Intrinsic value of Callon Petroleum - CPE

Previous Close

$11.11

  Intrinsic Value

$2.30

stock screener

  Rating & Target

str. sell

-79%

Previous close

$11.11

 
Intrinsic value

$2.30

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of CPE 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, %
  45.65
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  201
  586
  905
  1,353
  1,963
  2,770
  3,808
  5,111
  6,711
  8,636
  10,908
  13,545
  16,560
  19,961
  23,749
  27,925
  32,483
  37,418
  42,721
  48,384
  54,398
  60,755
  67,449
  74,475
  81,829
  89,510
  97,520
  105,862
  114,541
  123,565
  132,944
Variable operating expenses, $m
 
  724
  1,118
  1,672
  2,427
  3,423
  4,707
  6,318
  8,295
  10,674
  13,482
  16,742
  20,468
  24,671
  29,354
  34,515
  40,149
  46,249
  52,803
  59,803
  67,236
  75,093
  83,367
  92,051
  101,141
  110,635
  120,535
  130,845
  141,572
  152,726
  164,318
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
  261
  724
  1,118
  1,672
  2,427
  3,423
  4,707
  6,318
  8,295
  10,674
  13,482
  16,742
  20,468
  24,671
  29,354
  34,515
  40,149
  46,249
  52,803
  59,803
  67,236
  75,093
  83,367
  92,051
  101,141
  110,635
  120,535
  130,845
  141,572
  152,726
  164,318
Operating income, $m
  -60
  -138
  -214
  -319
  -463
  -654
  -899
  -1,206
  -1,584
  -2,038
  -2,574
  -3,197
  -3,908
  -4,711
  -5,605
  -6,590
  -7,666
  -8,831
  -10,082
  -11,419
  -12,838
  -14,338
  -15,918
  -17,576
  -19,312
  -21,124
  -23,015
  -24,983
  -27,032
  -29,161
  -31,375
EBITDA, $m
  13
  183
  283
  423
  614
  867
  1,191
  1,599
  2,100
  2,702
  3,413
  4,238
  5,182
  6,246
  7,431
  8,738
  10,164
  11,708
  13,367
  15,139
  17,021
  19,010
  21,105
  23,303
  25,604
  28,008
  30,514
  33,124
  35,840
  38,663
  41,598
Interest expense (income), $m
  0
  33
  61
  100
  155
  231
  330
  458
  619
  817
  1,055
  1,335
  1,661
  2,033
  2,453
  2,921
  3,437
  3,999
  4,609
  5,264
  5,963
  6,706
  7,491
  8,317
  9,185
  10,093
  11,042
  12,031
  13,061
  14,132
  15,247
Earnings before tax, $m
  -92
  -172
  -274
  -419
  -619
  -884
  -1,229
  -1,665
  -2,203
  -2,855
  -3,629
  -4,532
  -5,569
  -6,744
  -8,058
  -9,511
  -11,103
  -12,830
  -14,691
  -16,682
  -18,801
  -21,044
  -23,409
  -25,893
  -28,496
  -31,217
  -34,056
  -37,014
  -40,092
  -43,294
  -46,621
Tax expense, $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
Net income, $m
  -92
  -172
  -274
  -419
  -619
  -884
  -1,229
  -1,665
  -2,203
  -2,855
  -3,629
  -4,532
  -5,569
  -6,744
  -8,058
  -9,511
  -11,103
  -12,830
  -14,691
  -16,682
  -18,801
  -21,044
  -23,409
  -25,893
  -28,496
  -31,217
  -34,056
  -37,014
  -40,092
  -43,294
  -46,621

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  653
  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
  2,268
  4,306
  6,653
  9,949
  14,435
  20,366
  27,999
  37,583
  49,349
  63,500
  80,205
  99,597
  121,766
  146,770
  174,627
  205,330
  238,848
  275,133
  314,126
  355,764
  399,985
  446,730
  495,950
  547,610
  601,684
  658,165
  717,061
  778,395
  842,210
  908,563
  977,528
Adjusted assets (=assets-cash), $m
  1,615
  4,306
  6,653
  9,949
  14,435
  20,366
  27,999
  37,583
  49,349
  63,500
  80,205
  99,597
  121,766
  146,770
  174,627
  205,330
  238,848
  275,133
  314,126
  355,764
  399,985
  446,730
  495,950
  547,610
  601,684
  658,165
  717,061
  778,395
  842,210
  908,563
  977,528
Revenue / Adjusted assets
  0.124
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
Average production assets, $m
  1,012
  3,214
  4,966
  7,427
  10,776
  15,204
  20,901
  28,056
  36,839
  47,403
  59,873
  74,349
  90,899
  109,564
  130,360
  153,280
  178,301
  205,388
  234,496
  265,579
  298,590
  333,485
  370,229
  408,793
  449,160
  491,323
  535,289
  581,075
  628,713
  678,246
  729,728
Working capital, $m
  593
  -260
  -402
  -601
  -872
  -1,230
  -1,691
  -2,269
  -2,980
  -3,834
  -4,843
  -6,014
  -7,353
  -8,863
  -10,545
  -12,399
  -14,423
  -16,614
  -18,968
  -21,482
  -24,153
  -26,975
  -29,947
  -33,067
  -36,332
  -39,743
  -43,299
  -47,003
  -50,856
  -54,863
  -59,027
Total debt, $m
  390
  1,122
  1,852
  2,877
  4,272
  6,117
  8,491
  11,471
  15,130
  19,531
  24,727
  30,757
  37,652
  45,428
  54,092
  63,641
  74,065
  85,349
  97,476
  110,426
  124,178
  138,716
  154,023
  170,090
  186,907
  204,472
  222,789
  241,864
  261,710
  282,346
  303,794
Total liabilities, $m
  534
  1,339
  2,069
  3,094
  4,489
  6,334
  8,708
  11,688
  15,347
  19,748
  24,944
  30,975
  37,869
  45,645
  54,309
  63,858
  74,282
  85,566
  97,693
  110,643
  124,395
  138,933
  154,241
  170,307
  187,124
  204,689
  223,006
  242,081
  261,927
  282,563
  304,011
Total equity, $m
  1,733
  2,967
  4,584
  6,855
  9,946
  14,032
  19,291
  25,895
  34,001
  43,751
  55,261
  68,622
  83,897
  101,124
  120,318
  141,472
  164,566
  189,567
  216,433
  245,121
  275,589
  307,797
  341,710
  377,303
  414,560
  453,476
  494,055
  536,314
  580,283
  626,000
  673,517
Total liabilities and equity, $m
  2,267
  4,306
  6,653
  9,949
  14,435
  20,366
  27,999
  37,583
  49,348
  63,499
  80,205
  99,597
  121,766
  146,769
  174,627
  205,330
  238,848
  275,133
  314,126
  355,764
  399,984
  446,730
  495,951
  547,610
  601,684
  658,165
  717,061
  778,395
  842,210
  908,563
  977,528
Debt-to-equity ratio
  0.225
  0.380
  0.400
  0.420
  0.430
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
Adjusted equity ratio
  0.669
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689
  0.689

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -92
  -172
  -274
  -419
  -619
  -884
  -1,229
  -1,665
  -2,203
  -2,855
  -3,629
  -4,532
  -5,569
  -6,744
  -8,058
  -9,511
  -11,103
  -12,830
  -14,691
  -16,682
  -18,801
  -21,044
  -23,409
  -25,893
  -28,496
  -31,217
  -34,056
  -37,014
  -40,092
  -43,294
  -46,621
Depreciation, amort., depletion, $m
  73
  321
  497
  743
  1,078
  1,520
  2,090
  2,806
  3,684
  4,740
  5,987
  7,435
  9,090
  10,956
  13,036
  15,328
  17,830
  20,539
  23,450
  26,558
  29,859
  33,349
  37,023
  40,879
  44,916
  49,132
  53,529
  58,108
  62,871
  67,825
  72,973
Funds from operations, $m
  113
  150
  223
  323
  459
  636
  861
  1,141
  1,481
  1,885
  2,358
  2,903
  3,521
  4,212
  4,978
  5,817
  6,727
  7,709
  8,759
  9,876
  11,058
  12,305
  13,614
  14,986
  16,419
  17,915
  19,473
  21,094
  22,779
  24,531
  26,351
Change in working capital, $m
  -6
  -98
  -142
  -199
  -271
  -358
  -461
  -579
  -710
  -854
  -1,009
  -1,171
  -1,339
  -1,510
  -1,682
  -1,854
  -2,024
  -2,191
  -2,355
  -2,514
  -2,670
  -2,823
  -2,972
  -3,119
  -3,265
  -3,411
  -3,556
  -3,704
  -3,853
  -4,007
  -4,164
Cash from operations, $m
  119
  247
  364
  522
  730
  994
  1,322
  1,720
  2,191
  2,740
  3,367
  4,074
  4,859
  5,722
  6,660
  7,671
  8,751
  9,900
  11,113
  12,390
  13,728
  15,127
  16,586
  18,105
  19,685
  21,325
  23,029
  24,797
  26,632
  28,538
  30,516
Maintenance CAPEX, $m
  0
  -201
  -321
  -497
  -743
  -1,078
  -1,520
  -2,090
  -2,806
  -3,684
  -4,740
  -5,987
  -7,435
  -9,090
  -10,956
  -13,036
  -15,328
  -17,830
  -20,539
  -23,450
  -26,558
  -29,859
  -33,349
  -37,023
  -40,879
  -44,916
  -49,132
  -53,529
  -58,108
  -62,871
  -67,825
New CAPEX, $m
  -190
  -1,203
  -1,752
  -2,461
  -3,349
  -4,427
  -5,698
  -7,154
  -8,783
  -10,564
  -12,471
  -14,476
  -16,550
  -18,665
  -20,796
  -22,920
  -25,021
  -27,087
  -29,108
  -31,083
  -33,011
  -34,895
  -36,744
  -38,564
  -40,367
  -42,163
  -43,966
  -45,786
  -47,638
  -49,533
  -51,483
Cash from investing activities, $m
  -866
  -1,404
  -2,073
  -2,958
  -4,092
  -5,505
  -7,218
  -9,244
  -11,589
  -14,248
  -17,211
  -20,463
  -23,985
  -27,755
  -31,752
  -35,956
  -40,349
  -44,917
  -49,647
  -54,533
  -59,569
  -64,754
  -70,093
  -75,587
  -81,246
  -87,079
  -93,098
  -99,315
  -105,746
  -112,404
  -119,308
Free cash flow, $m
  -747
  -1,157
  -1,709
  -2,435
  -3,362
  -4,511
  -5,896
  -7,525
  -9,398
  -11,508
  -13,844
  -16,389
  -19,125
  -22,033
  -25,092
  -28,285
  -31,598
  -35,017
  -38,534
  -42,143
  -45,840
  -49,627
  -53,506
  -57,481
  -61,561
  -65,754
  -70,069
  -74,518
  -79,113
  -83,866
  -88,791
Issuance/(repayment) of debt, $m
  60
  502
  730
  1,025
  1,395
  1,844
  2,374
  2,981
  3,659
  4,401
  5,195
  6,031
  6,895
  7,776
  8,664
  9,549
  10,424
  11,285
  12,127
  12,949
  13,753
  14,538
  15,308
  16,066
  16,817
  17,566
  18,317
  19,075
  19,846
  20,636
  21,448
Issuance/(repurchase) of shares, $m
  1,358
  1,282
  1,891
  2,691
  3,710
  4,971
  6,488
  8,268
  10,310
  12,605
  15,139
  17,893
  20,844
  23,971
  27,252
  30,666
  34,197
  37,830
  41,557
  45,371
  49,269
  53,251
  57,322
  61,487
  65,754
  70,133
  74,635
  79,273
  84,061
  89,011
  94,138
Cash from financing (excl. dividends), $m  
  1,406
  1,784
  2,621
  3,716
  5,105
  6,815
  8,862
  11,249
  13,969
  17,006
  20,334
  23,924
  27,739
  31,747
  35,916
  40,215
  44,621
  49,115
  53,684
  58,320
  63,022
  67,789
  72,630
  77,553
  82,571
  87,699
  92,952
  98,348
  103,907
  109,647
  115,586
Total cash flow (excl. dividends), $m
  659
  628
  912
  1,281
  1,743
  2,304
  2,966
  3,724
  4,571
  5,498
  6,491
  7,534
  8,614
  9,714
  10,823
  11,929
  13,023
  14,098
  15,150
  16,178
  17,181
  18,162
  19,124
  20,071
  21,010
  21,945
  22,883
  23,830
  24,794
  25,780
  26,795
Retained Cash Flow (-), $m
  -1,370
  -1,282
  -1,891
  -2,691
  -3,710
  -4,971
  -6,488
  -8,268
  -10,310
  -12,605
  -15,139
  -17,893
  -20,844
  -23,971
  -27,252
  -30,666
  -34,197
  -37,830
  -41,557
  -45,371
  -49,269
  -53,251
  -57,322
  -61,487
  -65,754
  -70,133
  -74,635
  -79,273
  -84,061
  -89,011
  -94,138
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
 
  8
  13
  21
  31
  45
  64
  88
  118
  154
  199
  251
  312
  381
  459
  546
  642
  747
  861
  983
  1,113
  1,251
  1,397
  1,551
  1,713
  1,882
  2,059
  2,243
  2,435
  2,634
  2,842
Cash available for distribution, $m
 
  -655
  -979
  -1,410
  -1,967
  -2,666
  -3,522
  -4,544
  -5,739
  -7,107
  -8,648
  -10,358
  -12,230
  -14,257
  -16,428
  -18,737
  -21,174
  -23,733
  -26,407
  -29,193
  -32,088
  -35,089
  -38,198
  -41,415
  -44,744
  -48,188
  -51,753
  -55,443
  -59,267
  -63,231
  -67,343
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
 
  -627
  -895
  -1,223
  -1,612
  -2,055
  -2,538
  -3,043
  -3,549
  -4,032
  -4,469
  -4,837
  -5,120
  -5,305
  -5,382
  -5,352
  -5,219
  -4,992
  -4,684
  -4,313
  -3,896
  -3,453
  -3,001
  -2,557
  -2,135
  -1,747
  -1,398
  -1,095
  -838
  -626
  -457
Current shareholders' claim on cash, %
  100
  63.6
  41.7
  28.1
  19.4
  13.7
  9.9
  7.3
  5.5
  4.2
  3.3
  2.6
  2.1
  1.7
  1.4
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.1
  0.1

Callon Petroleum Company is an independent oil and natural gas company. The Company is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The Company focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin. The Permian Basin is located in West Texas and southeastern New Mexico and consisted of three primary sub-basins: the Midland Basin, the Delaware Basin, and the Central Basin Platform as of December 31, 2016. The Company's drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. It owns additional immaterial properties in Louisiana. As of December 31, 2016, the Company had owned leaseholds in 39,570 net acres in the Permian Basin, all of which was located in the Midland Basin.

FINANCIAL RATIOS  of  Callon Petroleum (CPE)

Valuation Ratios
P/E Ratio -24.3
Price to Sales 11.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 18.8
Price to Free Cash Flow -31.5
Growth Rates
Sales Growth Rate 45.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 22.5%
Total Debt to Equity 22.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -6%
Ret/ On Assets - 3 Yr. Avg. -9.7%
Return On Total Capital -6.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10.9%
Return On Equity -8.8%
Return On Equity - 3 Yr. Avg. -19.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 75.1%
Gross Margin - 3 Yr. Avg. 76%
EBITDA Margin -9.5%
EBITDA Margin - 3 Yr. Avg. -8.9%
Operating Margin -29.9%
Oper. Margin - 3 Yr. Avg. -51.9%
Pre-Tax Margin -45.8%
Pre-Tax Margin - 3 Yr. Avg. -50.7%
Net Profit Margin -45.8%
Net Profit Margin - 3 Yr. Avg. -64.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.3%
Payout Ratio -7.6%

CPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPE stock intrinsic value calculation we used $366 million for the last fiscal year's total revenue generated by Callon Petroleum. The default revenue input number comes from 2016 income statement of Callon Petroleum. 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 CPE stock valuation model: a) initial revenue growth rate of 60% 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 CPE is calculated based on our internal credit rating of Callon Petroleum, 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 Callon Petroleum.
    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 CPE stock the variable cost ratio is equal to 123.6%.

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 CPE 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 5.4% for Callon Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Callon Petroleum. 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 CPE stock is equal to 2.3%.

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 CPE are equal to 548.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Callon Petroleum 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 CPE is equal to -44.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1856 million for Callon Petroleum - 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 202 million for Callon Petroleum 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 Callon Petroleum at the current share price and the inputted number of shares is $2.2 billion.

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COMPANY NEWS

▶ Oil Surge Is Creating High-Yield Opportunities   [Jun-28-18 12:36PM  TheStreet.com]
▶ Callon Petroleum Declares Series A Preferred Dividend   [Jun-05-18 07:30AM  PR Newswire]
▶ Callon Petroleum Likely to Move Higher   [May-18-18 03:14PM  TheStreet.com]
▶ Callon: 1Q Earnings Snapshot   [May-02-18 05:43PM  Associated Press]
▶ 3 Energy Stocks to Buy for an Oil Breakout   [Apr-23-18 01:49PM  Kiplinger]
▶ Callon Petroleum Declares Series A Preferred Dividend   [Mar-05-18 06:00AM  PR Newswire]
▶ Callon Petroleum Company to Host Earnings Call   [Feb-28-18 07:15AM  ACCESSWIRE]
▶ Callon meets 4Q profit forecasts   [Feb-27-18 05:39PM  Associated Press]
▶ Top Growth Stocks To Buy   [Feb-22-18 11:02AM  Simply Wall St.]
▶ EQT Corporations Hedge Position for 2018   [Jan-26-18 09:04AM  Market Realist]
▶ Financially Strong And High Growth Stocks   [Jan-22-18 11:02AM  Simply Wall St.]
▶ US Dollar Hit a 3-Year Low: Good News for Crude Oil?   [Jan-17-18 08:27AM  Market Realist]
▶ Which Oil-Weighted Stocks Are Outdoing Oils Gains?   [Jan-11-18 12:01PM  Market Realist]
▶ Which Oil-Weighted Stocks Could Outperform Oil?   [Jan-04-18 10:04AM  Market Realist]
▶ These 5 Energy Stocks Could Be Huge Winners in 2018   [Dec-20-17 07:34PM  Motley Fool]
▶ December Top Growth Stocks   [Dec-14-17 11:02AM  Simply Wall St.]
▶ Have Oil-Weighted Stocks Missed Oils Rise?   [Nov-28-17 01:01PM  Market Realist]
▶ Your Upstream Losers This Week: EXXI, REN, EPE, CPE, and UNT   [Nov-15-17 02:40PM  Market Realist]
▶ CALLON PETROLEUM CO to Host Earnings Call   [Nov-07-17 07:20AM  ACCESSWIRE]
▶ Callon misses 3Q profit forecasts   [Nov-06-17 04:35PM  Associated Press]
▶ These 16 Stocks Look Ready to Reverse   [02:30PM  TheStreet.com]
▶ Top Growth Stocks To Buy   [11:02AM  Simply Wall St.]
▶ Upstream Gainers This Week: Jones Energy Leads the Pack   [Sep-21-17 12:24PM  Market Realist]
▶ What Is EQTs 2017 Hedge Position?   [Sep-05-17 07:36AM  Market Realist]
▶ Are Oil-Weighted Stocks Falling More Than Oil Prices?   [Aug-23-17 07:38AM  Market Realist]
▶ E&P Midcap Earnings: The Good, The Bad & The Not So Ugly   [Aug-08-17 02:38PM  Barrons.com]
Financial statements of CPE
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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