Intrinsic value of Resolute Energy - REN

Previous Close

$26.63

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$26.63

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

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
  -1,234
  -1,906
  -2,851
  -4,137
  -5,837
  -8,024
  -10,770
  -14,142
  -18,198
  -22,985
  -28,542
  -34,896
  -42,061
  -50,045
  -58,843
  -68,449
  -78,848
  -90,022
  -101,955
  -114,628
  -128,024
  -142,129
  -156,934
  -172,431
  -188,617
  -205,495
  -223,072
  -241,360
  -260,376
  -280,140
Interest expense (income), $m
  51
  40
  51
  86
  135
  202
  291
  405
  548
  723
  935
  1,184
  1,474
  1,805
  2,178
  2,594
  3,052
  3,553
  4,094
  4,677
  5,298
  5,959
  6,656
  7,391
  8,163
  8,970
  9,813
  10,693
  11,608
  12,561
  13,552
Earnings before tax, $m
  -162
  -1,353
  -2,080
  -3,121
  -4,539
  -6,415
  -8,832
  -11,870
  -15,602
  -20,095
  -25,403
  -31,568
  -38,620
  -46,579
  -55,451
  -65,233
  -75,917
  -87,486
  -99,923
  -113,208
  -127,320
  -142,240
  -157,954
  -174,448
  -191,715
  -209,753
  -228,563
  -248,154
  -268,537
  -289,732
  -311,761
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
  -1,353
  -2,080
  -3,121
  -4,539
  -6,415
  -8,832
  -11,870
  -15,602
  -20,095
  -25,403
  -31,568
  -38,620
  -46,579
  -55,451
  -65,233
  -75,917
  -87,486
  -99,923
  -113,208
  -127,320
  -142,240
  -157,954
  -174,448
  -191,715
  -209,753
  -228,563
  -248,154
  -268,537
  -289,732
  -311,761

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
  729
  1,126
  1,684
  2,444
  3,448
  4,740
  6,362
  8,354
  10,749
  13,577
  16,859
  20,612
  24,845
  29,560
  34,758
  40,432
  46,574
  53,174
  60,223
  67,708
  75,621
  83,953
  92,698
  101,852
  111,413
  121,382
  131,765
  142,567
  153,799
  165,473
Adjusted assets (=assets-cash), $m
  455
  729
  1,126
  1,684
  2,444
  3,448
  4,740
  6,362
  8,354
  10,749
  13,577
  16,859
  20,612
  24,845
  29,560
  34,758
  40,432
  46,574
  53,174
  60,223
  67,708
  75,621
  83,953
  92,698
  101,852
  111,413
  121,382
  131,765
  142,567
  153,799
  165,473
Revenue / Adjusted assets
  0.360
  0.359
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
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
  -78
  -121
  -181
  -263
  -371
  -510
  -685
  -899
  -1,157
  -1,461
  -1,815
  -2,219
  -2,674
  -3,182
  -3,741
  -4,352
  -5,013
  -5,724
  -6,482
  -7,288
  -8,140
  -9,037
  -9,978
  -10,963
  -11,992
  -13,066
  -14,183
  -15,346
  -16,555
  -17,812
Total debt, $m
  528
  520
  878
  1,380
  2,063
  2,967
  4,130
  5,590
  7,382
  9,538
  12,083
  15,038
  18,415
  22,224
  26,468
  31,146
  36,252
  41,780
  47,721
  54,065
  60,802
  67,923
  75,422
  83,292
  91,530
  100,135
  109,108
  118,452
  128,174
  138,283
  148,790
Total liabilities, $m
  664
  656
  1,014
  1,516
  2,199
  3,103
  4,266
  5,726
  7,518
  9,674
  12,219
  15,174
  18,551
  22,360
  26,604
  31,282
  36,388
  41,916
  47,857
  54,201
  60,938
  68,059
  75,558
  83,428
  91,666
  100,271
  109,244
  118,588
  128,310
  138,419
  148,926
Total equity, $m
  -76
  73
  113
  168
  244
  345
  474
  636
  835
  1,075
  1,358
  1,686
  2,061
  2,484
  2,956
  3,476
  4,043
  4,657
  5,317
  6,022
  6,771
  7,562
  8,395
  9,270
  10,185
  11,141
  12,138
  13,176
  14,257
  15,380
  16,547
Total liabilities and equity, $m
  588
  729
  1,127
  1,684
  2,443
  3,448
  4,740
  6,362
  8,353
  10,749
  13,577
  16,860
  20,612
  24,844
  29,560
  34,758
  40,431
  46,573
  53,174
  60,223
  67,709
  75,621
  83,953
  92,698
  101,851
  111,412
  121,382
  131,764
  142,567
  153,799
  165,473
Debt-to-equity ratio
  -6.947
  7.130
  7.790
  8.190
  8.440
  8.610
  8.710
  8.790
  8.840
  8.870
  8.900
  8.920
  8.930
  8.950
  8.950
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  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
  -1,353
  -2,080
  -3,121
  -4,539
  -6,415
  -8,832
  -11,870
  -15,602
  -20,095
  -25,403
  -31,568
  -38,620
  -46,579
  -55,451
  -65,233
  -75,917
  -87,486
  -99,923
  -113,208
  -127,320
  -142,240
  -157,954
  -174,448
  -191,715
  -209,753
  -228,563
  -248,154
  -268,537
  -289,732
  -311,761
Depreciation, amort., depletion, $m
  50
  80
  123
  184
  267
  376
  518
  695
  912
  1,174
  1,483
  1,841
  2,251
  2,713
  3,228
  3,796
  4,415
  5,086
  5,807
  6,576
  7,394
  8,258
  9,168
  10,123
  11,122
  12,166
  13,255
  14,389
  15,568
  16,795
  18,070
Funds from operations, $m
  102
  -1,274
  -1,957
  -2,937
  -4,272
  -6,039
  -8,315
  -11,175
  -14,690
  -18,921
  -23,920
  -29,727
  -36,370
  -43,866
  -52,223
  -61,437
  -71,501
  -82,400
  -94,117
  -106,632
  -119,926
  -133,982
  -148,786
  -164,325
  -180,593
  -197,587
  -215,309
  -233,765
  -252,969
  -272,937
  -293,692
Change in working capital, $m
  18
  -29
  -43
  -60
  -82
  -108
  -139
  -175
  -214
  -258
  -304
  -353
  -404
  -456
  -508
  -559
  -611
  -661
  -710
  -759
  -806
  -852
  -897
  -941
  -985
  -1,029
  -1,073
  -1,118
  -1,163
  -1,209
  -1,257
Cash from operations, $m
  84
  -1,244
  -1,915
  -2,877
  -4,190
  -5,931
  -8,176
  -11,001
  -14,476
  -18,663
  -23,616
  -29,373
  -35,966
  -43,410
  -51,715
  -60,878
  -70,891
  -81,739
  -93,406
  -105,873
  -119,120
  -133,131
  -147,889
  -163,384
  -179,608
  -196,558
  -214,235
  -232,647
  -251,806
  -271,728
  -292,435
Maintenance CAPEX, $m
  0
  -50
  -80
  -123
  -184
  -267
  -376
  -518
  -695
  -912
  -1,174
  -1,483
  -1,841
  -2,251
  -2,713
  -3,228
  -3,796
  -4,415
  -5,086
  -5,807
  -6,576
  -7,394
  -8,258
  -9,168
  -10,123
  -11,122
  -12,166
  -13,255
  -14,389
  -15,568
  -16,795
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
  -229
  -340
  -489
  -682
  -925
  -1,223
  -1,581
  -2,000
  -2,482
  -3,027
  -3,634
  -4,300
  -5,024
  -5,803
  -6,633
  -7,514
  -8,439
  -9,411
  -10,425
  -11,481
  -12,579
  -13,717
  -14,898
  -16,120
  -17,386
  -18,698
  -20,058
  -21,467
  -22,927
  -24,444
Free cash flow, $m
  -106
  -1,473
  -2,255
  -3,366
  -4,872
  -6,855
  -9,399
  -12,581
  -16,475
  -21,145
  -26,642
  -33,007
  -40,265
  -48,434
  -57,518
  -67,511
  -78,404
  -90,179
  -102,817
  -116,298
  -130,601
  -145,709
  -161,606
  -178,281
  -195,728
  -213,944
  -232,934
  -252,705
  -273,272
  -294,656
  -316,879
Issuance/(repayment) of debt, $m
  10
  114
  358
  502
  684
  904
  1,163
  1,460
  1,793
  2,156
  2,545
  2,954
  3,378
  3,809
  4,244
  4,678
  5,106
  5,528
  5,941
  6,344
  6,737
  7,122
  7,499
  7,870
  8,238
  8,605
  8,973
  9,344
  9,722
  10,109
  10,507
Issuance/(repurchase) of shares, $m
  221
  1,513
  2,120
  3,177
  4,615
  6,516
  8,961
  12,032
  15,801
  20,335
  25,685
  31,896
  38,996
  47,002
  55,922
  65,753
  76,484
  88,100
  100,583
  113,913
  128,068
  143,031
  158,787
  175,322
  192,631
  210,709
  229,560
  249,192
  269,617
  290,855
  312,929
Cash from financing (excl. dividends), $m  
  231
  1,627
  2,478
  3,679
  5,299
  7,420
  10,124
  13,492
  17,594
  22,491
  28,230
  34,850
  42,374
  50,811
  60,166
  70,431
  81,590
  93,628
  106,524
  120,257
  134,805
  150,153
  166,286
  183,192
  200,869
  219,314
  238,533
  258,536
  279,339
  300,964
  323,436
Total cash flow (excl. dividends), $m
  124
  154
  223
  313
  427
  564
  726
  911
  1,119
  1,345
  1,588
  1,844
  2,108
  2,377
  2,648
  2,919
  3,187
  3,450
  3,707
  3,959
  4,204
  4,444
  4,680
  4,911
  5,141
  5,370
  5,599
  5,831
  6,067
  6,308
  6,557
Retained Cash Flow (-), $m
  -127
  -1,513
  -2,120
  -3,177
  -4,615
  -6,516
  -8,961
  -12,032
  -15,801
  -20,335
  -25,685
  -31,896
  -38,996
  -47,002
  -55,922
  -65,753
  -76,484
  -88,100
  -100,583
  -113,913
  -128,068
  -143,031
  -158,787
  -175,322
  -192,631
  -210,709
  -229,560
  -249,192
  -269,617
  -290,855
  -312,929
Prev. year cash balance distribution, $m
 
  11
  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
 
  -1,348
  -1,897
  -2,863
  -4,188
  -5,952
  -8,236
  -11,121
  -14,683
  -18,989
  -24,097
  -30,052
  -36,888
  -44,625
  -53,274
  -62,834
  -73,297
  -84,651
  -96,876
  -109,954
  -123,864
  -138,587
  -154,107
  -170,411
  -187,490
  -205,339
  -223,961
  -243,361
  -263,550
  -284,547
  -306,372
Discount rate, %
 
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.10
  33.71
  35.40
  37.17
  39.02
  40.97
  43.02
  45.17
  47.43
  49.81
PV of cash for distribution, $m
 
  -1,203
  -1,493
  -1,967
  -2,479
  -2,997
  -3,479
  -3,884
  -4,174
  -4,322
  -4,314
  -4,154
  -3,860
  -3,463
  -2,999
  -2,507
  -2,023
  -1,575
  -1,182
  -856
  -597
  -400
  -258
  -160
  -95
  -54
  -30
  -15
  -8
  -4
  -2
Current shareholders' claim on cash, %
  100
  50.0
  1.7
  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 is an independent oil and gas company. The Company is engaged in the exploitation, development, exploration for and acquisition of oil and gas properties. The Company's assets are located primarily in the Delaware Basin in west Texas (the Permian Properties or Permian Basin Properties) and Aneth Field located in the Paradox Basin in southeast Utah (the Aneth Field Properties or Aneth Field). The Company has an interest in gas gathering and compression facilities located within and adjacent to its Aneth Field Properties. The Aneth field is an oil field located in southeast Utah. The Aneth field is connected by pipeline to a refinery located near Gallup, New Mexico. As of December 31, 2016, the Company had interests in approximately 23,900 gross (20,000 net) acres in the Permian Basin of Texas and southeast New Mexico.

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 1
Current Ratio 0
LT Debt to Equity -534.2%
Total Debt to Equity -694.7%
Interest Coverage -2
Management Effectiveness
Return On Assets -22.7%
Ret/ On Assets - 3 Yr. Avg. -32.2%
Return On Total Capital -42.4%
Ret/ On T. Cap. - 3 Yr. Avg. -45.6%
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 12.1%, 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 9.8% 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 6 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 -29.9%. 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 22.479 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

▶ Your Upstream Losers This Week: EXXI, REN, EPE, CPE, and UNT   [Nov-15-17 02:40PM  Market Realist]
▶ 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]
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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