Intrinsic value of Carrizo Oil&Gas - CRZO

Previous Close

$18.56

  Intrinsic Value

$0.07

stock screener

  Rating & Target

str. sell

-100%

Previous close

$18.56

 
Intrinsic value

$0.07

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of CRZO 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, %
  3.50
  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
  444
  710
  1,098
  1,641
  2,382
  3,360
  4,619
  6,201
  8,142
  10,476
  13,233
  16,432
  20,089
  24,215
  28,811
  33,876
  39,406
  45,392
  51,826
  58,695
  65,991
  73,703
  81,824
  90,347
  99,268
  108,586
  118,303
  128,422
  138,951
  149,898
  161,276
Variable operating expenses, $m
 
  2,893
  4,469
  6,684
  9,698
  13,682
  18,810
  25,249
  33,153
  42,660
  53,883
  66,910
  81,804
  98,602
  117,317
  137,943
  160,461
  184,838
  211,034
  239,007
  268,715
  300,119
  333,186
  367,892
  404,219
  442,164
  481,731
  522,936
  565,808
  610,384
  656,716
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
  989
  2,893
  4,469
  6,684
  9,698
  13,682
  18,810
  25,249
  33,153
  42,660
  53,883
  66,910
  81,804
  98,602
  117,317
  137,943
  160,461
  184,838
  211,034
  239,007
  268,715
  300,119
  333,186
  367,892
  404,219
  442,164
  481,731
  522,936
  565,808
  610,384
  656,716
Operating income, $m
  -545
  -2,182
  -3,372
  -5,042
  -7,316
  -10,322
  -14,191
  -19,048
  -25,011
  -32,183
  -40,650
  -50,479
  -61,715
  -74,387
  -88,506
  -104,067
  -121,055
  -139,446
  -159,208
  -180,312
  -202,724
  -226,416
  -251,362
  -277,545
  -304,951
  -333,578
  -363,428
  -394,514
  -426,857
  -460,486
  -495,440
EBITDA, $m
  -331
  -1,841
  -2,845
  -4,254
  -6,173
  -8,709
  -11,973
  -16,071
  -21,102
  -27,153
  -34,297
  -42,589
  -52,069
  -62,760
  -74,672
  -87,801
  -102,134
  -117,650
  -134,324
  -152,129
  -171,038
  -191,027
  -212,074
  -234,164
  -257,287
  -281,439
  -306,623
  -332,851
  -360,138
  -388,512
  -418,002
Interest expense (income), $m
  75
  78
  121
  196
  302
  445
  635
  879
  1,185
  1,561
  2,014
  2,548
  3,168
  3,877
  4,676
  5,567
  6,549
  7,620
  8,780
  10,027
  11,358
  12,772
  14,267
  15,841
  17,492
  19,221
  21,027
  22,910
  24,871
  26,912
  29,033
Earnings before tax, $m
  -675
  -2,261
  -3,493
  -5,239
  -7,618
  -10,767
  -14,825
  -19,927
  -26,197
  -33,745
  -42,664
  -53,027
  -64,883
  -78,264
  -93,182
  -109,634
  -127,604
  -147,066
  -167,989
  -190,339
  -214,082
  -239,188
  -265,629
  -293,386
  -322,444
  -352,799
  -384,455
  -417,424
  -451,728
  -487,398
  -524,473
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
  -675
  -2,261
  -3,493
  -5,239
  -7,618
  -10,767
  -14,825
  -19,927
  -26,197
  -33,745
  -42,664
  -53,027
  -64,883
  -78,264
  -93,182
  -109,634
  -127,604
  -147,066
  -167,989
  -190,339
  -214,082
  -239,188
  -265,629
  -293,386
  -322,444
  -352,799
  -384,455
  -417,424
  -451,728
  -487,398
  -524,473

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  1,626
  2,593
  4,006
  5,991
  8,692
  12,263
  16,859
  22,630
  29,714
  38,235
  48,294
  59,970
  73,319
  88,374
  105,148
  123,635
  143,818
  165,666
  189,145
  214,216
  240,843
  268,989
  298,627
  329,732
  362,292
  396,301
  431,764
  468,695
  507,120
  547,073
  588,599
Adjusted assets (=assets-cash), $m
  1,622
  2,593
  4,006
  5,991
  8,692
  12,263
  16,859
  22,630
  29,714
  38,235
  48,294
  59,970
  73,319
  88,374
  105,148
  123,635
  143,818
  165,666
  189,145
  214,216
  240,843
  268,989
  298,627
  329,732
  362,292
  396,301
  431,764
  468,695
  507,120
  547,073
  588,599
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  1,343
  2,149
  3,320
  4,965
  7,204
  10,164
  13,974
  18,757
  24,629
  31,691
  40,028
  49,706
  60,771
  73,249
  87,152
  102,475
  119,203
  137,312
  156,773
  177,553
  199,622
  222,952
  247,517
  273,299
  300,286
  328,474
  357,867
  388,478
  420,326
  453,441
  487,860
Working capital, $m
  -139
  -229
  -353
  -529
  -767
  -1,082
  -1,487
  -1,997
  -2,622
  -3,373
  -4,261
  -5,291
  -6,469
  -7,797
  -9,277
  -10,908
  -12,689
  -14,616
  -16,688
  -18,900
  -21,249
  -23,732
  -26,347
  -29,092
  -31,964
  -34,965
  -38,094
  -41,352
  -44,742
  -48,267
  -51,931
Total debt, $m
  1,325
  2,055
  3,327
  5,114
  7,545
  10,759
  14,895
  20,089
  26,465
  34,134
  43,187
  53,695
  65,709
  79,259
  94,355
  110,994
  129,158
  148,821
  169,952
  192,517
  216,480
  241,812
  268,486
  296,481
  325,785
  356,393
  388,309
  421,548
  456,130
  492,087
  529,461
Total liabilities, $m
  1,603
  2,333
  3,605
  5,392
  7,823
  11,037
  15,173
  20,367
  26,743
  34,412
  43,465
  53,973
  65,987
  79,537
  94,633
  111,272
  129,436
  149,099
  170,230
  192,795
  216,758
  242,090
  268,764
  296,759
  326,063
  356,671
  388,587
  421,826
  456,408
  492,365
  529,739
Total equity, $m
  23
  259
  401
  599
  869
  1,226
  1,686
  2,263
  2,971
  3,824
  4,829
  5,997
  7,332
  8,837
  10,515
  12,364
  14,382
  16,567
  18,914
  21,422
  24,084
  26,899
  29,863
  32,973
  36,229
  39,630
  43,176
  46,870
  50,712
  54,707
  58,860
Total liabilities and equity, $m
  1,626
  2,592
  4,006
  5,991
  8,692
  12,263
  16,859
  22,630
  29,714
  38,236
  48,294
  59,970
  73,319
  88,374
  105,148
  123,636
  143,818
  165,666
  189,144
  214,217
  240,842
  268,989
  298,627
  329,732
  362,292
  396,301
  431,763
  468,696
  507,120
  547,072
  588,599
Debt-to-equity ratio
  57.609
  7.930
  8.310
  8.540
  8.680
  8.770
  8.840
  8.880
  8.910
  8.930
  8.940
  8.950
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  9.000
Adjusted equity ratio
  0.012
  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
  -675
  -2,261
  -3,493
  -5,239
  -7,618
  -10,767
  -14,825
  -19,927
  -26,197
  -33,745
  -42,664
  -53,027
  -64,883
  -78,264
  -93,182
  -109,634
  -127,604
  -147,066
  -167,989
  -190,339
  -214,082
  -239,188
  -265,629
  -293,386
  -322,444
  -352,799
  -384,455
  -417,424
  -451,728
  -487,398
  -524,473
Depreciation, amort., depletion, $m
  214
  341
  527
  788
  1,144
  1,613
  2,218
  2,977
  3,909
  5,030
  6,354
  7,890
  9,646
  11,627
  13,834
  16,266
  18,921
  21,796
  24,885
  28,183
  31,686
  35,389
  39,288
  43,381
  47,664
  52,139
  56,804
  61,663
  66,718
  71,975
  77,438
Funds from operations, $m
  218
  -1,919
  -2,966
  -4,451
  -6,474
  -9,154
  -12,607
  -16,950
  -22,287
  -28,715
  -36,311
  -45,137
  -55,237
  -66,637
  -79,349
  -93,368
  -108,683
  -125,270
  -143,104
  -162,156
  -182,396
  -203,799
  -226,341
  -250,005
  -274,779
  -300,660
  -327,650
  -355,761
  -385,010
  -415,423
  -447,035
Change in working capital, $m
  -55
  -86
  -125
  -175
  -238
  -315
  -405
  -509
  -625
  -752
  -887
  -1,030
  -1,178
  -1,328
  -1,480
  -1,631
  -1,781
  -1,928
  -2,071
  -2,212
  -2,349
  -2,483
  -2,615
  -2,744
  -2,873
  -3,001
  -3,129
  -3,258
  -3,390
  -3,525
  -3,664
Cash from operations, $m
  273
  -1,834
  -2,841
  -4,275
  -6,236
  -8,839
  -12,202
  -16,440
  -21,662
  -27,963
  -35,423
  -44,106
  -54,059
  -65,309
  -77,869
  -91,737
  -106,902
  -123,343
  -141,033
  -159,944
  -180,047
  -201,316
  -223,726
  -247,260
  -271,907
  -297,660
  -324,522
  -352,502
  -381,620
  -411,898
  -443,371
Maintenance CAPEX, $m
  0
  -213
  -341
  -527
  -788
  -1,144
  -1,613
  -2,218
  -2,977
  -3,909
  -5,030
  -6,354
  -7,890
  -9,646
  -11,627
  -13,834
  -16,266
  -18,921
  -21,796
  -24,885
  -28,183
  -31,686
  -35,389
  -39,288
  -43,381
  -47,664
  -52,139
  -56,804
  -61,663
  -66,718
  -71,975
New CAPEX, $m
  -481
  -806
  -1,171
  -1,645
  -2,239
  -2,960
  -3,809
  -4,783
  -5,872
  -7,062
  -8,337
  -9,678
  -11,064
  -12,478
  -13,903
  -15,323
  -16,728
  -18,109
  -19,460
  -20,781
  -22,069
  -23,329
  -24,565
  -25,782
  -26,987
  -28,188
  -29,393
  -30,611
  -31,848
  -33,115
  -34,419
Cash from investing activities, $m
  -620
  -1,019
  -1,512
  -2,172
  -3,027
  -4,104
  -5,422
  -7,001
  -8,849
  -10,971
  -13,367
  -16,032
  -18,954
  -22,124
  -25,530
  -29,157
  -32,994
  -37,030
  -41,256
  -45,666
  -50,252
  -55,015
  -59,954
  -65,070
  -70,368
  -75,852
  -81,532
  -87,415
  -93,511
  -99,833
  -106,394
Free cash flow, $m
  -347
  -2,853
  -4,354
  -6,448
  -9,263
  -12,942
  -17,625
  -23,442
  -30,511
  -38,935
  -48,791
  -60,138
  -73,013
  -87,433
  -103,398
  -120,894
  -139,896
  -160,373
  -182,289
  -205,609
  -230,300
  -256,331
  -283,680
  -312,331
  -342,275
  -373,512
  -406,054
  -439,917
  -475,131
  -511,732
  -549,765
Issuance/(repayment) of debt, $m
  87
  730
  1,272
  1,786
  2,431
  3,214
  4,136
  5,194
  6,376
  7,669
  9,053
  10,509
  12,014
  13,550
  15,096
  16,639
  18,164
  19,663
  21,131
  22,564
  23,964
  25,332
  26,674
  27,995
  29,304
  30,608
  31,916
  33,238
  34,582
  35,958
  37,373
Issuance/(repurchase) of shares, $m
  224
  2,501
  3,634
  5,437
  7,888
  11,124
  15,285
  20,504
  26,905
  34,597
  43,670
  54,194
  66,218
  79,769
  94,860
  111,483
  129,622
  149,251
  170,337
  192,846
  216,745
  242,003
  268,593
  296,496
  325,700
  356,200
  388,001
  421,117
  455,571
  491,393
  528,626
Cash from financing (excl. dividends), $m  
  308
  3,231
  4,906
  7,223
  10,319
  14,338
  19,421
  25,698
  33,281
  42,266
  52,723
  64,703
  78,232
  93,319
  109,956
  128,122
  147,786
  168,914
  191,468
  215,410
  240,709
  267,335
  295,267
  324,491
  355,004
  386,808
  419,917
  454,355
  490,153
  527,351
  565,999
Total cash flow (excl. dividends), $m
  -39
  378
  552
  776
  1,056
  1,396
  1,797
  2,256
  2,770
  3,331
  3,932
  4,565
  5,219
  5,886
  6,558
  7,227
  7,890
  8,541
  9,179
  9,801
  10,409
  11,004
  11,586
  12,160
  12,729
  13,295
  13,864
  14,438
  15,022
  15,619
  16,234
Retained Cash Flow (-), $m
  421
  -2,501
  -3,634
  -5,437
  -7,888
  -11,124
  -15,285
  -20,504
  -26,905
  -34,597
  -43,670
  -54,194
  -66,218
  -79,769
  -94,860
  -111,483
  -129,622
  -149,251
  -170,337
  -192,846
  -216,745
  -242,003
  -268,593
  -296,496
  -325,700
  -356,200
  -388,001
  -421,117
  -455,571
  -491,393
  -528,626
Prev. year cash balance distribution, $m
 
  4
  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
 
  -2,118
  -3,082
  -4,661
  -6,832
  -9,728
  -13,488
  -18,248
  -24,135
  -31,266
  -39,738
  -49,629
  -60,999
  -73,884
  -88,302
  -104,256
  -121,732
  -140,709
  -161,158
  -183,045
  -206,336
  -230,999
  -257,007
  -284,336
  -312,971
  -342,904
  -374,137
  -406,679
  -440,549
  -475,774
  -512,392
Discount rate, %
 
  12.40
  13.02
  13.67
  14.35
  15.07
  15.83
  16.62
  17.45
  18.32
  19.24
  20.20
  21.21
  22.27
  23.38
  24.55
  25.78
  27.07
  28.42
  29.84
  31.33
  32.90
  34.55
  36.27
  38.09
  39.99
  41.99
  44.09
  46.29
  48.61
  51.04
PV of cash for distribution, $m
 
  -1,885
  -2,413
  -3,174
  -3,995
  -4,822
  -5,586
  -6,221
  -6,666
  -6,879
  -6,841
  -6,559
  -6,067
  -5,413
  -4,661
  -3,872
  -3,102
  -2,397
  -1,786
  -1,281
  -885
  -588
  -376
  -230
  -135
  -76
  -41
  -21
  -10
  -5
  -2
Current shareholders' claim on cash, %
  100
  7.1
  2.9
  1.2
  0.5
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Carrizo Oil & Gas, Inc. is an energy company. The Company is engaged in the exploration, development and production of oil and gas from resource plays located in the United States. Its operations are focused in proven, producing oil and gas plays in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas, the Utica Shale in Ohio, the Niobrara Formation in Colorado, and the Marcellus Shale in Pennsylvania. As of December 31, 2016, the Company's proved reserves of 200 million barrels of oil equivalent (MMBoe) were 64% crude oil, 12% natural gas liquids (NGLs) and 24% natural gas. As of December 31, 2016, it operated approximately 94% of the wells in Eagle Ford in which it held an interest. As of December 31, 2016, it held an average interest of approximately 85% in these operated wells. As of December 31, 2016, it owned leases covering approximately 309,200 gross (179,179 net) acres in the Eagle Ford, Niobrara, Utica and the Delaware Basin areas.

FINANCIAL RATIOS  of  Carrizo Oil&Gas (CRZO)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 2.7
Price to Book 52.6
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow -5.8
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.8%
Cap. Spend. - 3 Yr. Gr. Rate -9.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 5760.9%
Total Debt to Equity 5760.9%
Interest Coverage -8
Management Effectiveness
Return On Assets -33%
Ret/ On Assets - 3 Yr. Avg. -22.3%
Return On Total Capital -44.6%
Ret/ On T. Cap. - 3 Yr. Avg. -29.9%
Return On Equity -289.1%
Return On Equity - 3 Yr. Avg. -138.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72.1%
Gross Margin - 3 Yr. Avg. 76.3%
EBITDA Margin -86.9%
EBITDA Margin - 3 Yr. Avg. -67.9%
Operating Margin -122.7%
Oper. Margin - 3 Yr. Avg. -133.8%
Pre-Tax Margin -152%
Pre-Tax Margin - 3 Yr. Avg. -135.2%
Net Profit Margin -152%
Net Profit Margin - 3 Yr. Avg. -129.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 15.8%
Payout Ratio 0%

CRZO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRZO stock intrinsic value calculation we used $444 million for the last fiscal year's total revenue generated by Carrizo Oil&Gas. The default revenue input number comes from 2016 income statement of Carrizo Oil&Gas. 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 CRZO 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 12.4%, whose default value for CRZO is calculated based on our internal credit rating of Carrizo Oil&Gas, 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 Carrizo Oil&Gas.
    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 CRZO stock the variable cost ratio is equal to 407.2%.

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 CRZO 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 5.9% for Carrizo Oil&Gas.

Corporate tax rate of 27% is the nominal tax rate for Carrizo Oil&Gas. 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 CRZO 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 CRZO are equal to 302.5%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Carrizo Oil&Gas 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 CRZO is equal to -32.2%. 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 - $23 million for Carrizo Oil&Gas - 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 83.177 million for Carrizo Oil&Gas 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 Carrizo Oil&Gas at the current share price and the inputted number of shares is $1.5 billion.

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Financial statements of CRZO
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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