Intrinsic value of Continental Resources - CLR

Previous Close

$36.15

  Intrinsic Value

$2.85

stock screener

  Rating & Target

str. sell

-92%

  Value-price divergence*

+24%

Previous close

$36.15

 
Intrinsic value

$2.85

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence*

+24%

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

We calculate the intrinsic value of CLR 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 13.7

 

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, %
  -26.12
  46.60
  42.44
  38.70
  35.33
  32.29
  29.56
  27.11
  24.90
  22.91
  21.12
  19.51
  18.05
  16.75
  15.57
  14.52
  13.57
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
Revenue, $m
  2,052
  2,903
  4,135
  5,734
  7,760
  10,266
  13,302
  16,907
  21,117
  25,954
  31,435
  37,566
  44,348
  51,776
  59,840
  68,527
  77,823
  87,713
  98,184
  109,224
  120,823
  132,974
  145,676
  158,928
  172,734
  187,102
  202,045
  217,578
  233,720
  250,494
  267,927
Variable operating expenses, $m
 
  2,528
  3,601
  4,995
  6,759
  8,942
  11,586
  14,726
  18,393
  22,606
  27,380
  32,720
  38,628
  45,097
  52,121
  59,687
  67,784
  76,398
  85,518
  95,134
  105,237
  115,821
  126,884
  138,426
  150,451
  162,966
  175,981
  189,510
  203,570
  218,180
  233,365
Fixed operating expenses, $m
 
  598
  613
  628
  644
  660
  676
  693
  710
  728
  746
  765
  784
  804
  824
  844
  865
  887
  909
  932
  955
  979
  1,004
  1,029
  1,054
  1,081
  1,108
  1,136
  1,164
  1,193
  1,223
Total operating expenses, $m
  2,294
  3,126
  4,214
  5,623
  7,403
  9,602
  12,262
  15,419
  19,103
  23,334
  28,126
  33,485
  39,412
  45,901
  52,945
  60,531
  68,649
  77,285
  86,427
  96,066
  106,192
  116,800
  127,888
  139,455
  151,505
  164,047
  177,089
  190,646
  204,734
  219,373
  234,588
Operating income, $m
  -314
  -223
  -79
  112
  358
  665
  1,040
  1,488
  2,014
  2,620
  3,309
  4,081
  4,937
  5,875
  6,896
  7,996
  9,174
  10,428
  11,756
  13,158
  14,631
  16,175
  17,789
  19,473
  21,228
  23,055
  24,956
  26,932
  28,986
  31,121
  33,340
EBITDA, $m
  1,396
  2,277
  3,482
  5,051
  7,041
  9,507
  12,496
  16,050
  20,201
  24,973
  30,382
  36,435
  43,133
  50,469
  58,434
  67,016
  76,200
  85,972
  96,319
  107,228
  118,691
  130,701
  143,254
  156,352
  169,998
  184,200
  198,970
  214,324
  230,281
  246,863
  264,096
Interest expense (income), $m
  316
  303
  504
  775
  1,127
  1,573
  2,125
  2,793
  3,586
  4,513
  5,578
  6,784
  8,133
  9,626
  11,261
  13,036
  14,948
  16,994
  19,171
  21,475
  23,905
  26,458
  29,133
  31,928
  34,845
  37,883
  41,046
  44,335
  47,753
  51,306
  54,998
Earnings before tax, $m
  -632
  -526
  -583
  -663
  -770
  -908
  -1,085
  -1,305
  -1,573
  -1,893
  -2,269
  -2,703
  -3,197
  -3,751
  -4,365
  -5,040
  -5,774
  -6,566
  -7,414
  -8,317
  -9,274
  -10,283
  -11,344
  -12,455
  -13,617
  -14,828
  -16,090
  -17,403
  -18,768
  -20,186
  -21,659
Tax expense, $m
  -232
  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
  -400
  -526
  -583
  -663
  -770
  -908
  -1,085
  -1,305
  -1,573
  -1,893
  -2,269
  -2,703
  -3,197
  -3,751
  -4,365
  -5,040
  -5,774
  -6,566
  -7,414
  -8,317
  -9,274
  -10,283
  -11,344
  -12,455
  -13,617
  -14,828
  -16,090
  -17,403
  -18,768
  -20,186
  -21,659

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  13,812
  20,158
  28,712
  39,823
  53,891
  71,294
  92,372
  117,412
  146,644
  180,237
  218,297
  260,876
  307,976
  359,559
  415,557
  475,882
  540,436
  609,118
  681,832
  758,497
  839,046
  923,434
  1,011,639
  1,103,664
  1,199,539
  1,299,320
  1,403,090
  1,510,956
  1,623,055
  1,739,543
  1,860,605
Adjusted assets (=assets-cash), $m
  13,795
  20,158
  28,712
  39,823
  53,891
  71,294
  92,372
  117,412
  146,644
  180,237
  218,297
  260,876
  307,976
  359,559
  415,557
  475,882
  540,436
  609,118
  681,832
  758,497
  839,046
  923,434
  1,011,639
  1,103,664
  1,199,539
  1,299,320
  1,403,090
  1,510,956
  1,623,055
  1,739,543
  1,860,605
Revenue / Adjusted assets
  0.149
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
Average production assets, $m
  13,473
  19,750
  28,132
  39,017
  52,801
  69,852
  90,504
  115,038
  143,679
  176,592
  213,882
  255,600
  301,747
  352,287
  407,153
  466,258
  529,506
  596,799
  668,043
  743,157
  822,077
  904,758
  991,179
  1,081,343
  1,175,279
  1,273,042
  1,374,713
  1,480,399
  1,590,230
  1,704,363
  1,822,976
Working capital, $m
  -19
  -49
  -70
  -97
  -132
  -175
  -226
  -287
  -359
  -441
  -534
  -639
  -754
  -880
  -1,017
  -1,165
  -1,323
  -1,491
  -1,669
  -1,857
  -2,054
  -2,261
  -2,476
  -2,702
  -2,936
  -3,181
  -3,435
  -3,699
  -3,973
  -4,258
  -4,555
Total debt, $m
  6,580
  10,959
  16,853
  24,508
  34,201
  46,192
  60,714
  77,967
  98,108
  121,253
  147,477
  176,813
  209,265
  244,806
  283,389
  324,953
  369,430
  416,752
  466,852
  519,674
  575,173
  633,316
  694,089
  757,494
  823,552
  892,301
  963,799
  1,038,119
  1,115,355
  1,195,615
  1,279,027
Total liabilities, $m
  9,510
  13,889
  19,783
  27,438
  37,131
  49,122
  63,644
  80,897
  101,038
  124,183
  150,407
  179,743
  212,195
  247,736
  286,319
  327,883
  372,360
  419,682
  469,782
  522,604
  578,103
  636,246
  697,019
  760,424
  826,482
  895,231
  966,729
  1,041,049
  1,118,285
  1,198,545
  1,281,957
Total equity, $m
  4,302
  6,269
  8,930
  12,385
  16,760
  22,173
  28,728
  36,515
  45,606
  56,054
  67,890
  81,132
  95,780
  111,823
  129,238
  147,999
  168,076
  189,436
  212,050
  235,893
  260,943
  287,188
  314,620
  343,239
  373,057
  404,088
  436,361
  469,907
  504,770
  540,998
  578,648
Total liabilities and equity, $m
  13,812
  20,158
  28,713
  39,823
  53,891
  71,295
  92,372
  117,412
  146,644
  180,237
  218,297
  260,875
  307,975
  359,559
  415,557
  475,882
  540,436
  609,118
  681,832
  758,497
  839,046
  923,434
  1,011,639
  1,103,663
  1,199,539
  1,299,319
  1,403,090
  1,510,956
  1,623,055
  1,739,543
  1,860,605
Debt-to-equity ratio
  1.530
  1.750
  1.890
  1.980
  2.040
  2.080
  2.110
  2.140
  2.150
  2.160
  2.170
  2.180
  2.180
  2.190
  2.190
  2.200
  2.200
  2.200
  2.200
  2.200
  2.200
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
Adjusted equity ratio
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -400
  -526
  -583
  -663
  -770
  -908
  -1,085
  -1,305
  -1,573
  -1,893
  -2,269
  -2,703
  -3,197
  -3,751
  -4,365
  -5,040
  -5,774
  -6,566
  -7,414
  -8,317
  -9,274
  -10,283
  -11,344
  -12,455
  -13,617
  -14,828
  -16,090
  -17,403
  -18,768
  -20,186
  -21,659
Depreciation, amort., depletion, $m
  1,710
  2,500
  3,561
  4,939
  6,684
  8,842
  11,456
  14,562
  18,187
  22,353
  27,074
  32,354
  38,196
  44,593
  51,538
  59,020
  67,026
  75,544
  84,562
  94,071
  104,060
  114,526
  125,466
  136,879
  148,770
  161,145
  174,014
  187,392
  201,295
  215,742
  230,757
Funds from operations, $m
  964
  1,974
  2,978
  4,276
  5,914
  7,934
  10,371
  13,257
  16,614
  20,460
  24,805
  29,652
  34,999
  40,843
  47,173
  53,980
  61,252
  68,978
  77,148
  85,753
  94,786
  104,243
  114,122
  124,424
  135,153
  146,317
  157,924
  169,989
  182,527
  195,557
  209,098
Change in working capital, $m
  -162
  -16
  -21
  -27
  -34
  -43
  -52
  -61
  -72
  -82
  -93
  -104
  -115
  -126
  -137
  -148
  -158
  -168
  -178
  -188
  -197
  -207
  -216
  -225
  -235
  -244
  -254
  -264
  -274
  -285
  -296
Cash from operations, $m
  1,126
  1,990
  2,999
  4,303
  5,948
  7,976
  10,423
  13,318
  16,686
  20,543
  24,898
  29,756
  35,115
  40,969
  47,310
  54,127
  61,410
  69,146
  77,326
  85,941
  94,983
  104,450
  114,338
  124,649
  135,388
  146,561
  158,178
  170,254
  182,802
  195,842
  209,394
Maintenance CAPEX, $m
  0
  -1,705
  -2,500
  -3,561
  -4,939
  -6,684
  -8,842
  -11,456
  -14,562
  -18,187
  -22,353
  -27,074
  -32,354
  -38,196
  -44,593
  -51,538
  -59,020
  -67,026
  -75,544
  -84,562
  -94,071
  -104,060
  -114,526
  -125,466
  -136,879
  -148,770
  -161,145
  -174,014
  -187,392
  -201,295
  -215,742
New CAPEX, $m
  -1,165
  -6,277
  -8,382
  -10,886
  -13,783
  -17,051
  -20,651
  -24,534
  -28,641
  -32,913
  -37,290
  -41,718
  -46,147
  -50,540
  -54,866
  -59,105
  -63,248
  -67,293
  -71,244
  -75,114
  -78,920
  -82,681
  -86,421
  -90,164
  -93,936
  -97,763
  -101,671
  -105,685
  -109,831
  -114,133
  -118,614
Cash from investing activities, $m
  -533
  -7,982
  -10,882
  -14,447
  -18,722
  -23,735
  -29,493
  -35,990
  -43,203
  -51,100
  -59,643
  -68,792
  -78,501
  -88,736
  -99,459
  -110,643
  -122,268
  -134,319
  -146,788
  -159,676
  -172,991
  -186,741
  -200,947
  -215,630
  -230,815
  -246,533
  -262,816
  -279,699
  -297,223
  -315,428
  -334,356
Free cash flow, $m
  593
  -5,993
  -7,883
  -10,144
  -12,774
  -15,759
  -19,071
  -22,672
  -26,517
  -30,558
  -34,746
  -39,036
  -43,387
  -47,767
  -52,149
  -56,516
  -60,858
  -65,172
  -69,462
  -73,736
  -78,007
  -82,292
  -86,610
  -90,981
  -95,427
  -99,972
  -104,637
  -109,446
  -114,422
  -119,586
  -124,961
Issuance/(repayment) of debt, $m
  -550
  4,381
  5,894
  7,655
  9,693
  11,991
  14,523
  17,253
  20,141
  23,145
  26,223
  29,337
  32,452
  35,541
  38,583
  41,564
  44,478
  47,322
  50,100
  52,822
  55,498
  58,143
  60,773
  63,405
  66,058
  68,749
  71,497
  74,320
  77,236
  80,261
  83,412
Issuance/(repurchase) of shares, $m
  -9
  2,508
  3,244
  4,119
  5,145
  6,321
  7,640
  9,092
  10,664
  12,340
  14,106
  15,945
  17,845
  19,793
  21,781
  23,801
  25,850
  27,926
  30,028
  32,160
  34,325
  36,528
  38,776
  41,075
  43,434
  45,860
  48,362
  50,949
  53,630
  56,414
  59,309
Cash from financing (excl. dividends), $m  
  -588
  6,889
  9,138
  11,774
  14,838
  18,312
  22,163
  26,345
  30,805
  35,485
  40,329
  45,282
  50,297
  55,334
  60,364
  65,365
  70,328
  75,248
  80,128
  84,982
  89,823
  94,671
  99,549
  104,480
  109,492
  114,609
  119,859
  125,269
  130,866
  136,675
  142,721
Total cash flow (excl. dividends), $m
  5
  895
  1,255
  1,630
  2,064
  2,553
  3,092
  3,673
  4,288
  4,928
  5,583
  6,246
  6,909
  7,567
  8,215
  8,849
  9,470
  10,075
  10,667
  11,246
  11,816
  12,379
  12,939
  13,500
  14,064
  14,637
  15,222
  15,823
  16,444
  17,088
  17,759
Retained Cash Flow (-), $m
  367
  -2,508
  -3,244
  -4,119
  -5,145
  -6,321
  -7,640
  -9,092
  -10,664
  -12,340
  -14,106
  -15,945
  -17,845
  -19,793
  -21,781
  -23,801
  -25,850
  -27,926
  -30,028
  -32,160
  -34,325
  -36,528
  -38,776
  -41,075
  -43,434
  -45,860
  -48,362
  -50,949
  -53,630
  -56,414
  -59,309
Prev. year cash balance distribution, $m
 
  15
  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
 
  -1,597
  -1,989
  -2,489
  -3,081
  -3,768
  -4,548
  -5,419
  -6,376
  -7,412
  -8,522
  -9,699
  -10,935
  -12,226
  -13,566
  -14,952
  -16,381
  -17,851
  -19,362
  -20,914
  -22,509
  -24,149
  -25,837
  -27,575
  -29,369
  -31,223
  -33,140
  -35,126
  -37,186
  -39,325
  -41,550
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  -1,467
  -1,663
  -1,880
  -2,082
  -2,255
  -2,385
  -2,463
  -2,481
  -2,438
  -2,338
  -2,188
  -1,997
  -1,779
  -1,546
  -1,310
  -1,083
  -873
  -685
  -524
  -389
  -281
  -198
  -135
  -89
  -57
  -35
  -21
  -12
  -7
  -4
Current shareholders' claim on cash, %
  100
  84.4
  72.6
  63.4
  56.0
  50.1
  45.2
  41.1
  37.6
  34.7
  32.1
  29.9
  28.0
  26.3
  24.7
  23.4
  22.2
  21.1
  20.1
  19.1
  18.3
  17.5
  16.8
  16.2
  15.5
  15.0
  14.4
  13.9
  13.4
  13.0
  12.5

Continental Resources, Inc. is a crude oil and natural gas company with properties in the North, South and East regions of the United States. The North region consists of properties north of Kansas and west of the Mississippi River and includes North Dakota Bakken, Montana Bakken and the Red River units. The South region includes properties south of Nebraska and west of the Mississippi River including various plays in the South Central Oklahoma Oil Province (SCOOP), Sooner Trend Anadarko Canadian Kingfisher (STACK), and Arkoma Woodford areas of Oklahoma. The East region is consists of undeveloped leasehold acreage east of the Mississippi River with no drilling or production operations. As of December 31, 2016, its estimated proved reserves were 1,275 million barrels of oil equivalent (MMBoe), with estimated proved developed reserves of 519 MMBoe. As of December 31, 2016, its average daily production from South region properties was 91,088 barrels of oil equivalent (Boe) per day.

FINANCIAL RATIOS  of  Continental Resources (CLR)

Valuation Ratios
P/E Ratio -33.8
Price to Sales 6.8
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow -347.1
Growth Rates
Sales Growth Rate -26.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -62.2%
Cap. Spend. - 3 Yr. Gr. Rate -20.8%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 152.9%
Total Debt to Equity 153%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital -3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity -8.9%
Return On Equity - 3 Yr. Avg. 1.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 70.4%
EBITDA Margin - 3 Yr. Avg. 64.5%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin -31.9%
Pre-Tax Margin - 3 Yr. Avg. -6.5%
Net Profit Margin -20.2%
Net Profit Margin - 3 Yr. Avg. -4.4%
Effective Tax Rate 36.7%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 0%

CLR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLR stock intrinsic value calculation we used $1980 million for the last fiscal year's total revenue generated by Continental Resources. The default revenue input number comes from 2016 income statement of Continental Resources. 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 CLR stock valuation model: a) initial revenue growth rate of 46.6% 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 8.9%, whose default value for CLR is calculated based on our internal credit rating of Continental Resources, 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 Continental Resources.
    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 CLR stock the variable cost ratio is equal to 87.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $583 million in the base year in the intrinsic value calculation for CLR 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 4.6% for Continental Resources.

Corporate tax rate of 27% is the nominal tax rate for Continental Resources. 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 CLR 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 CLR are equal to 680.4%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Continental Resources 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 CLR is equal to -1.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4302 million for Continental Resources - 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 377.639 million for Continental Resources 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 Continental Resources at the current share price and the inputted number of shares is $13.7 billion.

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COMPANY NEWS

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▶ Can The Permian Push Prices Down To $40?   [Aug-14-17 07:00PM  Oilprice.com]
▶ Why Did Continentals Stock Rise after Its 2Q17 Earnings?   [Aug-11-17 06:11PM  Market Realist]
▶ Inside Continentals 2Q17 Earnings and Revenue   [02:52PM  Market Realist]
▶ Continental Resources President Says Wells Are Oily   [Aug-09-17 03:06PM  Bloomberg Video]
▶ Continental Resources reports 2Q loss   [Aug-08-17 11:55PM  Associated Press]
▶ [$$] Harold Hamm steps up bets on demand for gas   [Aug-06-17 06:17AM  Financial Times]
▶ [$$] Delta Air Lines: Ready for Takeoff   [Aug-05-17 12:14AM  Barrons.com]
▶ Whiting Petroleum Stocks Short Interest Trends   [Aug-03-17 10:37AM  Market Realist]
▶ Are Crude Oil Futures Trading Close to Resistance Level?   [Aug-02-17 10:02AM  Market Realist]
▶ What Are the Short Interest Trends in Continentals Stock?   [Jul-28-17 07:37AM  Market Realist]
▶ Whats Continental Resources Production Outlook for 2017?   [Jul-27-17 10:38AM  Market Realist]
▶ Continental Resources 2Q17 Earnings: What to Expect   [Jul-26-17 04:56PM  Market Realist]
▶ What to Watch in the Bakken Shale This Quarter   [Jul-24-17 07:45PM  Motley Fool]
▶ Schlumberger Sees Drilling Slowdown But Market Share, Price Gains   [Jul-21-17 04:21PM  Investor's Business Daily]
▶ U.S. Crude Output Jumps To Highest In 2 Years; Inventory Falls   [Jul-19-17 04:44PM  Investor's Business Daily]
▶ Which Oil-Weighted Stocks Are Capturing Oils Gain the Most?   [Jul-18-17 01:17PM  Market Realist]
▶ Whiting Petroleums Production Expectations for 2017   [Jul-14-17 07:39AM  Market Realist]
▶ Short Interest Trends: Whiting Petroleum Stock   [Jul-11-17 09:09AM  Market Realist]
▶ Why Shale Won't Be Enough To Avoid Supply Squeeze, IEA Warns   [06:31AM  Investor's Business Daily]
▶ Crude Oil Drives Oil-Weighted Stocks Returns   [11:04AM  Market Realist]
▶ Corpus Christi Set To Become The Next Oil Export Hotspot   [Jul-01-17 07:00PM  Oilprice.com]
▶ Inside the EIAs Forecast for WTI Crude Oil Prices   [Jun-27-17 10:36AM  Market Realist]
▶ Could Oil Fall to $40 a Barrel or Even Less?   [09:55AM  24/7 Wall St.]
▶ The Most Ignored Oil Price Influencer   [Jun-21-17 05:00PM  Oilprice.com]
▶ Short Interest Trends in Whiting Petroleum Stock   [Jun-13-17 04:05PM  Market Realist]
Financial statements of CLR
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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