Intrinsic value of Chesapeake Energy - CHK

Previous Close

$4.02

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$4.02

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of CHK 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 3.6

 

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, %
  -38.33
  40.60
  37.04
  33.84
  30.95
  28.36
  26.02
  23.92
  22.03
  20.32
  18.79
  17.41
  16.17
  15.05
  14.05
  13.14
  12.33
  11.60
  10.94
  10.34
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
Revenue, $m
  7,872
  11,068
  15,168
  20,300
  26,583
  34,121
  43,000
  53,285
  65,023
  78,238
  92,941
  109,125
  126,772
  145,857
  166,348
  188,213
  211,420
  235,938
  261,742
  288,815
  317,145
  346,729
  377,571
  409,687
  443,098
  477,835
  513,939
  551,457
  590,446
  630,969
  673,098
Variable operating expenses, $m
 
  27,283
  37,388
  50,039
  65,527
  84,109
  105,995
  131,348
  160,281
  192,857
  229,100
  268,993
  312,493
  359,537
  410,049
  463,946
  521,150
  581,586
  645,194
  711,929
  781,763
  854,687
  930,714
  1,009,878
  1,092,236
  1,177,864
  1,266,860
  1,359,342
  1,455,449
  1,555,339
  1,659,186
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
  12,166
  27,283
  37,388
  50,039
  65,527
  84,109
  105,995
  131,348
  160,281
  192,857
  229,100
  268,993
  312,493
  359,537
  410,049
  463,946
  521,150
  581,586
  645,194
  711,929
  781,763
  854,687
  930,714
  1,009,878
  1,092,236
  1,177,864
  1,266,860
  1,359,342
  1,455,449
  1,555,339
  1,659,186
Operating income, $m
  -4,294
  -16,215
  -22,221
  -29,739
  -38,944
  -49,988
  -62,995
  -78,063
  -95,258
  -114,619
  -136,159
  -159,868
  -185,721
  -213,680
  -243,700
  -275,733
  -309,730
  -345,648
  -383,452
  -423,114
  -464,618
  -507,958
  -553,142
  -600,191
  -649,138
  -700,028
  -752,921
  -807,885
  -865,003
  -924,370
  -986,088
EBITDA, $m
  -3,187
  -14,659
  -20,089
  -26,886
  -35,208
  -45,192
  -56,952
  -70,575
  -86,120
  -103,624
  -123,097
  -144,532
  -167,905
  -193,182
  -220,323
  -249,282
  -280,018
  -312,491
  -346,668
  -382,525
  -420,047
  -459,230
  -500,080
  -542,616
  -586,867
  -632,876
  -680,694
  -730,385
  -782,025
  -835,696
  -891,494
Interest expense (income), $m
  344
  348
  396
  596
  845
  1,151
  1,517
  1,949
  2,449
  3,019
  3,662
  4,376
  5,163
  6,021
  6,949
  7,945
  9,008
  10,136
  11,328
  12,582
  13,898
  15,275
  16,713
  18,213
  19,774
  21,398
  23,086
  24,842
  26,665
  28,561
  30,530
Earnings before tax, $m
  -4,589
  -16,562
  -22,617
  -30,335
  -39,789
  -51,138
  -64,512
  -80,012
  -97,707
  -117,638
  -139,820
  -164,244
  -190,884
  -219,701
  -250,649
  -283,677
  -318,737
  -355,784
  -394,780
  -435,696
  -478,516
  -523,233
  -569,855
  -618,404
  -668,912
  -721,426
  -776,007
  -832,726
  -891,669
  -952,930
  -1,016,618
Tax expense, $m
  -190
  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
  -4,401
  -16,562
  -22,617
  -30,335
  -39,789
  -51,138
  -64,512
  -80,012
  -97,707
  -117,638
  -139,820
  -164,244
  -190,884
  -219,701
  -250,649
  -283,677
  -318,737
  -355,784
  -394,780
  -435,696
  -478,516
  -523,233
  -569,855
  -618,404
  -668,912
  -721,426
  -776,007
  -832,726
  -891,669
  -952,930
  -1,016,618

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  882
  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
  13,028
  17,080
  23,407
  31,327
  41,023
  52,656
  66,358
  82,230
  100,344
  120,738
  143,427
  168,402
  195,636
  225,088
  256,711
  290,453
  326,265
  364,101
  403,923
  445,702
  489,421
  535,075
  582,672
  632,233
  683,793
  737,400
  793,116
  851,014
  911,182
  973,718
  1,038,731
Adjusted assets (=assets-cash), $m
  12,146
  17,080
  23,407
  31,327
  41,023
  52,656
  66,358
  82,230
  100,344
  120,738
  143,427
  168,402
  195,636
  225,088
  256,711
  290,453
  326,265
  364,101
  403,923
  445,702
  489,421
  535,075
  582,672
  632,233
  683,793
  737,400
  793,116
  851,014
  911,182
  973,718
  1,038,731
Revenue / Adjusted assets
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
Average production assets, $m
  12,392
  17,421
  23,874
  31,952
  41,842
  53,707
  67,682
  83,871
  102,346
  123,147
  146,289
  171,762
  199,539
  229,579
  261,832
  296,248
  332,775
  371,366
  411,982
  454,595
  499,186
  545,751
  594,297
  644,847
  697,436
  752,112
  808,940
  867,994
  929,362
  993,145
  1,059,456
Working capital, $m
  -1,506
  -2,645
  -3,625
  -4,852
  -6,353
  -8,155
  -10,277
  -12,735
  -15,540
  -18,699
  -22,213
  -26,081
  -30,299
  -34,860
  -39,757
  -44,983
  -50,529
  -56,389
  -62,556
  -69,027
  -75,798
  -82,868
  -90,240
  -97,915
  -105,900
  -114,203
  -122,831
  -131,798
  -141,117
  -150,802
  -160,870
Total debt, $m
  10,441
  11,325
  17,019
  24,147
  32,874
  43,344
  55,675
  69,960
  86,262
  104,617
  125,038
  147,515
  172,025
  198,532
  226,992
  257,361
  289,591
  323,644
  359,484
  397,085
  436,432
  477,521
  520,358
  564,963
  611,366
  659,613
  709,757
  761,866
  816,017
  872,299
  930,811
Total liabilities, $m
  14,488
  15,372
  21,066
  28,194
  36,921
  47,391
  59,722
  74,007
  90,309
  108,664
  129,085
  151,562
  176,072
  202,579
  231,039
  261,408
  293,638
  327,691
  363,531
  401,132
  440,479
  481,568
  524,405
  569,010
  615,413
  663,660
  713,804
  765,913
  820,064
  876,346
  934,858
Total equity, $m
  -1,460
  1,708
  2,341
  3,133
  4,102
  5,266
  6,636
  8,223
  10,034
  12,074
  14,343
  16,840
  19,564
  22,509
  25,671
  29,045
  32,626
  36,410
  40,392
  44,570
  48,942
  53,508
  58,267
  63,223
  68,379
  73,740
  79,312
  85,101
  91,118
  97,372
  103,873
Total liabilities and equity, $m
  13,028
  17,080
  23,407
  31,327
  41,023
  52,657
  66,358
  82,230
  100,343
  120,738
  143,428
  168,402
  195,636
  225,088
  256,710
  290,453
  326,264
  364,101
  403,923
  445,702
  489,421
  535,076
  582,672
  632,233
  683,792
  737,400
  793,116
  851,014
  911,182
  973,718
  1,038,731
Debt-to-equity ratio
  -7.151
  6.630
  7.270
  7.710
  8.010
  8.230
  8.390
  8.510
  8.600
  8.660
  8.720
  8.760
  8.790
  8.820
  8.840
  8.860
  8.880
  8.890
  8.900
  8.910
  8.920
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.950
  8.960
  8.960
  8.960
Adjusted equity ratio
  -0.193
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,401
  -16,562
  -22,617
  -30,335
  -39,789
  -51,138
  -64,512
  -80,012
  -97,707
  -117,638
  -139,820
  -164,244
  -190,884
  -219,701
  -250,649
  -283,677
  -318,737
  -355,784
  -394,780
  -435,696
  -478,516
  -523,233
  -569,855
  -618,404
  -668,912
  -721,426
  -776,007
  -832,726
  -891,669
  -952,930
  -1,016,618
Depreciation, amort., depletion, $m
  1,107
  1,555
  2,132
  2,853
  3,736
  4,795
  6,043
  7,488
  9,138
  10,995
  13,062
  15,336
  17,816
  20,498
  23,378
  26,451
  29,712
  33,158
  36,784
  40,589
  44,570
  48,728
  53,062
  57,576
  62,271
  67,153
  72,227
  77,499
  82,979
  88,674
  94,594
Funds from operations, $m
  -936
  -15,007
  -20,485
  -27,482
  -36,053
  -46,343
  -58,469
  -72,523
  -88,569
  -106,643
  -126,759
  -148,908
  -173,068
  -199,203
  -227,271
  -257,227
  -289,025
  -322,627
  -357,996
  -395,107
  -433,945
  -474,505
  -516,793
  -560,828
  -606,641
  -654,273
  -703,780
  -755,227
  -808,690
  -864,257
  -922,024
Change in working capital, $m
  -732
  -764
  -980
  -1,227
  -1,502
  -1,802
  -2,122
  -2,458
  -2,805
  -3,159
  -3,514
  -3,868
  -4,218
  -4,561
  -4,897
  -5,226
  -5,546
  -5,860
  -6,167
  -6,470
  -6,771
  -7,071
  -7,371
  -7,676
  -7,985
  -8,302
  -8,629
  -8,967
  -9,318
  -9,685
  -10,069
Cash from operations, $m
  -204
  -14,243
  -19,506
  -26,255
  -34,552
  -44,541
  -56,347
  -70,065
  -85,764
  -103,484
  -123,245
  -145,040
  -168,850
  -194,642
  -222,374
  -252,001
  -283,479
  -316,767
  -351,828
  -388,637
  -427,174
  -467,435
  -509,422
  -553,153
  -598,656
  -645,971
  -695,151
  -746,260
  -799,372
  -854,572
  -911,955
Maintenance CAPEX, $m
  0
  -1,106
  -1,555
  -2,132
  -2,853
  -3,736
  -4,795
  -6,043
  -7,488
  -9,138
  -10,995
  -13,062
  -15,336
  -17,816
  -20,498
  -23,378
  -26,451
  -29,712
  -33,158
  -36,784
  -40,589
  -44,570
  -48,728
  -53,062
  -57,576
  -62,271
  -67,153
  -72,227
  -77,499
  -82,979
  -88,674
New CAPEX, $m
  -2,120
  -5,030
  -6,453
  -8,078
  -9,890
  -11,865
  -13,975
  -16,189
  -18,475
  -20,801
  -23,142
  -25,473
  -27,777
  -30,040
  -32,254
  -34,416
  -36,527
  -38,591
  -40,617
  -42,613
  -44,591
  -46,565
  -48,546
  -50,550
  -52,589
  -54,677
  -56,827
  -59,054
  -61,368
  -63,783
  -66,310
Cash from investing activities, $m
  -660
  -6,136
  -8,008
  -10,210
  -12,743
  -15,601
  -18,770
  -22,232
  -25,963
  -29,939
  -34,137
  -38,535
  -43,113
  -47,856
  -52,752
  -57,794
  -62,978
  -68,303
  -73,775
  -79,397
  -85,180
  -91,135
  -97,274
  -103,612
  -110,165
  -116,948
  -123,980
  -131,281
  -138,867
  -146,762
  -154,984
Free cash flow, $m
  -864
  -20,379
  -27,514
  -36,465
  -47,294
  -60,142
  -75,118
  -92,297
  -111,727
  -133,424
  -157,382
  -183,575
  -211,963
  -242,497
  -275,125
  -309,795
  -346,456
  -385,070
  -425,603
  -468,034
  -512,355
  -558,570
  -606,696
  -656,764
  -708,820
  -762,919
  -819,132
  -877,541
  -938,239
  -1,001,334
  -1,066,940
Issuance/(repayment) of debt, $m
  952
  1,387
  5,694
  7,128
  8,727
  10,470
  12,332
  14,285
  16,302
  18,355
  20,420
  22,477
  24,510
  26,507
  28,460
  30,368
  32,231
  34,053
  35,840
  37,601
  39,347
  41,088
  42,837
  44,605
  46,404
  48,246
  50,144
  52,109
  54,151
  56,282
  58,512
Issuance/(repurchase) of shares, $m
  0
  20,110
  23,250
  31,127
  40,759
  52,301
  65,882
  81,599
  99,518
  119,678
  142,089
  166,742
  193,607
  222,646
  253,811
  287,052
  322,319
  359,568
  398,762
  439,874
  482,887
  527,798
  574,615
  623,360
  674,068
  726,787
  781,579
  838,516
  897,686
  959,184
  1,023,120
Cash from financing (excl. dividends), $m  
  921
  21,497
  28,944
  38,255
  49,486
  62,771
  78,214
  95,884
  115,820
  138,033
  162,509
  189,219
  218,117
  249,153
  282,271
  317,420
  354,550
  393,621
  434,602
  477,475
  522,234
  568,886
  617,452
  667,965
  720,472
  775,033
  831,723
  890,625
  951,837
  1,015,466
  1,081,632
Total cash flow (excl. dividends), $m
  57
  1,118
  1,430
  1,790
  2,191
  2,629
  3,096
  3,587
  4,093
  4,609
  5,127
  5,644
  6,154
  6,656
  7,146
  7,625
  8,093
  8,550
  8,999
  9,442
  9,880
  10,317
  10,756
  11,200
  11,652
  12,115
  12,591
  13,084
  13,597
  14,132
  14,692
Retained Cash Flow (-), $m
  3,598
  -20,110
  -23,250
  -31,127
  -40,759
  -52,301
  -65,882
  -81,599
  -99,518
  -119,678
  -142,089
  -166,742
  -193,607
  -222,646
  -253,811
  -287,052
  -322,319
  -359,568
  -398,762
  -439,874
  -482,887
  -527,798
  -574,615
  -623,360
  -674,068
  -726,787
  -781,579
  -838,516
  -897,686
  -959,184
  -1,023,120
Prev. year cash balance distribution, $m
 
  379
  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
 
  -18,613
  -21,820
  -29,337
  -38,568
  -49,673
  -62,786
  -78,012
  -95,425
  -115,069
  -136,962
  -161,098
  -187,453
  -215,991
  -246,665
  -279,426
  -314,226
  -351,017
  -389,763
  -430,432
  -473,008
  -517,481
  -563,859
  -612,160
  -662,416
  -714,672
  -768,988
  -825,432
  -884,088
  -945,052
  -1,008,428
Discount rate, %
 
  15.30
  16.07
  16.87
  17.71
  18.60
  19.53
  20.50
  21.53
  22.61
  23.74
  24.92
  26.17
  27.48
  28.85
  30.29
  31.81
  33.40
  35.07
  36.82
  38.66
  40.60
  42.63
  44.76
  46.99
  49.34
  51.81
  54.40
  57.12
  59.98
  62.98
PV of cash for distribution, $m
 
  -16,143
  -16,198
  -18,379
  -20,088
  -21,171
  -21,531
  -21,143
  -20,055
  -18,382
  -16,280
  -13,933
  -11,521
  -9,201
  -7,094
  -5,278
  -3,786
  -2,617
  -1,741
  -1,114
  -685
  -404
  -228
  -124
  -64
  -32
  -15
  -7
  -3
  -1
  0
Current shareholders' claim on cash, %
  100
  50.0
  3.4
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Chesapeake Energy Corporation produces natural gas, oil and natural gas liquids (NGL) in the United States. It operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. Exploration and production is engaged in finding and producing oil, natural gas and NGL. Marketing, gathering and compression is engaged in marketing, gathering and compression of oil, natural gas and NGL. As of December 31, 2016, it owned interests in approximately 22,700 oil and natural gas wells. It has a diverse resource base of onshore the United States unconventional natural gas and liquids assets. It has positions in resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania.

FINANCIAL RATIOS  of  Chesapeake Energy (CHK)

Valuation Ratios
P/E Ratio -0.8
Price to Sales 0.5
Price to Book -2.5
Price to Tangible Book
Price to Cash Flow -17.6
Price to Free Cash Flow -1.5
Growth Rates
Sales Growth Rate -38.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.8%
Cap. Spend. - 3 Yr. Gr. Rate -22.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity -680.7%
Total Debt to Equity -715.1%
Interest Coverage -12
Management Effectiveness
Return On Assets -26.8%
Ret/ On Assets - 3 Yr. Avg. -24%
Return On Total Capital -40.4%
Ret/ On T. Cap. - 3 Yr. Avg. -34.9%
Return On Equity -1298.2%
Return On Equity - 3 Yr. Avg. -480.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 74.4%
EBITDA Margin -39.9%
EBITDA Margin - 3 Yr. Avg. -47.8%
Operating Margin -54.5%
Oper. Margin - 3 Yr. Avg. -62.3%
Pre-Tax Margin -58.3%
Pre-Tax Margin - 3 Yr. Avg. -64.7%
Net Profit Margin -55.9%
Net Profit Margin - 3 Yr. Avg. -54.2%
Effective Tax Rate 4.1%
Eff/ Tax Rate - 3 Yr. Avg. 21.1%
Payout Ratio 0%

CHK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHK stock intrinsic value calculation we used $7872 million for the last fiscal year's total revenue generated by Chesapeake Energy. The default revenue input number comes from 2016 income statement of Chesapeake Energy. 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 CHK stock valuation model: a) initial revenue growth rate of 40.6% 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 15.3%, whose default value for CHK is calculated based on our internal credit rating of Chesapeake Energy, 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 Chesapeake Energy.
    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 CHK stock the variable cost ratio is equal to 246.5%.

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 CHK 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 Chesapeake Energy.

Corporate tax rate of 27% is the nominal tax rate for Chesapeake Energy. 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 CHK 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 CHK are equal to 157.4%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Chesapeake Energy 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 CHK is equal to -23.9%. 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 - $-1460 million for Chesapeake Energy - 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 907.895 million for Chesapeake Energy 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 Chesapeake Energy at the current share price and the inputted number of shares is $3.6 billion.

RELATED COMPANIES Price Int.Val. Rating
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STO Statoil ADR 19.94 16.36  hold
GE General Electr 18.21 23.56  hold
KKR KKR 19.56 36.61  str.buy

COMPANY NEWS

▶ Chesapeake Energys Stock Price Range Forecast   [03:10PM  Market Realist]
▶ Chesapeake Energy Stock Nears Long-Term Buy Signal   [Nov-13-17 11:28AM  Investopedia]
▶ Inventories Spread: Is More Upside Left for Natural Gas?   [Nov-09-17 12:20PM  Market Realist]
▶ Upstream Gainers this Week: California Resources Leads   [Nov-08-17 04:15PM  Market Realist]
▶ Natural Gass Surge in November 2017   [10:32AM  Market Realist]
▶ What Analysts Recommend for Chesapeake Energy   [07:32AM  Market Realist]
▶ How Higher Oil Prices Could Push Natural Gas Prices Lower   [Nov-02-17 03:52PM  Market Realist]
▶ Chesapeake reports 3Q loss   [07:33AM  Associated Press]
▶ Analysts Recommendations for Chesapeake Energy Stock   [Nov-01-17 03:25PM  Market Realist]
▶ How Weather Influences Natural Gas Prices   [11:35AM  Market Realist]
▶ Why Millennials Cant Bank On Clean Energy Jobs   [Oct-27-17 12:00PM  Oilprice.com]
▶ Chesapeake Energys Production Expectations   [05:40PM  Market Realist]
▶ Whats in Store for Chesapeake Energy in 3Q17?   [04:06PM  Market Realist]
▶ Chesapeake Energy Stock: Recent Short Interest Trends   [Oct-25-17 07:40AM  Market Realist]
▶ Natural Gas Is near $3: Gas-Weighted Stocks Could Benefit   [Oct-24-17 03:06PM  Market Realist]
▶ Chesapeake Energys Stock Price Range Forecast   [01:37PM  Market Realist]
▶ Saudi $2T Aramco IPO: 2018 or bust   [01:17PM  Yahoo Finance Video]
▶ Chesapeake Energy: A Reason to Worry?   [12:00PM  Market Realist]
▶ How the Inventory Spread Could Boost Natural Gas Prices   [Oct-19-17 01:36PM  Market Realist]
▶ [$$] An Old Fracking Hot Spot Makes a Comeback   [12:03AM  The Wall Street Journal]
▶ [$$] An Old Fracking Hot Spot Makes a Comeback   [Oct-17-17 04:46PM  The Wall Street Journal]
▶ Chesapeake Energys Stock Price Range Forecast   [12:35PM  Market Realist]
▶ A Look at the Top 5 Oil and Gas Producers   [Oct-12-17 03:05PM  Market Realist]
▶ Could Oil Rig Count Stop Natural Gas Fall?   [09:14AM  Market Realist]
▶ The Upstream Losers so Far This Week   [09:11AM  Market Realist]
Financial statements of CHK
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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