Intrinsic value of Callon Petroleum - CPE

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$10.25

  Intrinsic Value

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  Value-price divergence*

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

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

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 1.9

 

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
  322
  497
  743
  1,078
  1,521
  2,091
  2,807
  3,686
  4,743
  5,990
  7,439
  9,095
  10,962
  13,043
  15,336
  17,839
  20,549
  23,462
  26,571
  29,874
  33,366
  37,042
  40,900
  44,939
  49,157
  53,556
  58,137
  62,903
  67,859
  73,010
Variable operating expenses, $m
 
  808
  1,248
  1,867
  2,708
  3,821
  5,253
  7,051
  9,259
  11,914
  15,048
  18,686
  22,846
  27,537
  32,763
  38,524
  44,812
  51,620
  58,936
  66,748
  75,044
  83,814
  93,049
  102,741
  112,887
  123,483
  134,533
  146,041
  158,013
  170,462
  183,401
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
  808
  1,248
  1,867
  2,708
  3,821
  5,253
  7,051
  9,259
  11,914
  15,048
  18,686
  22,846
  27,537
  32,763
  38,524
  44,812
  51,620
  58,936
  66,748
  75,044
  83,814
  93,049
  102,741
  112,887
  123,483
  134,533
  146,041
  158,013
  170,462
  183,401
Operating income, $m
  -60
  -486
  -751
  -1,124
  -1,630
  -2,300
  -3,162
  -4,244
  -5,573
  -7,171
  -9,057
  -11,247
  -13,751
  -16,575
  -19,720
  -23,188
  -26,973
  -31,071
  -35,474
  -40,176
  -45,170
  -50,449
  -56,007
  -61,841
  -67,948
  -74,326
  -80,977
  -87,903
  -95,110
  -102,603
  -110,391
EBITDA, $m
  13
  -370
  -571
  -854
  -1,240
  -1,749
  -2,404
  -3,227
  -4,238
  -5,453
  -6,888
  -8,553
  -10,457
  -12,604
  -14,996
  -17,633
  -20,511
  -23,627
  -26,975
  -30,551
  -34,349
  -38,363
  -42,590
  -47,026
  -51,669
  -56,520
  -61,577
  -66,844
  -72,324
  -78,022
  -83,945
Interest expense (income), $m
  0
  14
  25
  41
  64
  96
  137
  190
  257
  339
  438
  555
  690
  845
  1,019
  1,213
  1,428
  1,662
  1,915
  2,187
  2,477
  2,786
  3,112
  3,456
  3,816
  4,193
  4,588
  4,999
  5,427
  5,872
  6,335
Earnings before tax, $m
  -92
  -500
  -776
  -1,165
  -1,695
  -2,396
  -3,299
  -4,434
  -5,830
  -7,510
  -9,496
  -11,802
  -14,441
  -17,419
  -20,740
  -24,401
  -28,401
  -32,732
  -37,389
  -42,363
  -47,647
  -53,235
  -59,119
  -65,297
  -71,764
  -78,519
  -85,565
  -92,902
  -100,536
  -108,475
  -116,726
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
  -500
  -776
  -1,165
  -1,695
  -2,396
  -3,299
  -4,434
  -5,830
  -7,510
  -9,496
  -11,802
  -14,441
  -17,419
  -20,740
  -24,401
  -28,401
  -32,732
  -37,389
  -42,363
  -47,647
  -53,235
  -59,119
  -65,297
  -71,764
  -78,519
  -85,565
  -92,902
  -100,536
  -108,475
  -116,726

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
  2,594
  4,007
  5,993
  8,695
  12,267
  16,865
  22,637
  29,724
  38,248
  48,310
  59,990
  73,343
  88,403
  105,182
  123,676
  143,865
  165,720
  189,207
  214,286
  240,921
  269,077
  298,724
  329,840
  362,411
  396,431
  431,905
  468,848
  507,286
  547,252
  588,791
Adjusted assets (=assets-cash), $m
  1,615
  2,594
  4,007
  5,993
  8,695
  12,267
  16,865
  22,637
  29,724
  38,248
  48,310
  59,990
  73,343
  88,403
  105,182
  123,676
  143,865
  165,720
  189,207
  214,286
  240,921
  269,077
  298,724
  329,840
  362,411
  396,431
  431,905
  468,848
  507,286
  547,252
  588,791
Revenue / Adjusted assets
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
Average production assets, $m
  1,012
  1,619
  2,502
  3,741
  5,429
  7,659
  10,529
  14,133
  18,558
  23,879
  30,162
  37,454
  45,791
  55,194
  65,670
  77,216
  89,820
  103,466
  118,129
  133,787
  150,417
  167,996
  186,505
  205,932
  226,267
  247,507
  269,656
  292,721
  316,719
  341,671
  367,606
Working capital, $m
  593
  -96
  -149
  -222
  -322
  -455
  -625
  -839
  -1,102
  -1,418
  -1,791
  -2,224
  -2,719
  -3,278
  -3,900
  -4,585
  -5,334
  -6,144
  -7,015
  -7,945
  -8,932
  -9,976
  -11,075
  -12,229
  -13,437
  -14,698
  -16,013
  -17,383
  -18,808
  -20,290
  -21,830
Total debt, $m
  390
  713
  1,181
  1,839
  2,733
  3,915
  5,437
  7,348
  9,694
  12,515
  15,846
  19,712
  24,132
  29,116
  34,670
  40,792
  47,474
  54,708
  62,482
  70,784
  79,600
  88,920
  98,733
  109,032
  119,813
  131,074
  142,816
  155,044
  167,767
  180,995
  194,745
Total liabilities, $m
  534
  858
  1,326
  1,984
  2,878
  4,060
  5,582
  7,493
  9,839
  12,660
  15,991
  19,857
  24,277
  29,261
  34,815
  40,937
  47,619
  54,853
  62,627
  70,929
  79,745
  89,065
  98,878
  109,177
  119,958
  131,219
  142,961
  155,189
  167,912
  181,140
  194,890
Total equity, $m
  1,733
  1,735
  2,681
  4,009
  5,817
  8,207
  11,282
  15,144
  19,885
  25,588
  32,319
  40,133
  49,067
  59,142
  70,367
  82,739
  96,245
  110,867
  126,579
  143,358
  161,176
  180,013
  199,847
  220,663
  242,453
  265,212
  288,944
  313,660
  339,374
  366,111
  393,901
Total liabilities and equity, $m
  2,267
  2,593
  4,007
  5,993
  8,695
  12,267
  16,864
  22,637
  29,724
  38,248
  48,310
  59,990
  73,344
  88,403
  105,182
  123,676
  143,864
  165,720
  189,206
  214,287
  240,921
  269,078
  298,725
  329,840
  362,411
  396,431
  431,905
  468,849
  507,286
  547,251
  588,791
Debt-to-equity ratio
  0.225
  0.410
  0.440
  0.460
  0.470
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Adjusted equity ratio
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -92
  -500
  -776
  -1,165
  -1,695
  -2,396
  -3,299
  -4,434
  -5,830
  -7,510
  -9,496
  -11,802
  -14,441
  -17,419
  -20,740
  -24,401
  -28,401
  -32,732
  -37,389
  -42,363
  -47,647
  -53,235
  -59,119
  -65,297
  -71,764
  -78,519
  -85,565
  -92,902
  -100,536
  -108,475
  -116,726
Depreciation, amort., depletion, $m
  73
  116
  180
  269
  391
  551
  757
  1,017
  1,335
  1,718
  2,170
  2,695
  3,294
  3,971
  4,724
  5,555
  6,462
  7,444
  8,499
  9,625
  10,821
  12,086
  13,418
  14,815
  16,278
  17,806
  19,400
  21,059
  22,786
  24,581
  26,446
Funds from operations, $m
  113
  -383
  -596
  -896
  -1,304
  -1,845
  -2,541
  -3,418
  -4,495
  -5,792
  -7,326
  -9,107
  -11,147
  -13,448
  -16,015
  -18,846
  -21,939
  -25,289
  -28,890
  -32,738
  -36,826
  -41,149
  -45,702
  -50,481
  -55,486
  -60,713
  -66,165
  -71,843
  -77,751
  -83,894
  -90,280
Change in working capital, $m
  -6
  -36
  -52
  -74
  -100
  -132
  -170
  -214
  -263
  -316
  -373
  -433
  -495
  -558
  -622
  -686
  -749
  -810
  -871
  -930
  -988
  -1,044
  -1,099
  -1,154
  -1,208
  -1,261
  -1,315
  -1,370
  -1,425
  -1,482
  -1,540
Cash from operations, $m
  119
  101
  -544
  -822
  -1,204
  -1,712
  -2,371
  -3,204
  -4,232
  -5,476
  -6,953
  -8,674
  -10,651
  -12,890
  -15,393
  -18,160
  -21,190
  -24,478
  -28,019
  -31,808
  -35,838
  -40,105
  -44,603
  -49,328
  -54,278
  -59,452
  -64,850
  -70,473
  -76,326
  -82,413
  -88,740
Maintenance CAPEX, $m
  0
  -73
  -116
  -180
  -269
  -391
  -551
  -757
  -1,017
  -1,335
  -1,718
  -2,170
  -2,695
  -3,294
  -3,971
  -4,724
  -5,555
  -6,462
  -7,444
  -8,499
  -9,625
  -10,821
  -12,086
  -13,418
  -14,815
  -16,278
  -17,806
  -19,400
  -21,059
  -22,786
  -24,581
New CAPEX, $m
  -190
  -607
  -882
  -1,240
  -1,687
  -2,230
  -2,870
  -3,604
  -4,425
  -5,322
  -6,282
  -7,292
  -8,337
  -9,403
  -10,476
  -11,546
  -12,605
  -13,645
  -14,664
  -15,658
  -16,629
  -17,579
  -18,510
  -19,427
  -20,335
  -21,240
  -22,148
  -23,065
  -23,998
  -24,952
  -25,935
Cash from investing activities, $m
  -866
  -680
  -998
  -1,420
  -1,956
  -2,621
  -3,421
  -4,361
  -5,442
  -6,657
  -8,000
  -9,462
  -11,032
  -12,697
  -14,447
  -16,270
  -18,160
  -20,107
  -22,108
  -24,157
  -26,254
  -28,400
  -30,596
  -32,845
  -35,150
  -37,518
  -39,954
  -42,465
  -45,057
  -47,738
  -50,516
Free cash flow, $m
  -747
  -579
  -1,543
  -2,242
  -3,160
  -4,333
  -5,792
  -7,565
  -9,674
  -12,133
  -14,953
  -18,137
  -21,683
  -25,587
  -29,840
  -34,431
  -39,350
  -44,585
  -50,127
  -55,965
  -62,093
  -68,505
  -75,198
  -82,172
  -89,428
  -96,970
  -104,804
  -112,938
  -121,383
  -130,150
  -139,255
Issuance/(repayment) of debt, $m
  60
  323
  468
  657
  894
  1,182
  1,522
  1,911
  2,346
  2,821
  3,331
  3,866
  4,420
  4,985
  5,554
  6,121
  6,683
  7,234
  7,774
  8,301
  8,816
  9,320
  9,813
  10,299
  10,781
  11,261
  11,742
  12,228
  12,723
  13,229
  13,750
Issuance/(repurchase) of shares, $m
  1,358
  258
  2,021
  2,913
  4,074
  5,540
  7,346
  9,516
  12,069
  15,014
  18,354
  22,084
  26,197
  30,677
  35,511
  40,682
  46,174
  51,972
  58,065
  64,442
  71,095
  78,022
  85,219
  92,689
  100,437
  108,469
  116,794
  125,425
  134,375
  143,659
  153,295
Cash from financing (excl. dividends), $m  
  1,406
  581
  2,489
  3,570
  4,968
  6,722
  8,868
  11,427
  14,415
  17,835
  21,685
  25,950
  30,617
  35,662
  41,065
  46,803
  52,857
  59,206
  65,839
  72,743
  79,911
  87,342
  95,032
  102,988
  111,218
  119,730
  128,536
  137,653
  147,098
  156,888
  167,045
Total cash flow (excl. dividends), $m
  659
  -256
  -1,075
  -1,584
  -2,266
  -3,151
  -4,271
  -5,655
  -7,328
  -9,312
  -11,622
  -14,270
  -17,263
  -20,602
  -24,286
  -28,310
  -32,667
  -37,351
  -42,353
  -47,664
  -53,277
  -59,185
  -65,385
  -71,873
  -78,647
  -85,709
  -93,062
  -100,710
  -108,660
  -116,922
  -125,505
Retained Cash Flow (-), $m
  -1,370
  -655
  -946
  -1,328
  -1,808
  -2,390
  -3,076
  -3,862
  -4,741
  -5,702
  -6,732
  -7,814
  -8,933
  -10,075
  -11,225
  -12,372
  -13,506
  -14,621
  -15,713
  -16,778
  -17,819
  -18,836
  -19,834
  -20,816
  -21,790
  -22,759
  -23,732
  -24,715
  -25,715
  -26,737
  -27,790
Prev. year cash balance distribution, $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
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
 
  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
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for 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
Current shareholders' claim on cash, %
  100
  82.5
  40.5
  20.6
  10.8
  5.9
  3.3
  1.9
  1.1
  0.7
  0.4
  0.2
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Callon Petroleum Company, an independent oil and natural gas company, acquires, explores for, develops, and produces oil and natural gas properties in the Permian Basin in West Texas. As of December 31, 2015, the company estimated net proved reserves totaled 54.3 million barrel of oil equivalent. Callon Petroleum Company was founded in 1950 and is headquartered in Natchez, Mississippi.

FINANCIAL RATIOS  of  Callon Petroleum (CPE)

Valuation Ratios
P/E Ratio -22.4
Price to Sales 10.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow -29
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 $201 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 4.3%, 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 251.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for 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 3.5% 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 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 CPE are equal to 503.5%.

Life of production assets of 13.9 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 -29.9%. 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 - $1733 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 190.083 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 $1.9 billion.


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COMPANY NEWS

▶ Are Hedge Funds Expecting A Permian Bubble?   [Jun-21-17 06:00PM  Oilprice.com]
▶ Callon Petroleum Declares Series A Preferred Dividend   [Jun-05-17 08:30AM  PR Newswire]
▶ ETFs with exposure to Callon Petroleum Co. : May 8, 2017   [May-08-17 04:20PM  Capital Cube]
▶ Callon meets 1Q profit forecasts   [May-02-17 06:12PM  Associated Press]
▶ Energy Stocks: Look out Below!   [Apr-19-17 02:47PM  Barrons.com]
▶ How Are Oil-Weighted Stocks Coping with Oils Fall?   [Mar-28-17 04:03PM  Market Realist]
▶ Webcast-OGIS New York for Callon Petroleum Co.   [Mar-08-17 05:56PM  at Company Spotlight]
▶ Callon Petroleum Declares Series A Preferred Dividend   [Mar-03-17 08:30AM  PR Newswire]
▶ Callon Petroleum Declares Series A Preferred Dividend   [Dec-05-16 08:30AM  PR Newswire]
▶ 6 stocks to watch   [Dec-01-16 02:44PM  at MarketWatch]
Stock chart of CPE Financial statements of CPE Annual reports 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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