Intrinsic value of Sanchez Energy - SN

Previous Close

$5.46

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$5.46

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of SN 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, %
  -9.45
  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
  431
  690
  1,065
  1,593
  2,312
  3,262
  4,484
  6,019
  7,903
  10,170
  12,845
  15,951
  19,501
  23,506
  27,967
  32,884
  38,252
  44,063
  50,308
  56,977
  64,059
  71,545
  79,428
  87,701
  96,362
  105,407
  114,839
  124,662
  134,882
  145,509
  156,554
Variable operating expenses, $m
 
  2,849
  4,402
  6,584
  9,553
  13,477
  18,528
  24,870
  32,657
  42,021
  53,076
  65,908
  80,579
  97,125
  115,560
  135,878
  158,058
  182,070
  207,874
  235,428
  264,691
  295,624
  328,196
  362,382
  398,166
  435,542
  474,517
  515,105
  557,334
  601,243
  646,881
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
  623
  2,849
  4,402
  6,584
  9,553
  13,477
  18,528
  24,870
  32,657
  42,021
  53,076
  65,908
  80,579
  97,125
  115,560
  135,878
  158,058
  182,070
  207,874
  235,428
  264,691
  295,624
  328,196
  362,382
  398,166
  435,542
  474,517
  515,105
  557,334
  601,243
  646,881
Operating income, $m
  -192
  -2,160
  -3,337
  -4,990
  -7,241
  -10,216
  -14,044
  -18,851
  -24,753
  -31,851
  -40,231
  -49,958
  -61,078
  -73,619
  -87,593
  -102,993
  -119,806
  -138,006
  -157,565
  -178,451
  -200,632
  -224,079
  -248,768
  -274,681
  -301,804
  -330,135
  -359,677
  -390,442
  -422,452
  -455,734
  -490,327
EBITDA, $m
  -32
  -1,933
  -2,987
  -4,467
  -6,482
  -9,145
  -12,572
  -16,875
  -22,158
  -28,512
  -36,013
  -44,719
  -54,674
  -65,900
  -78,408
  -92,194
  -107,244
  -123,536
  -141,044
  -159,740
  -179,595
  -200,584
  -222,684
  -245,880
  -270,159
  -295,519
  -321,964
  -349,503
  -378,156
  -407,949
  -438,915
Interest expense (income), $m
  119
  120
  60
  103
  164
  246
  355
  495
  671
  886
  1,146
  1,453
  1,808
  2,215
  2,674
  3,185
  3,748
  4,363
  5,028
  5,744
  6,508
  7,319
  8,176
  9,079
  10,027
  11,019
  12,055
  13,136
  14,261
  15,431
  16,649
Earnings before tax, $m
  -255
  -2,280
  -3,397
  -5,094
  -7,404
  -10,462
  -14,399
  -19,346
  -25,424
  -32,738
  -41,377
  -51,410
  -62,886
  -75,834
  -90,266
  -106,178
  -123,554
  -142,369
  -162,594
  -184,195
  -207,140
  -231,398
  -256,945
  -283,760
  -311,831
  -341,154
  -371,732
  -403,578
  -436,712
  -471,166
  -506,976
Tax expense, $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
Net income, $m
  -257
  -2,280
  -3,397
  -5,094
  -7,404
  -10,462
  -14,399
  -19,346
  -25,424
  -32,738
  -41,377
  -51,410
  -62,886
  -75,834
  -90,266
  -106,178
  -123,554
  -142,369
  -162,594
  -184,195
  -207,140
  -231,398
  -256,945
  -283,760
  -311,831
  -341,154
  -371,732
  -403,578
  -436,712
  -471,166
  -506,976

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  502
  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
  1,286
  1,254
  1,937
  2,897
  4,203
  5,930
  8,153
  10,944
  14,370
  18,490
  23,355
  29,001
  35,457
  42,737
  50,849
  59,789
  69,550
  80,115
  91,470
  103,594
  116,470
  130,082
  144,414
  159,457
  175,203
  191,649
  208,799
  226,659
  245,241
  264,562
  284,644
Adjusted assets (=assets-cash), $m
  784
  1,254
  1,937
  2,897
  4,203
  5,930
  8,153
  10,944
  14,370
  18,490
  23,355
  29,001
  35,457
  42,737
  50,849
  59,789
  69,550
  80,115
  91,470
  103,594
  116,470
  130,082
  144,414
  159,457
  175,203
  191,649
  208,799
  226,659
  245,241
  264,562
  284,644
Revenue / Adjusted assets
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
Average production assets, $m
  708
  1,132
  1,749
  2,616
  3,796
  5,356
  7,363
  9,883
  12,977
  16,699
  21,092
  26,191
  32,021
  38,596
  45,922
  53,996
  62,810
  72,352
  82,606
  93,556
  105,184
  117,477
  130,421
  144,006
  158,226
  173,079
  188,566
  204,696
  221,477
  238,926
  257,062
Working capital, $m
  386
  -186
  -287
  -429
  -622
  -877
  -1,206
  -1,619
  -2,126
  -2,736
  -3,455
  -4,291
  -5,246
  -6,323
  -7,523
  -8,846
  -10,290
  -11,853
  -13,533
  -15,327
  -17,232
  -19,246
  -21,366
  -23,592
  -25,921
  -28,355
  -30,892
  -33,534
  -36,283
  -39,142
  -42,113
Total debt, $m
  1,713
  859
  1,474
  2,338
  3,514
  5,068
  7,069
  9,580
  12,664
  16,372
  20,750
  25,832
  31,642
  38,195
  45,495
  53,542
  62,326
  71,835
  82,054
  92,966
  104,554
  116,805
  129,704
  143,242
  157,414
  172,215
  187,650
  203,724
  220,448
  237,837
  255,910
Total liabilities, $m
  1,982
  1,128
  1,743
  2,607
  3,783
  5,337
  7,338
  9,849
  12,933
  16,641
  21,019
  26,101
  31,911
  38,464
  45,764
  53,811
  62,595
  72,104
  82,323
  93,235
  104,823
  117,074
  129,973
  143,511
  157,683
  172,484
  187,919
  203,993
  220,717
  238,106
  256,179
Total equity, $m
  -696
  125
  194
  290
  420
  593
  815
  1,094
  1,437
  1,849
  2,335
  2,900
  3,546
  4,274
  5,085
  5,979
  6,955
  8,012
  9,147
  10,359
  11,647
  13,008
  14,441
  15,946
  17,520
  19,165
  20,880
  22,666
  24,524
  26,456
  28,464
Total liabilities and equity, $m
  1,286
  1,253
  1,937
  2,897
  4,203
  5,930
  8,153
  10,943
  14,370
  18,490
  23,354
  29,001
  35,457
  42,738
  50,849
  59,790
  69,550
  80,116
  91,470
  103,594
  116,470
  130,082
  144,414
  159,457
  175,203
  191,649
  208,799
  226,659
  245,241
  264,562
  284,643
Debt-to-equity ratio
  -2.461
  6.850
  7.610
  8.070
  8.360
  8.550
  8.670
  8.750
  8.810
  8.850
  8.880
  8.910
  8.920
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  -1.528
  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
  -257
  -2,280
  -3,397
  -5,094
  -7,404
  -10,462
  -14,399
  -19,346
  -25,424
  -32,738
  -41,377
  -51,410
  -62,886
  -75,834
  -90,266
  -106,178
  -123,554
  -142,369
  -162,594
  -184,195
  -207,140
  -231,398
  -256,945
  -283,760
  -311,831
  -341,154
  -371,732
  -403,578
  -436,712
  -471,166
  -506,976
Depreciation, amort., depletion, $m
  160
  226
  350
  523
  759
  1,071
  1,473
  1,977
  2,595
  3,340
  4,218
  5,238
  6,404
  7,719
  9,184
  10,799
  12,562
  14,470
  16,521
  18,711
  21,037
  23,495
  26,084
  28,801
  31,645
  34,616
  37,713
  40,939
  44,295
  47,785
  51,412
Funds from operations, $m
  176
  -2,053
  -3,047
  -4,570
  -6,645
  -9,391
  -12,926
  -17,370
  -22,828
  -29,398
  -37,159
  -46,172
  -56,482
  -68,115
  -81,082
  -95,379
  -110,992
  -127,899
  -146,073
  -165,484
  -186,103
  -207,903
  -230,861
  -254,959
  -280,186
  -306,538
  -334,019
  -362,639
  -392,417
  -423,380
  -455,563
Change in working capital, $m
  -5
  -70
  -101
  -142
  -193
  -256
  -329
  -413
  -507
  -610
  -720
  -835
  -955
  -1,077
  -1,200
  -1,323
  -1,444
  -1,563
  -1,680
  -1,794
  -1,905
  -2,014
  -2,120
  -2,226
  -2,330
  -2,433
  -2,537
  -2,642
  -2,749
  -2,859
  -2,971
Cash from operations, $m
  181
  -1,984
  -2,946
  -4,428
  -6,452
  -9,135
  -12,598
  -16,957
  -22,321
  -28,788
  -36,439
  -45,336
  -55,527
  -67,038
  -79,882
  -94,056
  -109,548
  -126,336
  -144,393
  -163,690
  -184,198
  -205,889
  -228,740
  -252,733
  -277,857
  -304,105
  -331,482
  -359,996
  -389,668
  -420,522
  -452,592
Maintenance CAPEX, $m
  0
  -142
  -226
  -350
  -523
  -759
  -1,071
  -1,473
  -1,977
  -2,595
  -3,340
  -4,218
  -5,238
  -6,404
  -7,719
  -9,184
  -10,799
  -12,562
  -14,470
  -16,521
  -18,711
  -21,037
  -23,495
  -26,084
  -28,801
  -31,645
  -34,616
  -37,713
  -40,939
  -44,295
  -47,785
New CAPEX, $m
  -319
  -425
  -617
  -867
  -1,180
  -1,560
  -2,007
  -2,520
  -3,094
  -3,721
  -4,393
  -5,099
  -5,830
  -6,575
  -7,326
  -8,074
  -8,814
  -9,542
  -10,254
  -10,950
  -11,629
  -12,293
  -12,944
  -13,585
  -14,220
  -14,853
  -15,488
  -16,129
  -16,781
  -17,449
  -18,136
Cash from investing activities, $m
  -109
  -567
  -843
  -1,217
  -1,703
  -2,319
  -3,078
  -3,993
  -5,071
  -6,316
  -7,733
  -9,317
  -11,068
  -12,979
  -15,045
  -17,258
  -19,613
  -22,104
  -24,724
  -27,471
  -30,340
  -33,330
  -36,439
  -39,669
  -43,021
  -46,498
  -50,104
  -53,842
  -57,720
  -61,744
  -65,921
Free cash flow, $m
  72
  -2,550
  -3,790
  -5,645
  -8,155
  -11,454
  -15,676
  -20,950
  -27,392
  -35,105
  -44,172
  -54,654
  -66,595
  -80,017
  -94,927
  -111,315
  -129,161
  -148,440
  -169,117
  -191,161
  -214,537
  -239,218
  -265,179
  -292,402
  -320,878
  -350,603
  -381,585
  -413,839
  -447,388
  -482,266
  -518,513
Issuance/(repayment) of debt, $m
  0
  -854
  615
  864
  1,176
  1,554
  2,000
  2,512
  3,083
  3,709
  4,378
  5,082
  5,810
  6,553
  7,301
  8,046
  8,784
  9,509
  10,219
  10,912
  11,589
  12,250
  12,899
  13,538
  14,171
  14,802
  15,435
  16,074
  16,724
  17,389
  18,074
Issuance/(repurchase) of shares, $m
  0
  3,603
  3,465
  5,190
  7,535
  10,634
  14,621
  19,625
  25,766
  33,150
  41,863
  51,975
  63,532
  76,562
  91,077
  107,072
  124,530
  143,426
  163,729
  185,407
  208,427
  232,759
  258,378
  285,264
  313,406
  342,799
  373,447
  405,364
  438,571
  473,098
  508,984
Cash from financing (excl. dividends), $m  
  -2
  2,749
  4,080
  6,054
  8,711
  12,188
  16,621
  22,137
  28,849
  36,859
  46,241
  57,057
  69,342
  83,115
  98,378
  115,118
  133,314
  152,935
  173,948
  196,319
  220,016
  245,009
  271,277
  298,802
  327,577
  357,601
  388,882
  421,438
  455,295
  490,487
  527,058
Total cash flow (excl. dividends), $m
  71
  200
  291
  408
  556
  735
  946
  1,187
  1,458
  1,753
  2,070
  2,402
  2,747
  3,098
  3,451
  3,804
  4,153
  4,495
  4,831
  5,159
  5,479
  5,791
  6,098
  6,400
  6,699
  6,998
  7,297
  7,599
  7,906
  8,221
  8,544
Retained Cash Flow (-), $m
  240
  -3,603
  -3,465
  -5,190
  -7,535
  -10,634
  -14,621
  -19,625
  -25,766
  -33,150
  -41,863
  -51,975
  -63,532
  -76,562
  -91,077
  -107,072
  -124,530
  -143,426
  -163,729
  -185,407
  -208,427
  -232,759
  -258,378
  -285,264
  -313,406
  -342,799
  -373,447
  -405,364
  -438,571
  -473,098
  -508,984
Prev. year cash balance distribution, $m
 
  502
  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
 
  -2,902
  -3,175
  -4,781
  -6,979
  -9,900
  -13,676
  -18,438
  -24,309
  -31,397
  -39,794
  -49,572
  -60,785
  -73,465
  -87,626
  -103,268
  -120,377
  -138,930
  -158,898
  -180,249
  -202,949
  -226,968
  -252,280
  -278,864
  -306,706
  -335,801
  -366,150
  -397,765
  -430,665
  -464,877
  -500,440
Discount rate, %
 
  13.90
  14.60
  15.32
  16.09
  16.90
  17.74
  18.63
  19.56
  20.54
  21.56
  22.64
  23.77
  24.96
  26.21
  27.52
  28.90
  30.34
  31.86
  33.45
  35.12
  36.88
  38.72
  40.66
  42.69
  44.83
  47.07
  49.42
  51.90
  54.49
  57.21
PV of cash for distribution, $m
 
  -2,547
  -2,418
  -3,117
  -3,843
  -4,536
  -5,133
  -5,577
  -5,823
  -5,845
  -5,647
  -5,251
  -4,702
  -4,055
  -3,367
  -2,693
  -2,073
  -1,536
  -1,094
  -749
  -493
  -311
  -188
  -109
  -60
  -32
  -16
  -8
  -4
  -2
  -1
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

Sanchez Energy Corporation is an independent exploration and production company. The Company is focused on the acquisition and development of the United States onshore unconventional oil and natural gas resources. The Company primarily focuses on the Eagle Ford Shale in South Texas. The Company also holds an undeveloped acreage position in the Tuscaloosa Marine Shale (TMS) in Mississippi and Louisiana. As of December 31, 2016, it had assembled approximately 278,000 net leasehold acres in the Eagle Ford Shale. As of December 31, 2016, it had 473 net wells in the Eagle Ford Shale area. In its Catarina area, the Company had approximately 106,000 net acres in Dimmit, LaSalle and Webb Counties, Texas, at December 31, 2016. In its Maverick area, it had approximately 100,000 net acres in Dimmit, Frio, LaSalle, Zavala and McMullen Counties, Texas, at December 31, 2016. In its Javelina area, it had approximately 39,500 net acres in LaSalle and Webb Counties, Texas, at December 31, 2016.

FINANCIAL RATIOS  of  Sanchez Energy (SN)

Valuation Ratios
P/E Ratio -1.4
Price to Sales 0.8
Price to Book -0.5
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow -2.6
Growth Rates
Sales Growth Rate -9.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -52%
Cap. Spend. - 3 Yr. Gr. Rate -7.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -246.1%
Total Debt to Equity -246.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -9.8%
Ret/ On Assets - 3 Yr. Avg. -22.7%
Return On Total Capital -22.7%
Ret/ On T. Cap. - 3 Yr. Avg. -32.2%
Return On Equity 44.6%
Return On Equity - 3 Yr. Avg. -164.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 57.3%
Gross Margin - 3 Yr. Avg. 66.3%
EBITDA Margin 5.6%
EBITDA Margin - 3 Yr. Avg. -49.1%
Operating Margin -44.5%
Oper. Margin - 3 Yr. Avg. -123.3%
Pre-Tax Margin -59.2%
Pre-Tax Margin - 3 Yr. Avg. -122.7%
Net Profit Margin -59.6%
Net Profit Margin - 3 Yr. Avg. -122.9%
Effective Tax Rate -0.8%
Eff/ Tax Rate - 3 Yr. Avg. 10.7%
Payout Ratio -1.6%

SN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SN stock intrinsic value calculation we used $431 million for the last fiscal year's total revenue generated by Sanchez Energy. The default revenue input number comes from 2016 income statement of Sanchez 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 SN 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 13.9%, whose default value for SN is calculated based on our internal credit rating of Sanchez 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 Sanchez 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 SN stock the variable cost ratio is equal to 413.2%.

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 SN 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 7% for Sanchez Energy.

Corporate tax rate of 27% is the nominal tax rate for Sanchez 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 SN 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 SN are equal to 164.2%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Sanchez 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 SN is equal to -26.9%. 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 - $-696 million for Sanchez 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 85.714 million for Sanchez 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 Sanchez Energy at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

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▶ Natural Gas Stocks: Buy Them Don't Trade Them   [Dec-28-17 03:53PM  TheStreet.com]
▶ Which Energy Stocks Were Top Gainers Last Week?   [Dec-26-17 03:20PM  Market Realist]
▶ Crude Oil Prices Went on a Wild Ride in 2017   [Dec-16-17 04:34PM  Motley Fool]
▶ OPECs Crude Oil Production Hit the Lowest Level since May   [Dec-14-17 12:40PM  Market Realist]
▶ Forecasting Anadarko Petroleums Stock Price   [Dec-12-17 03:05PM  Market Realist]
▶ Is OPEC Underestimating US Crude Oil Production?   [Dec-07-17 11:10AM  Market Realist]
▶ Analyzing Libyas Crude Oil Production   [09:17AM  Market Realist]
▶ US Crude Oil Production: Bearish Driver for Oil Prices   [Nov-16-17 10:25AM  Market Realist]
▶ Will US Gasoline Demand Help Oil Bulls or Bears?   [Nov-15-17 08:15AM  Market Realist]
▶ US Distillate Inventories Are at 32-Month Low   [Nov-09-17 09:55AM  Market Realist]
▶ US Gasoline Inventories Hit 3-Year Low   [08:23AM  Market Realist]
▶ Sanchez Energy reports 3Q loss   [Nov-06-17 05:39AM  Associated Press]
▶ OPECs Crude Oil Production Fell in October   [Nov-01-17 09:12AM  Market Realist]
▶ 3 Things That Could Kill the New Bull Market in Oil   [Oct-03-17 03:37PM  Motley Fool]
▶ A Look at the Trends in Sanchez Energys Implied Volatility   [Oct-02-17 10:40AM  Market Realist]
▶ What Are Analysts Saying about Sanchez Energy Stock?   [Sep-29-17 06:15PM  Market Realist]
▶ The Quiet Bull Market in Oil   [03:05PM  Motley Fool]
▶ Will US Crude Oil Futures Fall from 4-Month Highs?   [Sep-25-17 10:26AM  Market Realist]
▶ Eagle Ford Sees Surge In Production   [Sep-23-17 07:00PM  Oilprice.com]
▶ Inventories Are 25% above 5-Year Average   [Sep-21-17 11:36AM  Market Realist]
▶ Sanchez Energy Announces Closing of Javelina Asset Sale   [Sep-19-17 05:30PM  GlobeNewswire]
▶ 30-Day Trading Ranges for JONE, HES, SN, DNR, and AREX   [Sep-15-17 09:11AM  Market Realist]
▶ Is Sanchez Energy Repeating an Old Debt Mistake?   [Sep-14-17 06:06PM  Market Realist]
▶ Why August Was a Bad Month for Oil Drillers   [Sep-11-17 04:05PM  Motley Fool]
▶ Sanchez Energy Announces Settlement of Derivative Lawsuit   [Sep-06-17 05:00PM  GlobeNewswire]
▶ US Gasoline Futures Hit 2-Year High despite Inventory Rise   [Sep-01-17 05:10PM  Market Realist]
▶ Will US Crude Oil Futures Rise above Key Moving Averages?   [Aug-29-17 03:36PM  Market Realist]
▶ Oil and Gas Stock Roundup: The Calm Before the Storm   [Aug-26-17 12:47PM  Motley Fool]
▶ How Supply Outages Affect Crude Oil Prices   [Aug-16-17 09:51AM  Market Realist]
Financial statements of SN
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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