Intrinsic value of Mid-Con Energy Partners - MCEP

Previous Close

$1.88

  Intrinsic Value

$0.88

stock screener

  Rating & Target

str. sell

-53%

Previous close

$1.88

 
Intrinsic value

$0.88

 
Up/down potential

-53%

 
Rating

str. sell

We calculate the intrinsic value of MCEP 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, %
  -54.17
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  44
  45
  46
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  138
  144
Variable operating expenses, $m
 
  87
  89
  91
  94
  96
  99
  103
  107
  110
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
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
  61
  87
  89
  91
  94
  96
  99
  103
  107
  110
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
Operating income, $m
  -17
  -42
  -43
  -44
  -45
  -46
  -48
  -50
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -93
  -97
  -101
  -106
  -111
  -117
  -122
  -128
  -135
EBITDA, $m
  6
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
Interest expense (income), $m
  6
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
Earnings before tax, $m
  -25
  -47
  -48
  -49
  -51
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -77
  -80
  -84
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -146
  -153
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
  -25
  -47
  -48
  -49
  -51
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -77
  -80
  -84
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -146
  -153

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  276
  279
  285
  292
  301
  310
  320
  331
  343
  355
  369
  383
  399
  416
  433
  452
  472
  493
  515
  538
  563
  589
  617
  646
  676
  708
  742
  778
  815
  855
  896
Adjusted assets (=assets-cash), $m
  274
  279
  285
  292
  301
  310
  320
  331
  343
  355
  369
  383
  399
  416
  433
  452
  472
  493
  515
  538
  563
  589
  617
  646
  676
  708
  742
  778
  815
  855
  896
Revenue / Adjusted assets
  0.161
  0.161
  0.161
  0.161
  0.159
  0.161
  0.159
  0.160
  0.160
  0.161
  0.160
  0.162
  0.160
  0.161
  0.162
  0.162
  0.161
  0.160
  0.161
  0.162
  0.162
  0.161
  0.160
  0.161
  0.161
  0.161
  0.160
  0.161
  0.161
  0.161
  0.161
Average production assets, $m
  276
  282
  288
  295
  304
  313
  323
  334
  346
  359
  373
  387
  403
  420
  438
  456
  476
  498
  520
  544
  569
  595
  623
  652
  683
  715
  750
  786
  824
  863
  905
Working capital, $m
  -1
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Total debt, $m
  142
  145
  149
  153
  158
  164
  170
  176
  183
  191
  199
  208
  217
  227
  237
  249
  261
  273
  286
  300
  315
  331
  347
  365
  383
  402
  423
  444
  466
  490
  515
Total liabilities, $m
  165
  167
  171
  175
  180
  186
  192
  198
  205
  213
  221
  230
  239
  249
  259
  271
  283
  295
  308
  322
  337
  353
  369
  387
  405
  424
  445
  466
  488
  512
  537
Total equity, $m
  112
  112
  114
  117
  121
  124
  128
  133
  137
  142
  148
  154
  160
  167
  174
  181
  189
  198
  206
  216
  226
  236
  247
  259
  271
  284
  298
  312
  327
  343
  359
Total liabilities and equity, $m
  277
  279
  285
  292
  301
  310
  320
  331
  342
  355
  369
  384
  399
  416
  433
  452
  472
  493
  514
  538
  563
  589
  616
  646
  676
  708
  743
  778
  815
  855
  896
Debt-to-equity ratio
  1.268
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.330
  1.330
  1.340
  1.350
  1.350
  1.360
  1.360
  1.370
  1.370
  1.380
  1.380
  1.390
  1.390
  1.400
  1.400
  1.400
  1.410
  1.410
  1.420
  1.420
  1.420
  1.430
  1.430
  1.430
Adjusted equity ratio
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -25
  -47
  -48
  -49
  -51
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -77
  -80
  -84
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -146
  -153
Depreciation, amort., depletion, $m
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
Funds from operations, $m
  48
  -24
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
Change in working capital, $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
Cash from operations, $m
  44
  -24
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -67
  -70
  -73
  -77
Maintenance CAPEX, $m
  0
  -23
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -69
  -72
New CAPEX, $m
  -7
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
Cash from investing activities, $m
  -8
  -29
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -63
  -67
  -70
  -73
  -78
  -81
  -85
  -90
  -94
  -98
  -103
  -109
  -114
Free cash flow, $m
  36
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -143
  -150
  -157
  -165
  -173
  -182
  -191
Issuance/(repayment) of debt, $m
  -58
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
Issuance/(repurchase) of shares, $m
  25
  49
  51
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  140
  147
  154
  161
  169
Cash from financing (excl. dividends), $m  
  -34
  52
  55
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  105
  109
  115
  121
  127
  132
  138
  145
  152
  160
  168
  176
  185
  194
Total cash flow (excl. dividends), $m
  2
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
Retained Cash Flow (-), $m
  19
  -49
  -51
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -140
  -147
  -154
  -161
  -169
Prev. year cash balance distribution, $m
 
  2
  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
 
  -47
  -50
  -52
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -72
  -76
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -158
  -166
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  -44
  -43
  -40
  -38
  -35
  -33
  -30
  -27
  -24
  -22
  -19
  -16
  -14
  -12
  -10
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  61.2
  37.1
  22.4
  13.5
  8.1
  4.9
  2.9
  1.7
  1.0
  0.6
  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

Mid-Con Energy Partners, LP is engaged in the ownership, acquisition, exploitation and development of producing oil and natural gas properties in North America, with a focus on enhanced oil recovery (EOR). The Company's properties are located in the Mid-Continent and Permian Basin regions of the United States in over four areas: Northeastern Oklahoma; parts of Oklahoma, Colorado and Texas within the Hugoton; Texas Gulf Coast, and Texas within the Eastern Shelf of the Permian. The Company operates approximately 100% of its properties, as calculated on a barrel of oil equivalent (Boe) basis, through its affiliate, Mid-Con Energy Operating, LLC (Mid-Con Energy Operating). The Company designs and manages the development, recompletion or work-over for all of the wells it operates and supervises operation and maintenance activities. Mid-Con Energy Operating provides the Company with management, administrative and operational services under a services agreement.

FINANCIAL RATIOS  of  Mid-Con Energy Partners (MCEP)

Valuation Ratios
P/E Ratio -2.2
Price to Sales 1.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 1.3
Price to Free Cash Flow 1.5
Growth Rates
Sales Growth Rate -54.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -20.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 126.8%
Total Debt to Equity 126.8%
Interest Coverage -3
Management Effectiveness
Return On Assets -6.3%
Ret/ On Assets - 3 Yr. Avg. -7%
Return On Total Capital -8.8%
Ret/ On T. Cap. - 3 Yr. Avg. -9.1%
Return On Equity -20.6%
Return On Equity - 3 Yr. Avg. -19.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 40.9%
Gross Margin - 3 Yr. Avg. 59%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. -3.5%
Operating Margin -38.6%
Oper. Margin - 3 Yr. Avg. -36.6%
Pre-Tax Margin -56.8%
Pre-Tax Margin - 3 Yr. Avg. -46.5%
Net Profit Margin -56.8%
Net Profit Margin - 3 Yr. Avg. -46.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

MCEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCEP stock intrinsic value calculation we used $44 million for the last fiscal year's total revenue generated by Mid-Con Energy Partners. The default revenue input number comes from 2016 income statement of Mid-Con Energy Partners. 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 MCEP stock valuation model: a) initial revenue growth rate of 2% 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 7.7%, whose default value for MCEP is calculated based on our internal credit rating of Mid-Con Energy Partners, 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 Mid-Con Energy Partners.
    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 MCEP stock the variable cost ratio is equal to 193.2%.

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 MCEP 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 3.7% for Mid-Con Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for Mid-Con Energy Partners. 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 MCEP 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 MCEP are equal to 627.3%.

Life of production assets of 12 years is the average useful life of capital assets used in Mid-Con Energy Partners 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 MCEP is equal to -6.8%. 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 - $112 million for Mid-Con Energy Partners - 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 31.873 million for Mid-Con Energy Partners 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 Mid-Con Energy Partners at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of MCEP
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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