Intrinsic value of PDC Energy - PDCE

Previous Close

$43.80

  Intrinsic Value

$9.64

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

+143%

Previous close

$43.80

 
Intrinsic value

$9.64

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

+143%

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

We calculate the intrinsic value of PDCE 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 2.9

 

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, %
  -35.63
  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
  383
  613
  947
  1,416
  2,054
  2,898
  3,985
  5,349
  7,023
  9,037
  11,415
  14,174
  17,329
  20,888
  24,852
  29,222
  33,992
  39,156
  44,705
  50,631
  56,925
  63,577
  70,582
  77,934
  85,630
  93,668
  102,050
  110,779
  119,861
  129,304
  139,119
Variable operating expenses, $m
 
  675
  1,039
  1,551
  2,247
  3,168
  4,353
  5,841
  7,667
  9,864
  12,457
  15,461
  18,903
  22,785
  27,109
  31,876
  37,079
  42,712
  48,765
  55,229
  62,094
  69,351
  76,992
  85,012
  93,406
  102,174
  111,317
  120,839
  130,746
  141,046
  151,752
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
  715
  675
  1,039
  1,551
  2,247
  3,168
  4,353
  5,841
  7,667
  9,864
  12,457
  15,461
  18,903
  22,785
  27,109
  31,876
  37,079
  42,712
  48,765
  55,229
  62,094
  69,351
  76,992
  85,012
  93,406
  102,174
  111,317
  120,839
  130,746
  141,046
  151,752
Operating income, $m
  -332
  -62
  -92
  -135
  -193
  -269
  -368
  -492
  -644
  -827
  -1,043
  -1,287
  -1,574
  -1,897
  -2,257
  -2,654
  -3,087
  -3,556
  -4,060
  -4,598
  -5,169
  -5,774
  -6,410
  -7,077
  -7,776
  -8,506
  -9,267
  -10,060
  -10,885
  -11,742
  -12,634
EBITDA, $m
  85
  605
  935
  1,398
  2,028
  2,861
  3,934
  5,280
  6,934
  8,922
  11,269
  13,993
  17,108
  20,621
  24,535
  28,849
  33,559
  38,657
  44,135
  49,985
  56,198
  62,766
  69,682
  76,940
  84,538
  92,473
  100,748
  109,366
  118,332
  127,654
  137,344
Interest expense (income), $m
  43
  53
  111
  194
  311
  469
  679
  950
  1,289
  1,705
  2,206
  2,798
  3,484
  4,269
  5,155
  6,141
  7,228
  8,414
  9,699
  11,080
  12,554
  14,119
  15,774
  17,517
  19,346
  21,260
  23,260
  25,345
  27,516
  29,776
  32,125
Earnings before tax, $m
  -393
  -115
  -203
  -329
  -503
  -739
  -1,047
  -1,442
  -1,933
  -2,532
  -3,249
  -4,085
  -5,058
  -6,166
  -7,411
  -8,794
  -10,315
  -11,970
  -13,759
  -15,677
  -17,723
  -19,893
  -22,184
  -24,594
  -27,122
  -29,766
  -32,527
  -35,405
  -38,401
  -41,518
  -44,758
Tax expense, $m
  -147
  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
  -246
  -115
  -203
  -329
  -503
  -739
  -1,047
  -1,442
  -1,933
  -2,532
  -3,249
  -4,085
  -5,058
  -6,166
  -7,411
  -8,794
  -10,315
  -11,970
  -13,759
  -15,677
  -17,723
  -19,893
  -22,184
  -24,594
  -27,122
  -29,766
  -32,527
  -35,405
  -38,401
  -41,518
  -44,758

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  244
  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
  4,486
  6,809
  10,520
  15,732
  22,827
  32,205
  44,275
  59,430
  78,035
  100,412
  126,828
  157,492
  192,549
  232,087
  276,137
  324,688
  377,690
  435,068
  496,727
  562,570
  632,495
  706,413
  784,246
  865,935
  951,443
  1,040,756
  1,133,888
  1,230,876
  1,331,786
  1,436,709
  1,545,764
Adjusted assets (=assets-cash), $m
  4,242
  6,809
  10,520
  15,732
  22,827
  32,205
  44,275
  59,430
  78,035
  100,412
  126,828
  157,492
  192,549
  232,087
  276,137
  324,688
  377,690
  435,068
  496,727
  562,570
  632,495
  706,413
  784,246
  865,935
  951,443
  1,040,756
  1,133,888
  1,230,876
  1,331,786
  1,436,709
  1,545,764
Revenue / Adjusted assets
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
Average production assets, $m
  2,973
  4,757
  7,349
  10,990
  15,946
  22,498
  30,929
  41,516
  54,514
  70,146
  88,600
  110,021
  134,511
  162,131
  192,904
  226,821
  263,847
  303,930
  347,004
  393,000
  441,849
  493,486
  547,859
  604,925
  664,659
  727,051
  792,111
  859,865
  930,359
  1,003,656
  1,079,840
Working capital, $m
  129
  -183
  -282
  -422
  -612
  -864
  -1,187
  -1,594
  -2,093
  -2,693
  -3,402
  -4,224
  -5,164
  -6,225
  -7,406
  -8,708
  -10,130
  -11,669
  -13,322
  -15,088
  -16,964
  -18,946
  -21,033
  -23,224
  -25,518
  -27,913
  -30,411
  -33,012
  -35,718
  -38,533
  -41,457
Total debt, $m
  1,046
  2,172
  3,801
  6,089
  9,204
  13,321
  18,620
  25,273
  33,440
  43,264
  54,861
  68,322
  83,712
  101,069
  120,407
  141,721
  164,989
  190,178
  217,246
  246,151
  276,848
  309,298
  343,467
  379,328
  416,866
  456,075
  496,960
  539,537
  583,837
  629,898
  677,773
Total liabilities, $m
  1,863
  2,989
  4,618
  6,906
  10,021
  14,138
  19,437
  26,090
  34,257
  44,081
  55,678
  69,139
  84,529
  101,886
  121,224
  142,538
  165,806
  190,995
  218,063
  246,968
  277,665
  310,115
  344,284
  380,145
  417,683
  456,892
  497,777
  540,354
  584,654
  630,715
  678,590
Total equity, $m
  2,623
  3,820
  5,902
  8,826
  12,806
  18,067
  24,838
  33,340
  43,778
  56,331
  71,151
  88,353
  108,020
  130,201
  154,913
  182,150
  211,884
  244,073
  278,664
  315,602
  354,830
  396,298
  439,962
  485,790
  533,759
  583,864
  636,111
  690,521
  747,132
  805,994
  867,174
Total liabilities and equity, $m
  4,486
  6,809
  10,520
  15,732
  22,827
  32,205
  44,275
  59,430
  78,035
  100,412
  126,829
  157,492
  192,549
  232,087
  276,137
  324,688
  377,690
  435,068
  496,727
  562,570
  632,495
  706,413
  784,246
  865,935
  951,442
  1,040,756
  1,133,888
  1,230,875
  1,331,786
  1,436,709
  1,545,764
Debt-to-equity ratio
  0.399
  0.570
  0.640
  0.690
  0.720
  0.740
  0.750
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
Adjusted equity ratio
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -246
  -115
  -203
  -329
  -503
  -739
  -1,047
  -1,442
  -1,933
  -2,532
  -3,249
  -4,085
  -5,058
  -6,166
  -7,411
  -8,794
  -10,315
  -11,970
  -13,759
  -15,677
  -17,723
  -19,893
  -22,184
  -24,594
  -27,122
  -29,766
  -32,527
  -35,405
  -38,401
  -41,518
  -44,758
Depreciation, amort., depletion, $m
  417
  667
  1,027
  1,533
  2,221
  3,131
  4,302
  5,772
  7,578
  9,749
  12,312
  15,281
  18,682
  22,518
  26,792
  31,503
  36,645
  42,212
  48,195
  54,583
  61,368
  68,540
  76,091
  84,017
  92,314
  100,979
  110,015
  119,426
  129,217
  139,397
  149,978
Funds from operations, $m
  505
  552
  824
  1,204
  1,718
  2,392
  3,255
  4,331
  5,645
  7,216
  9,062
  11,196
  13,624
  16,352
  19,381
  22,708
  26,331
  30,242
  34,436
  38,906
  43,645
  48,647
  53,908
  59,423
  65,192
  71,213
  77,488
  84,021
  90,815
  97,879
  105,219
Change in working capital, $m
  19
  -68
  -100
  -140
  -190
  -252
  -324
  -406
  -499
  -600
  -708
  -822
  -940
  -1,060
  -1,181
  -1,302
  -1,422
  -1,539
  -1,654
  -1,766
  -1,875
  -1,982
  -2,087
  -2,191
  -2,293
  -2,395
  -2,498
  -2,601
  -2,706
  -2,814
  -2,925
Cash from operations, $m
  486
  620
  923
  1,344
  1,908
  2,644
  3,578
  4,737
  6,144
  7,816
  9,771
  12,018
  14,564
  17,412
  20,562
  24,011
  27,752
  31,781
  36,090
  40,672
  45,520
  50,629
  55,995
  61,614
  67,485
  73,608
  79,986
  86,622
  93,522
  100,693
  108,144
Maintenance CAPEX, $m
  0
  -413
  -661
  -1,021
  -1,526
  -2,215
  -3,125
  -4,296
  -5,766
  -7,571
  -9,742
  -12,306
  -15,281
  -18,682
  -22,518
  -26,792
  -31,503
  -36,645
  -42,212
  -48,195
  -54,583
  -61,368
  -68,540
  -76,091
  -84,017
  -92,314
  -100,979
  -110,015
  -119,426
  -129,217
  -139,397
New CAPEX, $m
  -1,514
  -1,784
  -2,592
  -3,641
  -4,956
  -6,552
  -8,432
  -10,587
  -12,997
  -15,632
  -18,454
  -21,421
  -24,490
  -27,620
  -30,773
  -33,917
  -37,026
  -40,083
  -43,074
  -45,996
  -48,849
  -51,638
  -54,373
  -57,066
  -59,734
  -62,393
  -65,060
  -67,754
  -70,494
  -73,298
  -76,183
Cash from investing activities, $m
  -1,509
  -2,197
  -3,253
  -4,662
  -6,482
  -8,767
  -11,557
  -14,883
  -18,763
  -23,203
  -28,196
  -33,727
  -39,771
  -46,302
  -53,291
  -60,709
  -68,529
  -76,728
  -85,286
  -94,191
  -103,432
  -113,006
  -122,913
  -133,157
  -143,751
  -154,707
  -166,039
  -177,769
  -189,920
  -202,515
  -215,580
Free cash flow, $m
  -1,023
  -1,576
  -2,330
  -3,318
  -4,575
  -6,123
  -7,978
  -10,145
  -12,620
  -15,387
  -18,426
  -21,709
  -25,207
  -28,890
  -32,729
  -36,698
  -40,777
  -44,947
  -49,197
  -53,519
  -57,912
  -62,376
  -66,917
  -71,544
  -76,266
  -81,098
  -86,053
  -91,147
  -96,398
  -101,821
  -107,436
Issuance/(repayment) of debt, $m
  434
  1,127
  1,629
  2,288
  3,114
  4,117
  5,299
  6,653
  8,168
  9,824
  11,597
  13,461
  15,390
  17,357
  19,338
  21,314
  23,268
  25,189
  27,069
  28,905
  30,697
  32,450
  34,169
  35,861
  37,538
  39,209
  40,885
  42,578
  44,300
  46,061
  47,875
Issuance/(repurchase) of shares, $m
  848
  1,555
  2,285
  3,253
  4,483
  6,000
  7,818
  9,943
  12,370
  15,086
  18,069
  21,287
  24,725
  28,347
  32,124
  36,032
  40,049
  44,159
  48,350
  52,615
  56,951
  61,361
  65,848
  70,422
  75,092
  79,871
  84,774
  89,815
  95,012
  100,380
  105,938
Cash from financing (excl. dividends), $m  
  1,266
  2,682
  3,914
  5,541
  7,597
  10,117
  13,117
  16,596
  20,538
  24,910
  29,666
  34,748
  40,115
  45,704
  51,462
  57,346
  63,317
  69,348
  75,419
  81,520
  87,648
  93,811
  100,017
  106,283
  112,630
  119,080
  125,659
  132,393
  139,312
  146,441
  153,813
Total cash flow (excl. dividends), $m
  243
  1,106
  1,584
  2,223
  3,023
  3,995
  5,139
  6,451
  7,918
  9,522
  11,240
  13,040
  14,909
  16,814
  18,733
  20,647
  22,540
  24,401
  26,222
  28,000
  29,737
  31,435
  33,100
  34,739
  36,363
  37,982
  39,606
  41,246
  42,914
  44,620
  46,377
Retained Cash Flow (-), $m
  -1,336
  -1,555
  -2,285
  -3,253
  -4,483
  -6,000
  -7,818
  -9,943
  -12,370
  -15,086
  -18,069
  -21,287
  -24,725
  -28,347
  -32,124
  -36,032
  -40,049
  -44,159
  -48,350
  -52,615
  -56,951
  -61,361
  -65,848
  -70,422
  -75,092
  -79,871
  -84,774
  -89,815
  -95,012
  -100,380
  -105,938
Prev. year cash balance distribution, $m
 
  243
  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
 
  -206
  -700
  -1,030
  -1,460
  -2,006
  -2,679
  -3,492
  -4,452
  -5,563
  -6,829
  -8,247
  -9,817
  -11,533
  -13,391
  -15,385
  -17,509
  -19,758
  -22,128
  -24,615
  -27,214
  -29,926
  -32,749
  -35,682
  -38,728
  -41,889
  -45,168
  -48,570
  -52,098
  -55,760
  -59,561
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
 
  -198
  -641
  -896
  -1,202
  -1,555
  -1,945
  -2,359
  -2,783
  -3,196
  -3,580
  -3,916
  -4,189
  -4,385
  -4,495
  -4,517
  -4,449
  -4,299
  -4,075
  -3,790
  -3,458
  -3,095
  -2,717
  -2,339
  -1,973
  -1,630
  -1,318
  -1,042
  -806
  -609
  -448
Current shareholders' claim on cash, %
  100
  62.9
  40.9
  27.3
  18.7
  13.2
  9.5
  7.0
  5.2
  4.0
  3.1
  2.4
  1.9
  1.6
  1.3
  1.1
  0.9
  0.7
  0.6
  0.5
  0.5
  0.4
  0.3
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.1
  0.1

PDC Energy, Inc. is an independent exploration and production company. The Company produces, develops, acquires and explores for crude oil, natural gas and natural gas liquids (NGLs) with operations in the Wattenberg Field in Colorado and the Utica Shale in southeastern Ohio. The Company operates through two segments: Oil and Gas Exploration and Production, and Gas Marketing. The Company's Oil and Gas Exploration and Production segment includes all of its crude oil and natural gas properties. The Company's Gas Marketing segment purchases, aggregates and resells natural gas. The Company's operations in the Wattenberg Field are focused on the horizontal Niobrara and Codell plays. Its Delaware Basin operations are focused in the Wolfcamp zones and its Ohio operations are focused in the Utica Shale play. As of December 31, 2016, the Company owned an interest in approximately 2,900 productive gross wells.

FINANCIAL RATIOS  of  PDC Energy (PDCE)

Valuation Ratios
P/E Ratio -11.7
Price to Sales 7.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow -2.8
Growth Rates
Sales Growth Rate -35.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 150.2%
Cap. Spend. - 3 Yr. Gr. Rate 30.8%
Financial Strength
Quick Ratio 244
Current Ratio 0
LT Debt to Equity 39.8%
Total Debt to Equity 39.9%
Interest Coverage -8
Management Effectiveness
Return On Assets -6.4%
Ret/ On Assets - 3 Yr. Avg. 0.1%
Return On Total Capital -8.8%
Ret/ On T. Cap. - 3 Yr. Avg. -1.1%
Return On Equity -12.6%
Return On Equity - 3 Yr. Avg. -1.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 89.3%
Gross Margin - 3 Yr. Avg. 88.7%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 36%
Operating Margin -86.7%
Oper. Margin - 3 Yr. Avg. -23.8%
Pre-Tax Margin -102.6%
Pre-Tax Margin - 3 Yr. Avg. -33.3%
Net Profit Margin -64.2%
Net Profit Margin - 3 Yr. Avg. -19.2%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

PDCE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PDCE stock intrinsic value calculation we used $383 million for the last fiscal year's total revenue generated by PDC Energy. The default revenue input number comes from 2016 income statement of PDC 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 PDCE 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 PDCE is calculated based on our internal credit rating of PDC 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 PDC 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 PDCE stock the variable cost ratio is equal to 110.7%.

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 PDCE 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 5.1% for PDC Energy.

Corporate tax rate of 27% is the nominal tax rate for PDC 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 PDCE 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 PDCE are equal to 776.2%.

Life of production assets of 7.2 years is the average useful life of capital assets used in PDC 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 PDCE is equal to -29.8%. 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 - $2623 million for PDC 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 66.425 million for PDC 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 PDC Energy at the current share price and the inputted number of shares is $2.9 billion.

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COMPANY NEWS

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▶ PDC Energy tops Street 2Q forecasts   [Aug-08-17 07:04PM  Associated Press]
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▶ US Crude Oil Production Hit a 16-Month High   [11:05AM  Market Realist]
▶ Why US Gasoline Demand Rose for 2nd Consecutive Month   [Aug-02-17 10:02AM  Market Realist]
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▶ Decoding US Crude Oil Price Forecasts and Moving Averages   [Jul-04-17 04:17PM  Market Realist]
▶ Why Barclays Is Positive on PDC Energy   [08:45AM  Market Realist]
▶ Underperforming Energy Sector May Soon See M&A Wave   [Jun-22-17 07:00PM  Oilprice.com]
▶ Libyas Crude Oil Production Is Helping Crude Oil Bears   [Jun-20-17 12:06PM  Market Realist]
▶ Cushing Crude Oil Inventories Fell Again   [Jun-19-17 11:46AM  Market Realist]
▶ US Distillate Inventories and Crude Oil Price Forecasts   [Jun-15-17 11:04AM  Market Realist]
▶ Rig Count: Precursor to Collateral Damage for Oil Prices?   [Jun-12-17 11:14AM  Market Realist]
▶ PDC Energy Announces Upcoming Investor Events   [Jun-02-17 11:17AM  GlobeNewswire]
▶ US Gasoline Demand Could Hit a Peak This Summer   [Jun-01-17 09:35AM  Market Realist]
▶ ETFs with exposure to PDC Energy, Inc. : May 31, 2017   [May-31-17 12:42PM  Capital Cube]
▶ Deadline day for oil and gas inspections in Colorado following fatal explosion   [May-30-17 08:35PM  American City Business Journals]
▶ Will Saudi Arabia and Iraq Help Crude Oil Prices?   [May-23-17 08:50AM  Market Realist]
▶ Could Bearish Drivers Halt US Crude Oil Price Recovery?   [May-15-17 10:38AM  Market Realist]
▶ Why Did US Distillate Inventories Fall Again?   [May-11-17 10:03AM  Market Realist]
▶ Cushing Crude Oil Inventories Fell for 3rd Consecutive Week   [May-09-17 12:35PM  Market Realist]
▶ These 5 Oil Stocks Got Blasted in April   [May-08-17 12:00PM  Motley Fool]
▶ Investor Network: PDC Energy Inc to Host Earnings Call   [May-05-17 10:00AM  Accesswire]
▶ PDC Energy misses 1Q profit forecasts   [08:06AM  Associated Press]
▶ Why US Gasoline Inventories Rose for the Third Straight Week   [May-04-17 12:06PM  Market Realist]
▶ Libyas Crude Oil Production Rises: Oil Prices at 1-Month Low   [May-02-17 10:03AM  Market Realist]
▶ Questions remain over fatal Firestone blaze and Anadarko Petroleum's well shutdown   [Apr-27-17 07:05PM  American City Business Journals]
▶ Will Russia Join the Production Cut Deal Extension in 2H17?   [Apr-26-17 08:41AM  Market Realist]
▶ US Distillate Inventories Fell for the Tenth Straight Week   [Apr-20-17 11:35AM  Market Realist]
▶ Opening Bell, April 19, 2017   [Apr-19-17 09:30AM  CNBC Videos]
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Financial statements of PDCE
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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