Intrinsic value of Resolute Energy - REN

Previous Close

$26.74

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-1334%

Previous close

$26.74

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-1334%

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

We calculate the intrinsic value of REN 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 0.6

 

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, %
  5.81
  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
  164
  262
  405
  606
  880
  1,241
  1,706
  2,290
  3,007
  3,870
  4,888
  6,069
  7,420
  8,944
  10,642
  12,513
  14,555
  16,767
  19,143
  21,680
  24,375
  27,224
  30,223
  33,371
  36,667
  40,109
  43,698
  47,435
  51,324
  55,368
  59,570
Variable operating expenses, $m
 
  1,576
  2,435
  3,641
  5,283
  7,454
  10,248
  13,755
  18,062
  23,241
  29,355
  36,453
  44,567
  53,718
  63,914
  75,152
  87,420
  100,700
  114,972
  130,211
  146,396
  163,505
  181,520
  200,428
  220,219
  240,892
  262,448
  284,897
  308,253
  332,538
  357,780
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
  256
  1,576
  2,435
  3,641
  5,283
  7,454
  10,248
  13,755
  18,062
  23,241
  29,355
  36,453
  44,567
  53,718
  63,914
  75,152
  87,420
  100,700
  114,972
  130,211
  146,396
  163,505
  181,520
  200,428
  220,219
  240,892
  262,448
  284,897
  308,253
  332,538
  357,780
Operating income, $m
  -92
  -1,314
  -2,029
  -3,035
  -4,404
  -6,213
  -8,542
  -11,465
  -15,055
  -19,372
  -24,468
  -30,383
  -37,147
  -44,774
  -53,273
  -62,639
  -72,864
  -83,933
  -95,829
  -108,531
  -122,021
  -136,282
  -151,297
  -167,057
  -183,553
  -200,783
  -218,750
  -237,461
  -256,929
  -277,171
  -298,210
EBITDA, $m
  -42
  -1,266
  -1,956
  -2,925
  -4,244
  -5,987
  -8,231
  -11,048
  -14,507
  -18,667
  -23,578
  -29,279
  -35,796
  -43,146
  -51,336
  -60,362
  -70,215
  -80,882
  -92,345
  -104,585
  -117,585
  -131,327
  -145,797
  -160,983
  -176,880
  -193,483
  -210,797
  -228,828
  -247,588
  -267,094
  -287,368
Interest expense (income), $m
  51
  45
  65
  117
  188
  286
  416
  582
  791
  1,048
  1,357
  1,721
  2,145
  2,628
  3,174
  3,782
  4,452
  5,183
  5,975
  6,826
  7,734
  8,699
  9,719
  10,793
  11,920
  13,100
  14,333
  15,618
  16,956
  18,349
  19,797
Earnings before tax, $m
  -162
  -1,359
  -2,095
  -3,152
  -4,592
  -6,499
  -8,957
  -12,048
  -15,846
  -20,420
  -25,825
  -32,105
  -39,291
  -47,403
  -56,446
  -66,421
  -77,316
  -89,117
  -101,804
  -115,357
  -129,756
  -144,981
  -161,016
  -177,850
  -195,473
  -213,884
  -233,083
  -253,079
  -273,885
  -295,519
  -318,006
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
  -162
  -1,359
  -2,095
  -3,152
  -4,592
  -6,499
  -8,957
  -12,048
  -15,846
  -20,420
  -25,825
  -32,105
  -39,291
  -47,403
  -56,446
  -66,421
  -77,316
  -89,117
  -101,804
  -115,357
  -129,756
  -144,981
  -161,016
  -177,850
  -195,473
  -213,884
  -233,083
  -253,079
  -273,885
  -295,519
  -318,006

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  133
  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
  588
  941
  1,453
  2,173
  3,153
  4,448
  6,116
  8,209
  10,779
  13,870
  17,519
  21,754
  26,597
  32,058
  38,142
  44,849
  52,170
  60,095
  68,612
  77,707
  87,366
  97,576
  108,327
  119,610
  131,421
  143,758
  156,622
  170,019
  183,958
  198,451
  213,514
Adjusted assets (=assets-cash), $m
  455
  941
  1,453
  2,173
  3,153
  4,448
  6,116
  8,209
  10,779
  13,870
  17,519
  21,754
  26,597
  32,058
  38,142
  44,849
  52,170
  60,095
  68,612
  77,707
  87,366
  97,576
  108,327
  119,610
  131,421
  143,758
  156,622
  170,019
  183,958
  198,451
  213,514
Revenue / Adjusted assets
  0.360
  0.278
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
Average production assets, $m
  299
  478
  738
  1,103
  1,601
  2,259
  3,105
  4,168
  5,473
  7,043
  8,896
  11,046
  13,505
  16,278
  19,368
  22,773
  26,491
  30,515
  34,840
  39,458
  44,363
  49,547
  55,006
  60,736
  66,733
  72,997
  79,530
  86,332
  93,410
  100,769
  108,418
Working capital, $m
  -38
  -26
  -41
  -61
  -88
  -124
  -171
  -229
  -301
  -387
  -489
  -607
  -742
  -894
  -1,064
  -1,251
  -1,456
  -1,677
  -1,914
  -2,168
  -2,438
  -2,722
  -3,022
  -3,337
  -3,667
  -4,011
  -4,370
  -4,744
  -5,132
  -5,537
  -5,957
Total debt, $m
  406
  588
  1,050
  1,698
  2,580
  3,746
  5,246
  7,130
  9,443
  12,225
  15,509
  19,321
  23,679
  28,594
  34,070
  40,106
  46,695
  53,828
  61,493
  69,678
  78,371
  87,560
  97,236
  107,391
  118,021
  129,124
  140,702
  152,759
  165,304
  178,348
  191,905
Total liabilities, $m
  664
  846
  1,308
  1,956
  2,838
  4,004
  5,504
  7,388
  9,701
  12,483
  15,767
  19,579
  23,937
  28,852
  34,328
  40,364
  46,953
  54,086
  61,751
  69,936
  78,629
  87,818
  97,494
  107,649
  118,279
  129,382
  140,960
  153,017
  165,562
  178,606
  192,163
Total equity, $m
  -76
  94
  145
  217
  315
  445
  612
  821
  1,078
  1,387
  1,752
  2,175
  2,660
  3,206
  3,814
  4,485
  5,217
  6,010
  6,861
  7,771
  8,737
  9,758
  10,833
  11,961
  13,142
  14,376
  15,662
  17,002
  18,396
  19,845
  21,351
Total liabilities and equity, $m
  588
  940
  1,453
  2,173
  3,153
  4,449
  6,116
  8,209
  10,779
  13,870
  17,519
  21,754
  26,597
  32,058
  38,142
  44,849
  52,170
  60,096
  68,612
  77,707
  87,366
  97,576
  108,327
  119,610
  131,421
  143,758
  156,622
  170,019
  183,958
  198,451
  213,514
Debt-to-equity ratio
  -5.342
  6.260
  7.220
  7.810
  8.180
  8.420
  8.580
  8.690
  8.760
  8.810
  8.850
  8.880
  8.900
  8.920
  8.930
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
Adjusted equity ratio
  -0.459
  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
  -162
  -1,359
  -2,095
  -3,152
  -4,592
  -6,499
  -8,957
  -12,048
  -15,846
  -20,420
  -25,825
  -32,105
  -39,291
  -47,403
  -56,446
  -66,421
  -77,316
  -89,117
  -101,804
  -115,357
  -129,756
  -144,981
  -161,016
  -177,850
  -195,473
  -213,884
  -233,083
  -253,079
  -273,885
  -295,519
  -318,006
Depreciation, amort., depletion, $m
  50
  48
  74
  110
  160
  226
  311
  417
  547
  704
  890
  1,105
  1,351
  1,628
  1,937
  2,277
  2,649
  3,052
  3,484
  3,946
  4,436
  4,955
  5,501
  6,074
  6,673
  7,300
  7,953
  8,633
  9,341
  10,077
  10,842
Funds from operations, $m
  102
  -1,311
  -2,021
  -3,041
  -4,432
  -6,274
  -8,647
  -11,631
  -15,299
  -19,715
  -24,935
  -31,000
  -37,941
  -45,775
  -54,510
  -64,143
  -74,667
  -86,065
  -98,320
  -111,411
  -125,319
  -140,026
  -155,516
  -171,776
  -188,800
  -206,584
  -225,130
  -244,446
  -264,544
  -285,443
  -307,164
Change in working capital, $m
  18
  -10
  -14
  -20
  -27
  -36
  -47
  -58
  -72
  -86
  -102
  -118
  -135
  -152
  -170
  -187
  -204
  -221
  -238
  -254
  -269
  -285
  -300
  -315
  -330
  -344
  -359
  -374
  -389
  -404
  -420
Cash from operations, $m
  84
  -1,301
  -2,007
  -3,021
  -4,405
  -6,237
  -8,600
  -11,572
  -15,227
  -19,629
  -24,833
  -30,882
  -37,806
  -45,622
  -54,340
  -63,956
  -74,463
  -85,844
  -98,082
  -111,157
  -125,050
  -139,741
  -155,216
  -171,461
  -188,470
  -206,240
  -224,771
  -244,072
  -264,155
  -285,038
  -306,744
Maintenance CAPEX, $m
  0
  -30
  -48
  -74
  -110
  -160
  -226
  -311
  -417
  -547
  -704
  -890
  -1,105
  -1,351
  -1,628
  -1,937
  -2,277
  -2,649
  -3,052
  -3,484
  -3,946
  -4,436
  -4,955
  -5,501
  -6,074
  -6,673
  -7,300
  -7,953
  -8,633
  -9,341
  -10,077
New CAPEX, $m
  -224
  -179
  -260
  -366
  -498
  -658
  -847
  -1,063
  -1,305
  -1,570
  -1,853
  -2,151
  -2,459
  -2,773
  -3,090
  -3,405
  -3,718
  -4,024
  -4,325
  -4,618
  -4,905
  -5,185
  -5,459
  -5,730
  -5,997
  -6,264
  -6,532
  -6,803
  -7,078
  -7,359
  -7,649
Cash from investing activities, $m
  -190
  -209
  -308
  -440
  -608
  -818
  -1,073
  -1,374
  -1,722
  -2,117
  -2,557
  -3,041
  -3,564
  -4,124
  -4,718
  -5,342
  -5,995
  -6,673
  -7,377
  -8,102
  -8,851
  -9,621
  -10,414
  -11,231
  -12,071
  -12,937
  -13,832
  -14,756
  -15,711
  -16,700
  -17,726
Free cash flow, $m
  -106
  -1,510
  -2,315
  -3,461
  -5,013
  -7,055
  -9,673
  -12,946
  -16,949
  -21,746
  -27,390
  -33,922
  -41,369
  -49,746
  -59,057
  -69,298
  -80,457
  -92,517
  -105,458
  -119,259
  -133,900
  -149,362
  -165,630
  -182,692
  -200,541
  -219,177
  -238,603
  -258,828
  -279,866
  -301,738
  -324,470
Issuance/(repayment) of debt, $m
  10
  182
  461
  648
  882
  1,166
  1,500
  1,884
  2,313
  2,782
  3,284
  3,812
  4,358
  4,915
  5,476
  6,036
  6,589
  7,133
  7,665
  8,185
  8,693
  9,189
  9,676
  10,155
  10,630
  11,103
  11,578
  12,057
  12,545
  13,044
  13,557
Issuance/(repurchase) of shares, $m
  221
  1,529
  2,146
  3,224
  4,690
  6,629
  9,124
  12,257
  16,103
  20,729
  26,190
  32,528
  39,776
  47,949
  57,055
  67,091
  78,048
  89,909
  102,655
  116,266
  130,721
  146,002
  162,091
  178,978
  196,654
  215,117
  234,369
  254,419
  275,279
  296,969
  319,513
Cash from financing (excl. dividends), $m  
  231
  1,711
  2,607
  3,872
  5,572
  7,795
  10,624
  14,141
  18,416
  23,511
  29,474
  36,340
  44,134
  52,864
  62,531
  73,127
  84,637
  97,042
  110,320
  124,451
  139,414
  155,191
  171,767
  189,133
  207,284
  226,220
  245,947
  266,476
  287,824
  310,013
  333,070
Total cash flow (excl. dividends), $m
  124
  201
  293
  411
  559
  740
  952
  1,195
  1,467
  1,765
  2,083
  2,418
  2,765
  3,118
  3,474
  3,829
  4,180
  4,525
  4,862
  5,192
  5,514
  5,829
  6,138
  6,442
  6,743
  7,043
  7,344
  7,648
  7,957
  8,274
  8,600
Retained Cash Flow (-), $m
  -127
  -1,529
  -2,146
  -3,224
  -4,690
  -6,629
  -9,124
  -12,257
  -16,103
  -20,729
  -26,190
  -32,528
  -39,776
  -47,949
  -57,055
  -67,091
  -78,048
  -89,909
  -102,655
  -116,266
  -130,721
  -146,002
  -162,091
  -178,978
  -196,654
  -215,117
  -234,369
  -254,419
  -275,279
  -296,969
  -319,513
Prev. year cash balance 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
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
 
  -1,328
  -1,853
  -2,813
  -4,131
  -5,889
  -8,172
  -11,062
  -14,636
  -18,964
  -24,107
  -30,110
  -37,011
  -44,831
  -53,581
  -63,263
  -73,868
  -85,385
  -97,793
  -111,074
  -125,207
  -140,173
  -155,954
  -172,536
  -189,911
  -208,074
  -227,025
  -246,771
  -267,321
  -288,695
  -310,913
Discount rate, %
 
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.30
  19.22
  20.18
  21.19
  22.24
  23.36
  24.52
  25.75
  27.04
  28.39
  29.81
  31.30
  32.87
  34.51
  36.23
  38.05
  39.95
  41.95
  44.04
PV of cash for distribution, $m
 
  -1,199
  -1,498
  -2,013
  -2,589
  -3,196
  -3,791
  -4,330
  -4,766
  -5,061
  -5,190
  -5,143
  -4,926
  -4,563
  -4,088
  -3,543
  -2,970
  -2,408
  -1,887
  -1,429
  -1,045
  -737
  -501
  -329
  -207
  -126
  -73
  -41
  -22
  -11
  -5
Current shareholders' claim on cash, %
  100
  50.0
  2.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Resolute Energy Corporation, an independent oil and gas company, engages in the acquisition, exploitation, exploration for, and development of oil and gas properties in the United States. The company holds interests in the Aneth Field covering approximately 43,000 gross acres located in the Paradox Basin in southeast Utah; and covering 27,750 gross acres in the Permian Basin in west Texas and southeast New Mexico. As of December 31, 2015, its estimated net proved reserves were approximately 33.1 million barrels of oil equivalent. Resolute Energy Corporation was founded in 2004 and is based in Denver, Colorado.

FINANCIAL RATIOS  of  Resolute Energy (REN)

Valuation Ratios
P/E Ratio -3.6
Price to Sales 3.6
Price to Book -7.7
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow -4.2
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 229.4%
Cap. Spend. - 3 Yr. Gr. Rate -15.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -534.2%
Total Debt to Equity -534.2%
Interest Coverage -2
Management Effectiveness
Return On Assets -22.7%
Ret/ On Assets - 3 Yr. Avg. -32.2%
Return On Total Capital -50.5%
Ret/ On T. Cap. - 3 Yr. Avg. -48.3%
Return On Equity 116.1%
Return On Equity - 3 Yr. Avg. -115.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 51.8%
Gross Margin - 3 Yr. Avg. 47.2%
EBITDA Margin -37.2%
EBITDA Margin - 3 Yr. Avg. -129%
Operating Margin -56.1%
Oper. Margin - 3 Yr. Avg. -197%
Pre-Tax Margin -98.8%
Pre-Tax Margin - 3 Yr. Avg. -200.1%
Net Profit Margin -98.8%
Net Profit Margin - 3 Yr. Avg. -194.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.1%
Payout Ratio 0%

REN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REN stock intrinsic value calculation we used $164 million for the last fiscal year's total revenue generated by Resolute Energy. The default revenue input number comes from 2016 income statement of Resolute 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 REN 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 10.7%, whose default value for REN is calculated based on our internal credit rating of Resolute 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 Resolute 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 REN stock the variable cost ratio is equal to 600.6%.

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 REN 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 11.1% for Resolute Energy.

Corporate tax rate of 27% is the nominal tax rate for Resolute 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 REN 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 REN are equal to 182%.

Life of production assets of 10 years is the average useful life of capital assets used in Resolute 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 REN is equal to -10%. 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 - $-76 million for Resolute 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 21.294 million for Resolute 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 Resolute Energy at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Resolute Energy Corporation Announces Exchange Offer   [Jun-05-17 04:34PM  GlobeNewswire]
▶ Top 5 Small-Cap Oil Stocks for 2017   [Jun-01-17 06:00AM  Investopedia]
▶ The Winner In Trump Vs. OPEC: Lower Oil Prices   [May-31-17 03:12PM  Forbes]
▶ 2 Stocks I'd Never Buy, and 1 I'll Consider   [Apr-21-17 10:51AM  Motley Fool]
▶ Oil and Gas Stock Roundup: Say Goodbye to $50 Oil   [Mar-11-17 10:00AM  Motley Fool]
▶ Conference-OGIS New York for Resolute Energy Corp.   [Mar-08-17 05:56PM  at Company Spotlight]
▶ 3 Stocks I'd Never Touch   [Mar-06-17 12:31PM  at Motley Fool]
▶ Will Resolute Energy Corp. Stock Sink or Swim?   [Jan-31-17 09:14AM  at Motley Fool]
▶ Top Oil Stocks to Buy in 2017   [Jan-08-17 08:11AM  at Motley Fool]
▶ 2 Signs You Should Sell Resolute Energy Corp.   [Nov-29-16 08:47AM  at Motley Fool]
Stock chart of REN Financial statements of REN
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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