  -259
  -274
  -288
  -303
  -317
  -331
  -345
  -359
  -374
  -388
  -404
  -420
  -436
  -453
  -471
  -490
  -510
  -531
Cash from operations, $m
  697
  1,079
  1,370
  1,711
  2,104
  2,551
  3,052
  3,607
  4,217
  4,880
  5,595
  6,361
  7,177
  8,041
  8,953
  9,912
  10,916
  11,967
  13,063
  14,205
  15,394
  16,630
  17,915
  19,251
  20,639
  22,081
  23,580
  25,138
  26,759
  28,446
  30,202
Maintenance CAPEX, $m
  0
  -669
  -876
  -1,126
  -1,421
  -1,762
  -2,152
  -2,591
  -3,080
  -3,618
  -4,206
  -4,841
  -5,524
  -6,253
  -7,026
  -7,843
  -8,704
  -9,607
  -10,552
  -11,539
  -12,568
  -13,639
  -14,754
  -15,913
  -17,118
  -18,370
  -19,670
  -21,023
  -22,428
  -23,890
  -25,411
New CAPEX, $m
  -1,981
  -2,371
  -2,847
  -3,356
  -3,891
  -4,444
  -5,007
  -5,574
  -6,138
  -6,697
  -7,245
  -7,782
  -8,306
  -8,818
  -9,319
  -9,810
  -10,293
  -10,773
  -11,251
  -11,730
  -12,215
  -12,708
  -13,213
  -13,733
  -14,271
  -14,830
  -15,414
  -16,024
  -16,665
  -17,337
  -18,045
Cash from investing activities, $m
  -1,998
  -3,040
  -3,723
  -4,482
  -5,312
  -6,206
  -7,159
  -8,165
  -9,218
  -10,315
  -11,451
  -12,623
  -13,830
  -15,071
  -16,345
  -17,653
  -18,997
  -20,380
  -21,803
  -23,269
  -24,783
  -26,347
  -27,967
  -29,646
  -31,389
  -33,200
  -35,084
  -37,047
  -39,093
  -41,227
  -43,456
Free cash flow, $m
  -1,301
  -1,961
  -2,354
  -2,772
  -3,208
  -3,655
  -4,107
  -4,557
  -5,001
  -5,435
  -5,856
  -6,262
  -6,653
  -7,030
  -7,392
  -7,741
  -8,081
  -8,413
  -8,740
  -9,064
  -9,389
  -9,717
  -10,052
  -10,395
  -10,750
  -11,119
  -11,505
  -11,909
  -12,334
  -12,781
  -13,254
Issuance/(repayment) of debt, $m
  140
  812
  977
  1,152
  1,335
  1,525
  1,718
  1,913
  2,107
  2,298
  2,487
  2,671
  2,851
  3,026
  3,198
  3,367
  3,533
  3,697
  3,861
  4,026
  4,192
  4,362
  4,535
  4,713
  4,898
  5,090
  5,290
  5,500
  5,719
  5,950
  6,193
Issuance/(repurchase) of shares, $m
  1,206
  1,945
  2,353
  2,771
  3,206
  3,654
  4,105
  4,555
  4,999
  5,433
  5,853
  6,260
  6,650
  7,026
  7,388
  7,738
  8,077
  8,409
  8,736
  9,060
  9,385
  9,713
  10,047
  10,391
  10,745
  11,114
  11,499
  11,903
  12,328
  12,775
  13,248
Cash from financing (excl. dividends), $m  
  1,301
  2,757
  3,330
  3,923
  4,541
  5,179
  5,823
  6,468
  7,106
  7,731
  8,340
  8,931
  9,501
  10,052
  10,586
  11,105
  11,610
  12,106
  12,597
  13,086
  13,577
  14,075
  14,582
  15,104
  15,643
  16,204
  16,789
  17,403
  18,047
  18,725
  19,441
Total cash flow (excl. dividends), $m
  0
  796
  976
  1,151
  1,334
  1,524
  1,717
  1,911
  2,105
  2,296
  2,484
  2,668
  2,848
  3,023
  3,195
  3,363
  3,529
  3,693
  3,857
  4,022
  4,188
  4,357
  4,530
  4,708
  4,893
  5,085
  5,285
  5,494
  5,713
  5,944
  6,187
Retained Cash Flow (-), $m
  -1,538
  -2,077
  -2,512
  -2,962
  -3,434
  -3,922
  -4,419
  -4,919
  -5,417
  -5,910
  -6,394
  -6,868
  -7,331
  -7,782
  -8,224
  -8,657
  -9,084
  -9,507
  -9,929
  -10,352
  -10,780
  -11,215
  -11,661
  -12,120
  -12,595
  -13,088
  -13,603
  -14,142
  -14,707
  -15,301
  -15,925
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
 
  -1,281
  -1,536
  -1,811
  -2,100
  -2,398
  -2,702
  -3,008
  -3,313
  -3,614
  -3,910
  -4,200
  -4,483
  -4,759
  -5,029
  -5,294
  -5,555
  -5,814
  -6,072
  -6,331
  -6,592
  -6,858
  -7,131
  -7,411
  -7,702
  -8,004
  -8,319
  -8,648
  -8,993
  -9,357
  -9,739
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
 
  -1,227
  -1,404
  -1,571
  -1,721
  -1,848
  -1,947
  -2,014
  -2,049
  -2,050
  -2,020
  -1,961
  -1,877
  -1,771
  -1,648
  -1,512
  -1,369
  -1,223
  -1,077
  -935
  -800
  -675
  -560
  -458
  -368
  -290
  -225
  -171
  -127
  -93
  -66
Current shareholders' claim on cash, %
  100
  76.6
  59.7
  47.4
  38.3
  31.4
  26.2
  22.1
  18.9
  16.3
  14.2
  12.5
  11.1
  9.9
  8.9
  8.1
  7.4
  6.8
  6.2
  5.7
  5.3
  4.9
  4.6
  4.3
  4.1
  3.8
  3.6
  3.4
  3.2
  3.0
  2.9

Tourmaline Oil Corp. is a Canada-based intermediate crude oil and natural gas exploration and production company. The Company is engaged in the acquisition, exploration, development and production of petroleum and natural gas properties. The Company is focused on exploration and acquisition program in the Western Canadian Sedimentary Basin. Its core areas include the Alberta Deep Basin, north east British Columbia (NEBC) Montney and Peace River High Regional Charlie Lake. It holds interests in 13 natural gas plants in the Alberta Deep Basin, 10 of which, the Wild River 14-20, the Hinton 6-32, the Minehead 15-12, the Anderson 1-9, the Musreau 8-13, the Edson 4-17, the Ansell 1-34, the Brazeau 15-36, the Oldman 10-24 and the Sundance 15-7 are owned and operated by the Company. The Peace River High in NEBC is focused on liquids rich natural gas in the Triassic Montney formation. It has drilled approximately 200 Montney multi-stage fracture-stimulated horizontal natural gas wells in NEBC.

FINANCIAL RATIOS  of  Tourmaline Oil Corp. (TOU)

Valuation Ratios
P/E Ratio -196.8
Price to Sales 5.8
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -4.9
Growth Rates
Sales Growth Rate -14.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.4%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 20.9%
Total Debt to Equity 20.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.4%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital -0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.8%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 57.6%
EBITDA Margin - 3 Yr. Avg. 72.4%
Operating Margin 1.2%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin -3.3%
Pre-Tax Margin - 3 Yr. Avg. 20.8%
Net Profit Margin -2.9%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 8.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.8%
Payout Ratio 0%

TOU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TOU stock intrinsic value calculation we used $1093 million for the last fiscal year's total revenue generated by Tourmaline Oil Corp.. The default revenue input number comes from 2016 income statement of Tourmaline Oil 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 TOU stock valuation model: a) initial revenue growth rate of 31.1% 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 TOU is calculated based on our internal credit rating of Tourmaline Oil 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 Tourmaline Oil 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 TOU stock the variable cost ratio is equal to 83.9%.

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 TOU 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 Tourmaline Oil Corp..

Corporate tax rate of 27% is the nominal tax rate for Tourmaline Oil 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 TOU 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 TOU are equal to 697.3%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Tourmaline Oil 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 TOU is equal to -20.5%. 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 - $6741 million for Tourmaline Oil 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 271.291 million for Tourmaline Oil 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 Tourmaline Oil Corp. at the current share price and the inputted number of shares is $6.4 billion.

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Financial statements of TOU
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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