Intrinsic value of Gran Tierra Energy - GTE

Previous Close

$2.10

  Intrinsic Value

$0.48

stock screener

  Rating & Target

str. sell

-77%

  Value-price divergence*

-4%

Previous close

$2.10

 
Intrinsic value

$0.48

 
Up/down potential

-77%

 
Rating

str. sell

 
Value-price divergence*

-4%

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

We calculate the intrinsic value of GTE 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 0.8

 

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, %
  4.71
  33.30
  30.47
  27.92
  25.63
  23.57
  21.71
  20.04
  18.54
  17.18
  15.96
  14.87
  13.88
  12.99
  12.19
  11.47
  10.83
  10.24
  9.72
  9.25
  8.82
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
Revenue, $m
  289
  385
  503
  643
  808
  998
  1,215
  1,458
  1,729
  2,026
  2,349
  2,698
  3,073
  3,472
  3,895
  4,342
  4,812
  5,305
  5,821
  6,359
  6,920
  7,505
  8,112
  8,744
  9,400
  10,083
  10,792
  11,528
  12,295
  13,091
  13,921
Variable operating expenses, $m
 
  896
  1,167
  1,489
  1,868
  2,306
  2,805
  3,365
  3,987
  4,670
  5,414
  6,207
  7,068
  7,987
  8,961
  9,989
  11,070
  12,204
  13,391
  14,629
  15,920
  17,263
  18,661
  20,114
  21,624
  23,194
  24,825
  26,520
  28,282
  30,115
  32,022
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
  942
  896
  1,167
  1,489
  1,868
  2,306
  2,805
  3,365
  3,987
  4,670
  5,414
  6,207
  7,068
  7,987
  8,961
  9,989
  11,070
  12,204
  13,391
  14,629
  15,920
  17,263
  18,661
  20,114
  21,624
  23,194
  24,825
  26,520
  28,282
  30,115
  32,022
Operating income, $m
  -653
  -511
  -664
  -846
  -1,061
  -1,308
  -1,590
  -1,907
  -2,258
  -2,644
  -3,065
  -3,509
  -3,996
  -4,515
  -5,065
  -5,647
  -6,258
  -6,899
  -7,569
  -8,269
  -8,999
  -9,759
  -10,549
  -11,370
  -12,224
  -13,111
  -14,033
  -14,991
  -15,987
  -17,024
  -18,102
EBITDA, $m
  -513
  -383
  -500
  -640
  -804
  -993
  -1,209
  -1,451
  -1,720
  -2,016
  -2,338
  -2,685
  -3,058
  -3,455
  -3,876
  -4,321
  -4,789
  -5,280
  -5,793
  -6,329
  -6,887
  -7,468
  -8,073
  -8,702
  -9,355
  -10,034
  -10,739
  -11,473
  -12,235
  -13,028
  -13,853
Interest expense (income), $m
  6
  12
  22
  34
  49
  66
  86
  108
  134
  162
  193
  226
  263
  302
  343
  387
  434
  483
  534
  587
  643
  702
  763
  826
  891
  960
  1,031
  1,104
  1,181
  1,261
  1,344
Earnings before tax, $m
  -650
  -523
  -686
  -881
  -1,110
  -1,374
  -1,676
  -2,015
  -2,392
  -2,806
  -3,258
  -3,735
  -4,258
  -4,816
  -5,408
  -6,034
  -6,692
  -7,381
  -8,103
  -8,857
  -9,643
  -10,460
  -11,311
  -12,196
  -13,115
  -14,071
  -15,064
  -16,096
  -17,169
  -18,284
  -19,445
Tax expense, $m
  -184
  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
  -466
  -523
  -686
  -881
  -1,110
  -1,374
  -1,676
  -2,015
  -2,392
  -2,806
  -3,258
  -3,735
  -4,258
  -4,816
  -5,408
  -6,034
  -6,692
  -7,381
  -8,103
  -8,857
  -9,643
  -10,460
  -11,311
  -12,196
  -13,115
  -14,071
  -15,064
  -16,096
  -17,169
  -18,284
  -19,445

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25
  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
  1,368
  1,792
  2,338
  2,991
  3,757
  4,642
  5,650
  6,783
  8,040
  9,421
  10,925
  12,550
  14,292
  16,149
  18,118
  20,197
  22,383
  24,676
  27,075
  29,578
  32,188
  34,905
  37,731
  40,669
  43,723
  46,896
  50,193
  53,621
  57,184
  60,890
  64,747
Adjusted assets (=assets-cash), $m
  1,343
  1,792
  2,338
  2,991
  3,757
  4,642
  5,650
  6,783
  8,040
  9,421
  10,925
  12,550
  14,292
  16,149
  18,118
  20,197
  22,383
  24,676
  27,075
  29,578
  32,188
  34,905
  37,731
  40,669
  43,723
  46,896
  50,193
  53,621
  57,184
  60,890
  64,747
Revenue / Adjusted assets
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
Average production assets, $m
  441
  588
  767
  981
  1,233
  1,523
  1,854
  2,225
  2,638
  3,091
  3,585
  4,117
  4,689
  5,298
  5,944
  6,626
  7,344
  8,096
  8,883
  9,704
  10,561
  11,452
  12,379
  13,343
  14,345
  15,386
  16,468
  17,592
  18,762
  19,978
  21,243
Working capital, $m
  -23
  -64
  -83
  -107
  -134
  -166
  -202
  -242
  -287
  -336
  -390
  -448
  -510
  -576
  -647
  -721
  -799
  -881
  -966
  -1,056
  -1,149
  -1,246
  -1,347
  -1,451
  -1,560
  -1,674
  -1,791
  -1,914
  -2,041
  -2,173
  -2,311
Total debt, $m
  205
  375
  582
  829
  1,120
  1,455
  1,837
  2,267
  2,743
  3,267
  3,837
  4,452
  5,113
  5,816
  6,563
  7,351
  8,179
  9,048
  9,957
  10,906
  11,895
  12,925
  13,996
  15,110
  16,267
  17,470
  18,719
  20,018
  21,369
  22,773
  24,235
Total liabilities, $m
  509
  679
  886
  1,133
  1,424
  1,759
  2,141
  2,571
  3,047
  3,571
  4,141
  4,756
  5,417
  6,120
  6,867
  7,655
  8,483
  9,352
  10,261
  11,210
  12,199
  13,229
  14,300
  15,414
  16,571
  17,774
  19,023
  20,322
  21,673
  23,077
  24,539
Total equity, $m
  859
  1,113
  1,452
  1,857
  2,333
  2,883
  3,509
  4,212
  4,993
  5,851
  6,785
  7,793
  8,875
  10,028
  11,251
  12,542
  13,900
  15,324
  16,813
  18,368
  19,989
  21,676
  23,431
  25,256
  27,152
  29,122
  31,170
  33,299
  35,511
  37,813
  40,208
Total liabilities and equity, $m
  1,368
  1,792
  2,338
  2,990
  3,757
  4,642
  5,650
  6,783
  8,040
  9,422
  10,926
  12,549
  14,292
  16,148
  18,118
  20,197
  22,383
  24,676
  27,074
  29,578
  32,188
  34,905
  37,731
  40,670
  43,723
  46,896
  50,193
  53,621
  57,184
  60,890
  64,747
Debt-to-equity ratio
  0.239
  0.340
  0.400
  0.450
  0.480
  0.500
  0.520
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
Adjusted equity ratio
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -466
  -523
  -686
  -881
  -1,110
  -1,374
  -1,676
  -2,015
  -2,392
  -2,806
  -3,258
  -3,735
  -4,258
  -4,816
  -5,408
  -6,034
  -6,692
  -7,381
  -8,103
  -8,857
  -9,643
  -10,460
  -11,311
  -12,196
  -13,115
  -14,071
  -15,064
  -16,096
  -17,169
  -18,284
  -19,445
Depreciation, amort., depletion, $m
  140
  128
  164
  207
  257
  315
  381
  455
  538
  629
  727
  823
  938
  1,060
  1,189
  1,325
  1,469
  1,619
  1,777
  1,941
  2,112
  2,290
  2,476
  2,669
  2,869
  3,077
  3,294
  3,518
  3,752
  3,996
  4,249
Funds from operations, $m
  93
  -395
  -522
  -674
  -853
  -1,059
  -1,295
  -1,560
  -1,854
  -2,178
  -2,530
  -2,912
  -3,321
  -3,757
  -4,220
  -4,708
  -5,223
  -5,762
  -6,327
  -6,916
  -7,530
  -8,170
  -8,835
  -9,527
  -10,246
  -10,994
  -11,770
  -12,577
  -13,416
  -14,289
  -15,197
Change in working capital, $m
  0
  -16
  -19
  -23
  -27
  -32
  -36
  -40
  -45
  -49
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -89
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -132
  -138
Cash from operations, $m
  93
  -379
  -503
  -651
  -825
  -1,028
  -1,259
  -1,519
  -1,809
  -2,128
  -2,477
  -2,854
  -3,258
  -3,691
  -4,149
  -4,634
  -5,145
  -5,680
  -6,241
  -6,827
  -7,437
  -8,073
  -8,735
  -9,422
  -10,137
  -10,880
  -11,652
  -12,455
  -13,289
  -14,157
  -15,059
Maintenance CAPEX, $m
  0
  -88
  -118
  -153
  -196
  -247
  -305
  -371
  -445
  -528
  -618
  -717
  -823
  -938
  -1,060
  -1,189
  -1,325
  -1,469
  -1,619
  -1,777
  -1,941
  -2,112
  -2,290
  -2,476
  -2,669
  -2,869
  -3,077
  -3,294
  -3,518
  -3,752
  -3,996
New CAPEX, $m
  -147
  -147
  -179
  -214
  -251
  -291
  -331
  -372
  -412
  -453
  -493
  -533
  -572
  -609
  -646
  -682
  -717
  -752
  -787
  -821
  -856
  -891
  -927
  -964
  -1,002
  -1,041
  -1,082
  -1,125
  -1,169
  -1,216
  -1,265
Cash from investing activities, $m
  -621
  -235
  -297
  -367
  -447
  -538
  -636
  -743
  -857
  -981
  -1,111
  -1,250
  -1,395
  -1,547
  -1,706
  -1,871
  -2,042
  -2,221
  -2,406
  -2,598
  -2,797
  -3,003
  -3,217
  -3,440
  -3,671
  -3,910
  -4,159
  -4,419
  -4,687
  -4,968
  -5,261
Free cash flow, $m
  -528
  -615
  -800
  -1,018
  -1,273
  -1,565
  -1,894
  -2,261
  -2,667
  -3,109
  -3,588
  -4,103
  -4,653
  -5,238
  -5,855
  -6,505
  -7,187
  -7,901
  -8,647
  -9,425
  -10,234
  -11,077
  -11,952
  -12,862
  -13,808
  -14,790
  -15,811
  -16,873
  -17,977
  -19,125
  -20,320
Issuance/(repayment) of debt, $m
  113
  170
  207
  247
  291
  336
  382
  429
  476
  524
  570
  616
  660
  704
  746
  788
  829
  869
  909
  949
  989
  1,030
  1,071
  1,114
  1,157
  1,203
  1,250
  1,299
  1,351
  1,405
  1,461
Issuance/(repurchase) of shares, $m
  128
  802
  1,025
  1,286
  1,586
  1,924
  2,302
  2,718
  3,173
  3,664
  4,192
  4,744
  5,340
  5,970
  6,631
  7,325
  8,049
  8,805
  9,593
  10,412
  11,263
  12,148
  13,066
  14,020
  15,012
  16,041
  17,111
  18,224
  19,381
  20,586
  21,840
Cash from financing (excl. dividends), $m  
  407
  972
  1,232
  1,533
  1,877
  2,260
  2,684
  3,147
  3,649
  4,188
  4,762
  5,360
  6,000
  6,674
  7,377
  8,113
  8,878
  9,674
  10,502
  11,361
  12,252
  13,178
  14,137
  15,134
  16,169
  17,244
  18,361
  19,523
  20,732
  21,991
  23,301
Total cash flow (excl. dividends), $m
  -120
  358
  432
  515
  603
  695
  790
  886
  982
  1,078
  1,173
  1,256
  1,347
  1,436
  1,523
  1,607
  1,691
  1,773
  1,855
  1,936
  2,018
  2,101
  2,185
  2,272
  2,361
  2,454
  2,550
  2,650
  2,755
  2,866
  2,982
Retained Cash Flow (-), $m
  143
  -802
  -1,025
  -1,286
  -1,586
  -1,924
  -2,302
  -2,718
  -3,173
  -3,664
  -4,192
  -4,744
  -5,340
  -5,970
  -6,631
  -7,325
  -8,049
  -8,805
  -9,593
  -10,412
  -11,263
  -12,148
  -13,066
  -14,020
  -15,012
  -16,041
  -17,111
  -18,224
  -19,381
  -20,586
  -21,840
Prev. year cash balance distribution, $m
 
  25
  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
 
  -419
  -593
  -771
  -983
  -1,229
  -1,512
  -1,832
  -2,190
  -2,586
  -3,018
  -3,488
  -3,993
  -4,534
  -5,109
  -5,717
  -6,359
  -7,032
  -7,738
  -8,476
  -9,245
  -10,047
  -10,881
  -11,749
  -12,651
  -13,588
  -14,562
  -15,574
  -16,626
  -17,720
  -18,858
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
 
  -402
  -541
  -669
  -806
  -947
  -1,090
  -1,227
  -1,354
  -1,467
  -1,560
  -1,629
  -1,672
  -1,687
  -1,674
  -1,633
  -1,567
  -1,479
  -1,373
  -1,252
  -1,123
  -989
  -855
  -725
  -604
  -492
  -393
  -308
  -235
  -176
  -128
Current shareholders' claim on cash, %
  100
  50.1
  25.6
  13.4
  7.1
  3.8
  2.1
  1.2
  0.7
  0.4
  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
  0.0
  0.0

Gran Tierra Energy Inc. is an energy company engaged in oil and gas acquisition, exploration, development and production. The Company focuses on onshore oil and gas properties in Colombia, and also own rights to oil and gas properties in Brazil and Peru. Its segments are Colombia, Peru and Brazil based on geographic organization. It operates principally in the Putumayo Basin in Colombia, and has properties in other basins, including the Catatumbo, Cauca, Llanos, Sinu-San Jacinto, Middle Magdalena and Lower Magdalena Basins. It has interests in over 30 blocks in Colombia and it is the operator on over 20 of these blocks. Its blocks and fields include Chaza-Costayaco and Moqueta Fields, Guayuyaco-Guayuyaco and Juanambu Fields, Garibay-Jilguero Field and over 11 Other Blocks. Blocks REC-T-129, REC-T-142, REC-T-155 and REC-T-224 are located over 70 kilometers northeast of Salvador, Brazil in the Reconcavo Basin. Its blocks in Peru include Block 123, Block 129, Block 107 and Block 133.

FINANCIAL RATIOS  of  Gran Tierra Energy (GTE)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 2.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -15.5
Growth Rates
Sales Growth Rate 4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.4%
Cap. Spend. - 3 Yr. Gr. Rate -15.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 23.9%
Total Debt to Equity 23.9%
Interest Coverage -107
Management Effectiveness
Return On Assets -36.7%
Ret/ On Assets - 3 Yr. Avg. -21.6%
Return On Total Capital -45.1%
Ret/ On T. Cap. - 3 Yr. Avg. -27.1%
Return On Equity -50.1%
Return On Equity - 3 Yr. Avg. -28.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 88.9%
Gross Margin - 3 Yr. Avg. 90%
EBITDA Margin -174.4%
EBITDA Margin - 3 Yr. Avg. -71.2%
Operating Margin -226%
Oper. Margin - 3 Yr. Avg. -121.1%
Pre-Tax Margin -224.9%
Pre-Tax Margin - 3 Yr. Avg. -120.4%
Net Profit Margin -161.2%
Net Profit Margin - 3 Yr. Avg. -96.3%
Effective Tax Rate 28.3%
Eff/ Tax Rate - 3 Yr. Avg. -230.5%
Payout Ratio 0%

GTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GTE stock intrinsic value calculation we used $289 million for the last fiscal year's total revenue generated by Gran Tierra Energy. The default revenue input number comes from 2016 income statement of Gran Tierra Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GTE stock valuation model: a) initial revenue growth rate of 33.3% 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 GTE is calculated based on our internal credit rating of Gran Tierra Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Gran Tierra Energy.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GTE stock the variable cost ratio is equal to 233.6%.

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 GTE 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 Gran Tierra Energy.

Corporate tax rate of 27% is the nominal tax rate for Gran Tierra Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GTE 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 GTE are equal to 152.6%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Gran Tierra Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GTE is equal to -16.6%. 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 - $859 million for Gran Tierra Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 394.771 million for Gran Tierra Energy is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Gran Tierra Energy at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Weekly Top Insider Buys Highlight for the Week of Oct. 6   [Oct-08-17 04:26PM  GuruFocus.com]
▶ Gran Tierra Appoints New Director   [Sep-19-17 06:00AM  GlobeNewswire]
▶ 9 Stocks Charles Brandes Continues to Buy   [Aug-29-17 05:07PM  GuruFocus.com]
▶ Gran Tierra Energy reports 2Q loss   [Aug-05-17 01:10AM  Associated Press]
▶ 5 Cheap Oil Stocks Under $5   [Jul-01-17 04:01PM  Insider Monkey]
▶ Gran Tierra Energy posts 1Q profit   [May-03-17 06:43PM  Associated Press]
▶ Gran Tierra Energy reports 4Q loss   [06:44AM  Associated Press]
▶ Gran Tierra Energy Inc. (GTE) Hedge Funds Are Snapping Up   [Dec-07-16 02:47AM  at Insider Monkey]
Financial statements of GTE
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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