Intrinsic value of Sanchez Energy - SN

Previous Close

$4.66

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

0%

Previous close

$4.66

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

0%

*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
  58.60
  53.24
  48.42
  44.07
  40.17
  36.65
  33.49
  30.64
  28.07
  25.77
  23.69
  21.82
  20.14
  18.62
  17.26
  16.04
  14.93
  13.94
  13.05
  12.24
  11.52
  10.86
  10.28
  9.75
  9.28
  8.85
  8.46
  8.12
  7.81
  7.52
Revenue, $m
  431
  684
  1,047
  1,555
  2,240
  3,140
  4,290
  5,727
  7,481
  9,581
  12,050
  14,905
  18,157
  21,814
  25,876
  30,343
  35,209
  40,466
  46,107
  52,121
  58,501
  65,239
  72,327
  79,761
  87,538
  95,657
  104,121
  112,933
  122,100
  131,630
  141,534
Variable operating expenses, $m
 
  2,824
  4,328
  6,424
  9,255
  12,973
  17,727
  23,663
  30,913
  39,591
  49,791
  61,587
  75,025
  90,134
  106,921
  125,377
  145,482
  167,206
  190,513
  215,365
  241,727
  269,566
  298,854
  329,571
  361,706
  395,256
  430,228
  466,639
  504,515
  543,894
  584,819
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
  2,824
  4,328
  6,424
  9,255
  12,973
  17,727
  23,663
  30,913
  39,591
  49,791
  61,587
  75,025
  90,134
  106,921
  125,377
  145,482
  167,206
  190,513
  215,365
  241,727
  269,566
  298,854
  329,571
  361,706
  395,256
  430,228
  466,639
  504,515
  543,894
  584,819
Operating income, $m
  -192
  -2,141
  -3,281
  -4,869
  -7,015
  -9,833
  -13,437
  -17,936
  -23,431
  -30,009
  -37,741
  -46,682
  -56,868
  -68,320
  -81,044
  -95,034
  -110,274
  -126,740
  -144,406
  -163,244
  -183,226
  -204,327
  -226,527
  -249,811
  -274,168
  -299,599
  -326,107
  -353,706
  -382,416
  -412,264
  -443,285
EBITDA, $m
  -32
  -1,916
  -2,937
  -4,359
  -6,280
  -8,802
  -12,028
  -16,056
  -20,974
  -26,863
  -33,784
  -41,787
  -50,905
  -61,157
  -72,547
  -85,070
  -98,711
  -113,451
  -129,265
  -146,127
  -164,014
  -182,903
  -202,775
  -223,617
  -245,421
  -268,185
  -291,914
  -316,619
  -342,318
  -369,037
  -396,805
Interest expense (income), $m
  119
  120
  59
  101
  159
  238
  341
  473
  637
  838
  1,079
  1,361
  1,688
  2,061
  2,480
  2,945
  3,457
  4,014
  4,616
  5,262
  5,951
  6,682
  7,454
  8,266
  9,117
  10,008
  10,938
  11,908
  12,917
  13,967
  15,059
Earnings before tax, $m
  -255
  -2,261
  -3,340
  -4,970
  -7,174
  -10,071
  -13,778
  -18,409
  -24,068
  -30,847
  -38,820
  -48,043
  -58,556
  -70,381
  -83,524
  -97,979
  -113,731
  -130,754
  -149,023
  -168,507
  -189,178
  -211,010
  -233,981
  -258,076
  -283,286
  -309,607
  -337,045
  -365,614
  -395,333
  -426,231
  -458,344
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
  -2,261
  -3,340
  -4,970
  -7,174
  -10,071
  -13,778
  -18,409
  -24,068
  -30,847
  -38,820
  -48,043
  -58,556
  -70,381
  -83,524
  -97,979
  -113,731
  -130,754
  -149,023
  -168,507
  -189,178
  -211,010
  -233,981
  -258,076
  -283,286
  -309,607
  -337,045
  -365,614
  -395,333
  -426,231
  -458,344

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
  1,243
  1,905
  2,827
  4,072
  5,708
  7,800
  10,412
  13,602
  17,421
  21,909
  27,100
  33,013
  39,661
  47,048
  55,169
  64,016
  73,575
  83,830
  94,766
  106,366
  118,616
  131,503
  145,019
  159,160
  173,922
  189,311
  205,333
  221,999
  239,327
  257,335
Adjusted assets (=assets-cash), $m
  784
  1,243
  1,905
  2,827
  4,072
  5,708
  7,800
  10,412
  13,602
  17,421
  21,909
  27,100
  33,013
  39,661
  47,048
  55,169
  64,016
  73,575
  83,830
  94,766
  106,366
  118,616
  131,503
  145,019
  159,160
  173,922
  189,311
  205,333
  221,999
  239,327
  257,335
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
  1,122
  1,720
  2,553
  3,678
  5,155
  7,044
  9,403
  12,284
  15,733
  19,786
  24,474
  29,814
  35,818
  42,489
  49,823
  57,813
  66,445
  75,707
  85,583
  96,059
  107,122
  118,760
  130,967
  143,737
  157,069
  170,967
  185,436
  200,487
  216,136
  232,399
Working capital, $m
  386
  -184
  -282
  -418
  -603
  -845
  -1,154
  -1,541
  -2,012
  -2,577
  -3,242
  -4,009
  -4,884
  -5,868
  -6,961
  -8,162
  -9,471
  -10,885
  -12,403
  -14,021
  -15,737
  -17,549
  -19,456
  -21,456
  -23,548
  -25,732
  -28,009
  -30,379
  -32,845
  -35,408
  -38,073
Total debt, $m
  1,713
  850
  1,445
  2,275
  3,396
  4,868
  6,751
  9,102
  11,973
  15,410
  19,450
  24,121
  29,443
  35,426
  42,074
  49,383
  57,345
  65,948
  75,178
  85,021
  95,460
  106,485
  118,084
  130,249
  142,975
  156,261
  170,111
  184,530
  199,530
  215,125
  231,332
Total liabilities, $m
  1,982
  1,119
  1,714
  2,544
  3,665
  5,137
  7,020
  9,371
  12,242
  15,679
  19,719
  24,390
  29,712
  35,695
  42,343
  49,652
  57,614
  66,217
  75,447
  85,290
  95,729
  106,754
  118,353
  130,518
  143,244
  156,530
  170,380
  184,799
  199,799
  215,394
  231,601
Total equity, $m
  -696
  124
  190
  283
  407
  571
  780
  1,041
  1,360
  1,742
  2,191
  2,710
  3,301
  3,966
  4,705
  5,517
  6,402
  7,357
  8,383
  9,477
  10,637
  11,862
  13,150
  14,502
  15,916
  17,392
  18,931
  20,533
  22,200
  23,933
  25,733
Total liabilities and equity, $m
  1,286
  1,243
  1,904
  2,827
  4,072
  5,708
  7,800
  10,412
  13,602
  17,421
  21,910
  27,100
  33,013
  39,661
  47,048
  55,169
  64,016
  73,574
  83,830
  94,767
  106,366
  118,616
  131,503
  145,020
  159,160
  173,922
  189,311
  205,332
  221,999
  239,327
  257,334
Debt-to-equity ratio
  -2.461
  6.840
  7.590
  8.050
  8.340
  8.530
  8.660
  8.740
  8.800
  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
  8.990
  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
  -2,261
  -3,340
  -4,970
  -7,174
  -10,071
  -13,778
  -18,409
  -24,068
  -30,847
  -38,820
  -48,043
  -58,556
  -70,381
  -83,524
  -97,979
  -113,731
  -130,754
  -149,023
  -168,507
  -189,178
  -211,010
  -233,981
  -258,076
  -283,286
  -309,607
  -337,045
  -365,614
  -395,333
  -426,231
  -458,344
Depreciation, amort., depletion, $m
  160
  224
  344
  511
  736
  1,031
  1,409
  1,881
  2,457
  3,147
  3,957
  4,895
  5,963
  7,164
  8,498
  9,965
  11,563
  13,289
  15,141
  17,117
  19,212
  21,424
  23,752
  26,193
  28,747
  31,414
  34,193
  37,087
  40,097
  43,227
  46,480
Funds from operations, $m
  176
  -2,036
  -2,996
  -4,460
  -6,439
  -9,040
  -12,369
  -16,528
  -21,612
  -27,701
  -34,863
  -43,149
  -52,594
  -63,218
  -75,026
  -88,015
  -102,168
  -117,465
  -133,881
  -151,390
  -169,966
  -189,585
  -210,229
  -231,883
  -254,538
  -278,193
  -302,852
  -328,527
  -355,235
  -383,004
  -411,864
Change in working capital, $m
  -5
  -68
  -98
  -136
  -184
  -242
  -310
  -386
  -472
  -565
  -664
  -768
  -875
  -984
  -1,093
  -1,202
  -1,309
  -1,414
  -1,517
  -1,618
  -1,716
  -1,812
  -1,907
  -2,000
  -2,092
  -2,184
  -2,277
  -2,370
  -2,466
  -2,564
  -2,664
Cash from operations, $m
  181
  -1,968
  -2,898
  -4,323
  -6,255
  -8,798
  -12,059
  -16,142
  -21,140
  -27,136
  -34,199
  -42,381
  -51,719
  -62,234
  -73,934
  -86,813
  -100,859
  -116,051
  -132,364
  -149,772
  -168,250
  -187,773
  -208,322
  -229,883
  -252,446
  -276,009
  -300,575
  -326,156
  -352,770
  -380,440
  -409,200
Maintenance CAPEX, $m
  0
  -142
  -224
  -344
  -511
  -736
  -1,031
  -1,409
  -1,881
  -2,457
  -3,147
  -3,957
  -4,895
  -5,963
  -7,164
  -8,498
  -9,965
  -11,563
  -13,289
  -15,141
  -17,117
  -19,212
  -21,424
  -23,752
  -26,193
  -28,747
  -31,414
  -34,193
  -37,087
  -40,097
  -43,227
New CAPEX, $m
  -319
  -415
  -598
  -833
  -1,125
  -1,477
  -1,889
  -2,359
  -2,881
  -3,449
  -4,054
  -4,687
  -5,340
  -6,004
  -6,671
  -7,334
  -7,990
  -8,633
  -9,262
  -9,876
  -10,476
  -11,063
  -11,639
  -12,207
  -12,770
  -13,332
  -13,897
  -14,469
  -15,052
  -15,648
  -16,263
Cash from investing activities, $m
  -109
  -557
  -822
  -1,177
  -1,636
  -2,213
  -2,920
  -3,768
  -4,762
  -5,906
  -7,201
  -8,644
  -10,235
  -11,967
  -13,835
  -15,832
  -17,955
  -20,196
  -22,551
  -25,017
  -27,593
  -30,275
  -33,063
  -35,959
  -38,963
  -42,079
  -45,311
  -48,662
  -52,139
  -55,745
  -59,490
Free cash flow, $m
  72
  -2,525
  -3,720
  -5,500
  -7,890
  -11,011
  -14,980
  -19,909
  -25,901
  -33,041
  -41,399
  -51,025
  -61,954
  -74,201
  -87,768
  -102,645
  -118,813
  -136,246
  -154,915
  -174,790
  -195,842
  -218,047
  -241,385
  -265,842
  -291,410
  -318,089
  -345,887
  -374,819
  -404,908
  -436,186
  -468,690
Issuance/(repayment) of debt, $m
  0
  -863
  596
  830
  1,121
  1,472
  1,883
  2,351
  2,871
  3,437
  4,040
  4,671
  5,322
  5,983
  6,648
  7,309
  7,962
  8,603
  9,230
  9,842
  10,440
  11,025
  11,599
  12,165
  12,726
  13,287
  13,850
  14,419
  15,000
  15,595
  16,208
Issuance/(repurchase) of shares, $m
  0
  3,583
  3,406
  5,063
  7,299
  10,234
  13,987
  18,670
  24,387
  31,229
  39,269
  48,562
  59,148
  71,046
  84,263
  98,792
  114,615
  131,710
  150,048
  169,600
  190,338
  212,235
  235,270
  259,428
  284,700
  311,083
  338,584
  367,216
  397,000
  427,964
  460,145
Cash from financing (excl. dividends), $m  
  -2
  2,720
  4,002
  5,893
  8,420
  11,706
  15,870
  21,021
  27,258
  34,666
  43,309
  53,233
  64,470
  77,029
  90,911
  106,101
  122,577
  140,313
  159,278
  179,442
  200,778
  223,260
  246,869
  271,593
  297,426
  324,370
  352,434
  381,635
  412,000
  443,559
  476,353
Total cash flow (excl. dividends), $m
  71
  195
  282
  392
  530
  696
  890
  1,111
  1,357
  1,625
  1,910
  2,208
  2,516
  2,829
  3,143
  3,455
  3,764
  4,067
  4,363
  4,653
  4,935
  5,212
  5,483
  5,751
  6,016
  6,281
  6,547
  6,817
  7,091
  7,372
  7,662
Retained Cash Flow (-), $m
  240
  -3,583
  -3,406
  -5,063
  -7,299
  -10,234
  -13,987
  -18,670
  -24,387
  -31,229
  -39,269
  -48,562
  -59,148
  -71,046
  -84,263
  -98,792
  -114,615
  -131,710
  -150,048
  -169,600
  -190,338
  -212,235
  -235,270
  -259,428
  -284,700
  -311,083
  -338,584
  -367,216
  -397,000
  -427,964
  -460,145
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
 
  -2,886
  -3,125
  -4,670
  -6,769
  -9,538
  -13,097
  -17,559
  -23,030
  -29,604
  -37,359
  -46,354
  -56,632
  -68,217
  -81,120
  -95,336
  -110,851
  -127,643
  -145,685
  -164,947
  -185,402
  -207,023
  -229,787
  -253,677
  -278,684
  -304,802
  -332,037
  -360,399
  -389,909
  -420,592
  -452,483
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
 
  -2,534
  -2,380
  -3,045
  -3,727
  -4,370
  -4,916
  -5,311
  -5,516
  -5,512
  -5,301
  -4,910
  -4,380
  -3,765
  -3,117
  -2,486
  -1,909
  -1,411
  -1,003
  -686
  -450
  -284
  -171
  -99
  -55
  -29
  -15
  -7
  -3
  -1
  -1
Current shareholders' claim on cash, %
  100
  50.0
  1.8
  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 -1.2
Price to Sales 0.7
Price to Book -0.4
Price to Tangible Book
Price to Cash Flow 1.7
Price to Free Cash Flow -2.2
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 58.6% 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 81.09 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

▶ 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]
▶ Will Global Oil Consumption Beat Production?   [Aug-14-17 02:47PM  Market Realist]
▶ Sanchez Energy misses Street 2Q forecasts   [Aug-09-17 04:31PM  Associated Press]
▶ The Worst Energy Stocks from July 2428, 2017   [Aug-01-17 08:18AM  Market Realist]
▶ U.S. Shale Slashes Capex As Low Oil Prices Bite   [Jul-30-17 07:00PM  Oilprice.com]
▶ 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]
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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