Intrinsic value of Sanchez Energy - SN

Previous Close

$6.29

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-79%

Previous close

$6.29

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-79%

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

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

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 0.4

 

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
  -2,047
  -3,162
  -4,729
  -6,861
  -9,680
  -13,308
  -17,863
  -23,455
  -30,182
  -38,122
  -47,338
  -57,876
  -69,760
  -83,000
  -97,594
  -113,525
  -130,771
  -149,305
  -169,095
  -190,113
  -212,331
  -235,726
  -260,280
  -285,982
  -312,827
  -340,820
  -369,973
  -400,304
  -431,842
  -464,621
Interest expense (income), $m
  119
  120
  111
  182
  281
  416
  595
  824
  1,113
  1,467
  1,894
  2,397
  2,981
  3,649
  4,402
  5,241
  6,165
  7,175
  8,268
  9,442
  10,696
  12,028
  13,436
  14,918
  16,474
  18,103
  19,804
  21,578
  23,425
  25,347
  27,346
Earnings before tax, $m
  -255
  -2,280
  -3,448
  -5,172
  -7,522
  -10,632
  -14,639
  -19,676
  -25,866
  -33,319
  -42,125
  -52,354
  -64,059
  -77,268
  -91,994
  -108,234
  -125,971
  -145,181
  -165,833
  -187,893
  -211,328
  -236,107
  -262,204
  -289,599
  -318,279
  -348,238
  -379,481
  -412,020
  -445,877
  -481,081
  -517,673
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
  -3,448
  -5,172
  -7,522
  -10,632
  -14,639
  -19,676
  -25,866
  -33,319
  -42,125
  -52,354
  -64,059
  -77,268
  -91,994
  -108,234
  -125,971
  -145,181
  -165,833
  -187,893
  -211,328
  -236,107
  -262,204
  -289,599
  -318,279
  -348,238
  -379,481
  -412,020
  -445,877
  -481,081
  -517,673

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
  2,059
  3,180
  4,756
  6,901
  9,736
  13,385
  17,967
  23,592
  30,357
  38,344
  47,614
  58,213
  70,166
  83,484
  98,162
  114,186
  131,532
  150,174
  170,080
  191,220
  213,567
  237,098
  261,795
  287,646
  314,648
  342,804
  372,126
  402,634
  434,355
  467,325
Adjusted assets (=assets-cash), $m
  784
  2,059
  3,180
  4,756
  6,901
  9,736
  13,385
  17,967
  23,592
  30,357
  38,344
  47,614
  58,213
  70,166
  83,484
  98,162
  114,186
  131,532
  150,174
  170,080
  191,220
  213,567
  237,098
  261,795
  287,646
  314,648
  342,804
  372,126
  402,634
  434,355
  467,325
Revenue / Adjusted assets
  0.550
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
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
  -69
  -107
  -159
  -231
  -326
  -448
  -602
  -790
  -1,017
  -1,285
  -1,595
  -1,950
  -2,351
  -2,797
  -3,288
  -3,825
  -4,406
  -5,031
  -5,698
  -6,406
  -7,155
  -7,943
  -8,770
  -9,636
  -10,541
  -11,484
  -12,466
  -13,488
  -14,551
  -15,655
Total debt, $m
  1,713
  1,584
  2,593
  4,012
  5,942
  8,494
  11,778
  15,901
  20,964
  27,052
  34,240
  42,584
  52,122
  62,880
  74,866
  88,077
  102,498
  118,110
  134,887
  152,803
  171,829
  191,942
  213,120
  235,347
  258,613
  282,914
  308,255
  334,645
  362,102
  390,651
  420,324
Total liabilities, $m
  1,982
  1,853
  2,862
  4,281
  6,211
  8,763
  12,047
  16,170
  21,233
  27,321
  34,509
  42,853
  52,391
  63,149
  75,135
  88,346
  102,767
  118,379
  135,156
  153,072
  172,098
  192,211
  213,389
  235,616
  258,882
  283,183
  308,524
  334,914
  362,371
  390,920
  420,593
Total equity, $m
  -696
  206
  318
  476
  690
  974
  1,339
  1,797
  2,359
  3,036
  3,834
  4,761
  5,821
  7,017
  8,348
  9,816
  11,419
  13,153
  15,017
  17,008
  19,122
  21,357
  23,710
  26,180
  28,765
  31,465
  34,280
  37,213
  40,263
  43,436
  46,733
Total liabilities and equity, $m
  1,286
  2,059
  3,180
  4,757
  6,901
  9,737
  13,386
  17,967
  23,592
  30,357
  38,343
  47,614
  58,212
  70,166
  83,483
  98,162
  114,186
  131,532
  150,173
  170,080
  191,220
  213,568
  237,099
  261,796
  287,647
  314,648
  342,804
  372,127
  402,634
  434,356
  467,326
Debt-to-equity ratio
  -2.461
  7.690
  8.150
  8.430
  8.610
  8.720
  8.800
  8.850
  8.890
  8.910
  8.930
  8.940
  8.950
  8.960
  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
  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
  -3,448
  -5,172
  -7,522
  -10,632
  -14,639
  -19,676
  -25,866
  -33,319
  -42,125
  -52,354
  -64,059
  -77,268
  -91,994
  -108,234
  -125,971
  -145,181
  -165,833
  -187,893
  -211,328
  -236,107
  -262,204
  -289,599
  -318,279
  -348,238
  -379,481
  -412,020
  -445,877
  -481,081
  -517,673
Depreciation, amort., depletion, $m
  160
  113
  175
  262
  380
  536
  736
  988
  1,298
  1,670
  2,109
  2,619
  3,202
  3,860
  4,592
  5,400
  6,281
  7,235
  8,261
  9,356
  10,518
  11,748
  13,042
  14,401
  15,823
  17,308
  18,857
  20,470
  22,148
  23,893
  25,706
Funds from operations, $m
  176
  -2,167
  -3,273
  -4,910
  -7,142
  -10,096
  -13,903
  -18,688
  -24,569
  -31,649
  -40,015
  -49,735
  -60,857
  -73,408
  -87,402
  -102,834
  -119,690
  -137,946
  -157,573
  -178,538
  -200,810
  -224,360
  -249,162
  -275,198
  -302,456
  -330,930
  -360,624
  -391,551
  -423,729
  -457,189
  -491,967
Change in working capital, $m
  -5
  -26
  -38
  -53
  -72
  -95
  -122
  -153
  -188
  -227
  -268
  -311
  -355
  -400
  -446
  -492
  -537
  -581
  -624
  -667
  -708
  -749
  -788
  -827
  -866
  -905
  -943
  -982
  -1,022
  -1,063
  -1,104
Cash from operations, $m
  181
  -2,141
  -3,235
  -4,857
  -7,070
  -10,001
  -13,780
  -18,534
  -24,380
  -31,422
  -39,748
  -49,425
  -60,502
  -73,008
  -86,956
  -102,343
  -119,154
  -137,365
  -156,948
  -177,871
  -200,101
  -223,611
  -248,374
  -274,371
  -301,590
  -330,026
  -359,681
  -390,568
  -422,707
  -456,126
  -490,862
Maintenance CAPEX, $m
  0
  -71
  -113
  -175
  -262
  -380
  -536
  -736
  -988
  -1,298
  -1,670
  -2,109
  -2,619
  -3,202
  -3,860
  -4,592
  -5,400
  -6,281
  -7,235
  -8,261
  -9,356
  -10,518
  -11,748
  -13,042
  -14,401
  -15,823
  -17,308
  -18,857
  -20,470
  -22,148
  -23,893
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
  -496
  -730
  -1,042
  -1,442
  -1,940
  -2,543
  -3,256
  -4,082
  -5,019
  -6,063
  -7,208
  -8,449
  -9,777
  -11,186
  -12,666
  -14,214
  -15,823
  -17,489
  -19,211
  -20,985
  -22,811
  -24,692
  -26,627
  -28,621
  -30,676
  -32,796
  -34,986
  -37,251
  -39,597
  -42,029
Free cash flow, $m
  72
  -2,636
  -3,966
  -5,899
  -8,512
  -11,940
  -16,323
  -21,791
  -28,463
  -36,441
  -45,811
  -56,633
  -68,951
  -82,785
  -98,141
  -115,009
  -133,367
  -153,188
  -174,437
  -197,081
  -221,086
  -246,422
  -273,065
  -300,998
  -330,211
  -360,701
  -392,477
  -425,554
  -459,958
  -495,723
  -532,890
Issuance/(repayment) of debt, $m
  0
  -129
  1,010
  1,418
  1,930
  2,552
  3,284
  4,124
  5,062
  6,089
  7,188
  8,343
  9,539
  10,758
  11,986
  13,210
  14,422
  15,612
  16,777
  17,915
  19,026
  20,113
  21,178
  22,227
  23,266
  24,302
  25,340
  26,390
  27,457
  28,549
  29,673
Issuance/(repurchase) of shares, $m
  0
  3,182
  3,560
  5,330
  7,736
  10,915
  15,004
  20,134
  26,429
  33,995
  42,923
  53,281
  65,119
  78,463
  93,326
  109,702
  127,574
  146,916
  167,697
  189,884
  213,442
  238,342
  264,557
  292,069
  320,864
  350,938
  382,297
  414,952
  448,928
  484,254
  520,970
Cash from financing (excl. dividends), $m  
  -2
  3,053
  4,570
  6,748
  9,666
  13,467
  18,288
  24,258
  31,491
  40,084
  50,111
  61,624
  74,658
  89,221
  105,312
  122,912
  141,996
  162,528
  184,474
  207,799
  232,468
  258,455
  285,735
  314,296
  344,130
  375,240
  407,637
  441,342
  476,385
  512,803
  550,643
Total cash flow (excl. dividends), $m
  71
  416
  604
  849
  1,155
  1,527
  1,965
  2,467
  3,029
  3,643
  4,300
  4,992
  5,707
  6,436
  7,171
  7,903
  8,628
  9,340
  10,037
  10,718
  11,383
  12,033
  12,670
  13,298
  13,919
  14,539
  15,160
  15,788
  16,427
  17,080
  17,752
Retained Cash Flow (-), $m
  240
  -3,182
  -3,560
  -5,330
  -7,736
  -10,915
  -15,004
  -20,134
  -26,429
  -33,995
  -42,923
  -53,281
  -65,119
  -78,463
  -93,326
  -109,702
  -127,574
  -146,916
  -167,697
  -189,884
  -213,442
  -238,342
  -264,557
  -292,069
  -320,864
  -350,938
  -382,297
  -414,952
  -448,928
  -484,254
  -520,970
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
 
  -2,766
  -2,956
  -4,481
  -6,581
  -9,389
  -13,039
  -17,667
  -23,400
  -30,353
  -38,623
  -48,290
  -59,412
  -72,027
  -86,155
  -101,799
  -118,946
  -137,576
  -157,660
  -179,166
  -202,059
  -226,309
  -251,887
  -278,771
  -306,944
  -336,399
  -367,136
  -399,164
  -432,501
  -467,174
  -503,217
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
 
  -2,428
  -2,251
  -2,922
  -3,623
  -4,301
  -4,894
  -5,344
  -5,605
  -5,651
  -5,480
  -5,115
  -4,595
  -3,975
  -3,311
  -2,655
  -2,049
  -1,521
  -1,086
  -745
  -491
  -310
  -188
  -109
  -60
  -32
  -16
  -8
  -4
  -2
  -1
Current shareholders' claim on cash, %
  100
  50.0
  2.7
  0.2
  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
  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, an independent exploration and production company, engages in the exploration, acquisition, and development of oil and natural gas resources in the onshore U.S. Gulf Coast. It holds a 93% working interest in the Eagle Ford Shale, which consists of approximately 200,000 net leasehold acres in the oil and condensate, or black oil and volatile oil located in South Texas; and a 65% working interest in the Tuscaloosa Marine Shale covering an area of approximately 62,000 net leasehold acres situated in Mississippi and Louisiana. The company was founded in 2011 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Sanchez Energy (SN)

Valuation Ratios
P/E Ratio -1.6
Price to Sales 1
Price to Book -0.6
Price to Tangible Book
Price to Cash Flow 2.3
Price to Free Cash Flow -3
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 10 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 -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 - $-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 65.651 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 $0.4 billion.

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COMPANY NEWS

▶ Short Interest Trends in Whiting Petroleum Stock   [Jul-26-17 07:41AM  Market Realist]
▶ Cabot Oil & Gass Production Expectations for 2017   [Jul-19-17 10:35AM  Market Realist]
▶ US Crude Oil Production Near 2-Year High   [Jul-13-17 12:35PM  Market Realist]
▶ Key Support and Resistance Level for US Crude Oil Futures   [Jul-10-17 01:21PM  Market Realist]
▶ OPECs Crude Oil Production Hit a 2017 High   [Jul-03-17 12:35PM  Market Realist]
▶ Is the Permian Still Sizzling?   [Jun-26-17 03:35PM  Market Realist]
▶ Sanchez Energy sells 21,000 acres of Eagle Ford land   [Jun-22-17 04:40PM  American City Business Journals]
▶ Analyzing US Crude Oil Output   [01:05PM  Market Realist]
▶ Shale Stocks Slammed As Crude Continues to Come Unglued   [Jun-21-17 05:00PM  Motley Fool]
▶ Crude Oil Storage in Tankers Hit a 2017 High   [Jun-20-17 10:26AM  Market Realist]
▶ Which Energy Stocks Rose the Most Last Week?   [Jun-19-17 02:17PM  Market Realist]
▶ Why Finisar, Impinj, and Sanchez Energy Jumped Today   [Jun-16-17 04:39PM  Motley Fool]
▶ Why Did US Crude Oil Prices Hit a 7-Month Low?   [Jun-15-17 11:04AM  Market Realist]
▶ Will US Crude Oil Inventories Fall for the Ninth Week?   [Jun-07-17 10:55AM  Market Realist]
▶ Asias Crude Oil Imports and Demand Could Drive Oil Prices   [Jun-01-17 11:05AM  Market Realist]
▶ Top 5 Small-Cap Oil Stocks for 2017   [06:00AM  Investopedia]
▶ ETFs with exposure to Sanchez Energy Corp. : May 31, 2017   [May-31-17 12:47PM  Capital Cube]
▶ Houston energy co. switches name to reflect midstream focus   [May-30-17 09:35AM  American City Business Journals]
▶ US Gasoline Inventories Are above Their 5-Year Range   [May-18-17 11:35AM  Market Realist]
▶ Irans Crude Oil Production Could Be the Wild Card   [May-17-17 07:40AM  Market Realist]
▶ Are Shale Drillers Making an $84 Billion Mistake?   [May-14-17 11:00AM  Motley Fool]
▶ Gasoline Inventories Impact Crude Oil Prices   [10:12AM  Market Realist]
▶ Uh-Oh, OPEC: Top Shale Play Vows Big Output Boost Even With Sub-$50 Oil   [May-09-17 05:02PM  Investor's Business Daily]
▶ Sanchez Energy misses 1Q profit forecasts   [10:27AM  Associated Press]
▶ These 5 Oil Stocks Got Blasted in April   [May-08-17 12:00PM  Motley Fool]
▶ OECDs Crude Oil Inventories Impact Crude Oil Futures   [Apr-25-17 07:40AM  Market Realist]
▶ US Refinery Demand Is near Record Levels   [Apr-20-17 09:53AM  Market Realist]
▶ Gasoline Futures Hit 20-Month High   [Apr-13-17 08:55AM  Market Realist]
▶ Will Crude Oil Prices Hit $60 per Barrel in 2Q17?   [Apr-05-17 10:05AM  Market Realist]
▶ The Biggest Texas Oil Fields Producing Today   [Mar-31-17 12:30PM  Motley Fool]
▶ US Gasoline Inventories Are 5% below Their All-Time High   [Mar-16-17 09:07AM  Market Realist]
▶ Producers Production Cut Deal: Will the Extension Happen?   [Mar-14-17 11:05AM  Market Realist]
▶ These Upstream Stocks Lead in Short Interest   [Mar-13-17 11:35AM  Market Realist]
▶ Sanchez Energy Announces Closing of Comanche Transaction   [Mar-01-17 05:17PM  GlobeNewswire]
Stock chart of SN Financial statements of SN Annual reports 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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