Intrinsic value of TransAtlantic Petroleum - TAT

Previous Close

$0.78

  Intrinsic Value

$0.45

stock screener

  Rating & Target

sell

-43%

  Value-price divergence*

+31%

Previous close

$0.78

 
Intrinsic value

$0.45

 
Up/down potential

-43%

 
Rating

sell

 
Value-price divergence*

+31%

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

We calculate the intrinsic value of TAT 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 0.0

 

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, %
  -18.82
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  69
  70
  72
  74
  76
  78
  81
  84
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  187
  196
  206
  216
  226
Variable operating expenses, $m
 
  82
  83
  86
  88
  91
  94
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  157
  165
  172
  180
  189
  198
  207
  217
  228
  239
  250
  262
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
  69
  82
  83
  86
  88
  91
  94
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  157
  165
  172
  180
  189
  198
  207
  217
  228
  239
  250
  262
Operating income, $m
  0
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
EBITDA, $m
  29
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
Interest expense (income), $m
  7
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
Earnings before tax, $m
  -16
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
Tax expense, $m
  6
  0
  0
  0
  0
  0
  0
  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
  -6
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  0
  0
  0
  0
  0
  0
  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
  196
  190
  194
  199
  205
  211
  218
  225
  233
  242
  251
  261
  272
  283
  295
  308
  321
  335
  350
  366
  383
  401
  420
  439
  460
  482
  505
  529
  555
  582
  610
Adjusted assets (=assets-cash), $m
  186
  190
  194
  199
  205
  211
  218
  225
  233
  242
  251
  261
  272
  283
  295
  308
  321
  335
  350
  366
  383
  401
  420
  439
  460
  482
  505
  529
  555
  582
  610
Revenue / Adjusted assets
  0.371
  0.368
  0.371
  0.372
  0.371
  0.370
  0.372
  0.373
  0.369
  0.372
  0.371
  0.372
  0.371
  0.371
  0.369
  0.370
  0.371
  0.370
  0.371
  0.372
  0.371
  0.372
  0.371
  0.371
  0.372
  0.371
  0.370
  0.371
  0.371
  0.371
  0.370
Average production assets, $m
  143
  146
  149
  153
  157
  162
  167
  173
  179
  186
  193
  201
  209
  217
  227
  236
  247
  258
  269
  282
  295
  308
  323
  338
  354
  371
  388
  407
  427
  447
  469
Working capital, $m
  -8
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
Total debt, $m
  42
  34
  36
  39
  42
  45
  49
  53
  58
  62
  67
  73
  78
  85
  91
  98
  105
  113
  121
  130
  139
  149
  159
  170
  181
  193
  205
  218
  232
  247
  262
Total liabilities, $m
  112
  103
  105
  108
  111
  114
  118
  122
  127
  131
  136
  142
  147
  154
  160
  167
  174
  182
  190
  199
  208
  218
  228
  239
  250
  262
  274
  287
  301
  316
  331
Total equity, $m
  85
  87
  89
  91
  94
  96
  99
  103
  107
  110
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
Total liabilities and equity, $m
  197
  190
  194
  199
  205
  210
  217
  225
  234
  241
  251
  261
  271
  283
  295
  308
  321
  335
  350
  366
  383
  401
  420
  440
  460
  482
  505
  529
  555
  582
  610
Debt-to-equity ratio
  0.494
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.520
  0.540
  0.560
  0.590
  0.610
  0.630
  0.650
  0.680
  0.700
  0.720
  0.740
  0.760
  0.780
  0.790
  0.810
  0.830
  0.840
  0.860
  0.870
  0.890
  0.900
  0.920
  0.930
  0.940
Adjusted equity ratio
  0.403
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
Depreciation, amort., depletion, $m
  29
  29
  30
  31
  31
  32
  33
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  94
Funds from operations, $m
  19
  15
  15
  15
  15
  16
  16
  16
  16
  17
  17
  18
  18
  18
  19
  19
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  27
  28
  29
  31
  32
Change in working capital, $m
  -3
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Cash from operations, $m
  22
  14
  14
  14
  15
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
Maintenance CAPEX, $m
  0
  -29
  -29
  -30
  -31
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
New CAPEX, $m
  -11
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -9
  -32
  -32
  -34
  -35
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -48
  -51
  -52
  -55
  -57
  -60
  -64
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
Free cash flow, $m
  13
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -74
  -78
  -83
Issuance/(repayment) of debt, $m
  -14
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  7
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
Cash from financing (excl. dividends), $m  
  -7
  18
  19
  21
  22
  23
  25
  26
  27
  29
  31
  32
  35
  36
  39
  41
  42
  45
  48
  51
  53
  57
  59
  63
  66
  70
  74
  77
  82
  86
  90
Total cash flow (excl. dividends), $m
  4
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Retained Cash Flow (-), $m
  -26
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
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
 
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -15
  -14
  -14
  -14
  -14
  -14
  -13
  -13
  -13
  -12
  -12
  -11
  -10
  -10
  -9
  -8
  -7
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  100
  78.5
  61.3
  47.6
  36.8
  28.2
  21.6
  16.4
  12.4
  9.4
  7.0
  5.3
  3.9
  2.9
  2.2
  1.6
  1.2
  0.9
  0.6
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0

TransAtlantic Petroleum Ltd. is a holding company. The Company is an international oil and natural gas company engaged in acquisition, exploration, development and production. Its segments include Turkey and Bulgaria. The Company holds interests in approximately 880,000 and 567,000 net acres of developed and undeveloped oil and natural gas properties in Turkey and Bulgaria, respectively. The Company holds interests in over 20 onshore and offshore exploration licenses and approximately 25 onshore production leases covering a total of over 1.4 million gross acres in Turkey. All of its oil production is concentrated in southeastern Turkey, primarily in the Arpatepe, Bahar, Goksu and Selmo oil fields, and its natural gas production is concentrated in the Thrace Basin, which is located in northwestern Turkey near Istanbul. The Company holds interests in an onshore exploration license and an onshore production concession covering a total of approximately 567,110 acres in Bulgaria.

FINANCIAL RATIOS  of  TransAtlantic Petroleum (TAT)

Valuation Ratios
P/E Ratio -6.1
Price to Sales 0.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 1.7
Price to Free Cash Flow 3.3
Growth Rates
Sales Growth Rate -18.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57.7%
Cap. Spend. - 3 Yr. Gr. Rate -36.3%
Financial Strength
Quick Ratio 0
Current Ratio 0.4
LT Debt to Equity 4.7%
Total Debt to Equity 49.4%
Interest Coverage -1
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. -0.4%
Return On Total Capital -4.3%
Ret/ On T. Cap. - 3 Yr. Avg. -12.7%
Return On Equity -8.3%
Return On Equity - 3 Yr. Avg. -24.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 75.4%
Gross Margin - 3 Yr. Avg. 81.1%
EBITDA Margin 29%
EBITDA Margin - 3 Yr. Avg. 49.7%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -1.4%
Pre-Tax Margin -23.2%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin -8.7%
Net Profit Margin - 3 Yr. Avg. -38.3%
Effective Tax Rate -37.5%
Eff/ Tax Rate - 3 Yr. Avg. -193.3%
Payout Ratio 0%

TAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TAT stock intrinsic value calculation we used $69 million for the last fiscal year's total revenue generated by TransAtlantic Petroleum. The default revenue input number comes from 2016 income statement of TransAtlantic Petroleum. 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 TAT stock valuation model: a) initial revenue growth rate of 2% 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 4.3%, whose default value for TAT is calculated based on our internal credit rating of TransAtlantic Petroleum, 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 TransAtlantic Petroleum.
    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 TAT stock the variable cost ratio is equal to 115.9%.

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 TAT 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 10.6% for TransAtlantic Petroleum.

Corporate tax rate of 27% is the nominal tax rate for TransAtlantic Petroleum. 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 TAT 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 TAT are equal to 207.2%.

Life of production assets of 4.9 years is the average useful life of capital assets used in TransAtlantic Petroleum 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 TAT is equal to 29%. 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 - $85 million for TransAtlantic Petroleum - 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 47.759 million for TransAtlantic Petroleum 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 TransAtlantic Petroleum at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Transatlantic Petroleum posts 1Q loss   [May-10-17 05:42PM  Associated Press]
▶ Transatlantic Petroleum posts 4Q loss   [Mar-22-17 05:28PM  Associated Press]
▶ Webcast-OGIS New York for TransAtlantic Petroleum Ltd.   [Mar-14-17 03:56PM  at Company Spotlight]
Financial statements of TAT
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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