Intrinsic value of W&T Offshore - WTI

Previous Close

$1.85

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-101%

Previous close

$1.85

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-101%

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

We calculate the intrinsic value of WTI 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 0.2

 

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, %
  -21.10
  59.00
  53.60
  48.74
  44.37
  40.43
  36.89
  33.70
  30.83
  28.25
  25.92
  23.83
  21.95
  20.25
  18.73
  17.35
  16.12
  15.01
  14.01
  13.11
  12.29
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.54
Revenue, $m
  400
  636
  977
  1,453
  2,098
  2,946
  4,032
  5,391
  7,053
  9,045
  11,390
  14,104
  17,199
  20,682
  24,555
  28,817
  33,461
  38,483
  43,872
  49,622
  55,723
  62,167
  68,949
  76,063
  83,506
  91,278
  99,381
  107,817
  116,594
  125,718
  135,202
Variable operating expenses, $m
 
  2,073
  3,185
  4,737
  6,838
  9,603
  13,146
  17,575
  22,993
  29,488
  37,131
  45,979
  56,070
  67,425
  80,050
  93,942
  109,084
  125,453
  143,024
  161,767
  181,656
  202,665
  224,772
  247,964
  272,230
  297,567
  323,981
  351,484
  380,095
  409,841
  440,758
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
  607
  2,073
  3,185
  4,737
  6,838
  9,603
  13,146
  17,575
  22,993
  29,488
  37,131
  45,979
  56,070
  67,425
  80,050
  93,942
  109,084
  125,453
  143,024
  161,767
  181,656
  202,665
  224,772
  247,964
  272,230
  297,567
  323,981
  351,484
  380,095
  409,841
  440,758
Operating income, $m
  -207
  -1,437
  -2,208
  -3,284
  -4,741
  -6,657
  -9,113
  -12,184
  -15,940
  -20,443
  -25,741
  -31,875
  -38,870
  -46,742
  -55,495
  -65,125
  -75,622
  -86,971
  -99,151
  -112,145
  -125,933
  -140,497
  -155,824
  -171,901
  -188,724
  -206,289
  -224,600
  -243,667
  -263,501
  -284,123
  -305,556
EBITDA, $m
  5
  -1,315
  -2,020
  -3,005
  -4,338
  -6,092
  -8,339
  -11,148
  -14,585
  -18,705
  -23,553
  -29,166
  -35,566
  -42,769
  -50,778
  -59,590
  -69,195
  -79,578
  -90,724
  -102,613
  -115,229
  -128,555
  -142,579
  -157,290
  -172,682
  -188,754
  -205,509
  -222,955
  -241,104
  -259,973
  -279,584
Interest expense (income), $m
  97
  89
  63
  118
  195
  300
  438
  614
  835
  1,105
  1,429
  1,810
  2,250
  2,753
  3,319
  3,948
  4,640
  5,395
  6,211
  7,086
  8,020
  9,011
  10,058
  11,160
  12,316
  13,525
  14,787
  16,103
  17,474
  18,900
  20,382
Earnings before tax, $m
  -292
  -1,526
  -2,270
  -3,402
  -4,936
  -6,957
  -9,551
  -12,798
  -16,775
  -21,548
  -27,170
  -33,685
  -41,121
  -49,495
  -58,814
  -69,074
  -80,263
  -92,366
  -105,362
  -119,232
  -133,953
  -149,509
  -165,882
  -183,061
  -201,039
  -219,814
  -239,388
  -259,770
  -280,975
  -303,023
  -325,938
Tax expense, $m
  -43
  0
  0
  0
  0
  0
  0
  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
  -249
  -1,526
  -2,270
  -3,402
  -4,936
  -6,957
  -9,551
  -12,798
  -16,775
  -21,548
  -27,170
  -33,685
  -41,121
  -49,495
  -58,814
  -69,074
  -80,263
  -92,366
  -105,362
  -119,232
  -133,953
  -149,509
  -165,882
  -183,061
  -201,039
  -219,814
  -239,388
  -259,770
  -280,975
  -303,023
  -325,938

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  70
  0
  0
  0
  0
  0
  0
  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
  830
  1,320
  2,027
  3,015
  4,352
  6,112
  8,366
  11,185
  14,633
  18,766
  23,631
  29,262
  35,683
  42,909
  50,945
  59,785
  69,422
  79,839
  91,021
  102,950
  115,607
  128,977
  143,047
  157,806
  173,249
  189,374
  206,184
  223,687
  241,895
  260,826
  280,502
Adjusted assets (=assets-cash), $m
  760
  1,320
  2,027
  3,015
  4,352
  6,112
  8,366
  11,185
  14,633
  18,766
  23,631
  29,262
  35,683
  42,909
  50,945
  59,785
  69,422
  79,839
  91,021
  102,950
  115,607
  128,977
  143,047
  157,806
  173,249
  189,374
  206,184
  223,687
  241,895
  260,826
  280,502
Revenue / Adjusted assets
  0.526
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
Average production assets, $m
  769
  1,222
  1,877
  2,791
  4,030
  5,659
  7,746
  10,356
  13,549
  17,376
  21,880
  27,094
  33,040
  39,731
  47,171
  55,357
  64,279
  73,925
  84,279
  95,324
  107,043
  119,423
  132,450
  146,116
  160,415
  175,346
  190,910
  207,117
  223,976
  241,505
  259,723
Working capital, $m
  -11
  -64
  -98
  -145
  -210
  -295
  -403
  -539
  -705
  -905
  -1,139
  -1,410
  -1,720
  -2,068
  -2,456
  -2,882
  -3,346
  -3,848
  -4,387
  -4,962
  -5,572
  -6,217
  -6,895
  -7,606
  -8,351
  -9,128
  -9,938
  -10,782
  -11,659
  -12,572
  -13,520
Total debt, $m
  1,021
  720
  1,356
  2,245
  3,449
  5,032
  7,061
  9,599
  12,702
  16,422
  20,800
  25,867
  31,647
  38,151
  45,382
  53,339
  62,012
  71,387
  81,451
  92,187
  103,578
  115,612
  128,274
  141,557
  155,456
  169,969
  185,098
  200,850
  217,238
  234,276
  251,983
Total liabilities, $m
  1,489
  1,188
  1,824
  2,713
  3,917
  5,500
  7,529
  10,067
  13,170
  16,890
  21,268
  26,335
  32,115
  38,619
  45,850
  53,807
  62,480
  71,855
  81,919
  92,655
  104,046
  116,080
  128,742
  142,025
  155,924
  170,437
  185,566
  201,318
  217,706
  234,744
  252,451
Total equity, $m
  -659
  132
  203
  301
  435
  611
  837
  1,119
  1,463
  1,877
  2,363
  2,926
  3,568
  4,291
  5,094
  5,979
  6,942
  7,984
  9,102
  10,295
  11,561
  12,898
  14,305
  15,781
  17,325
  18,937
  20,618
  22,369
  24,190
  26,083
  28,050
Total liabilities and equity, $m
  830
  1,320
  2,027
  3,014
  4,352
  6,111
  8,366
  11,186
  14,633
  18,767
  23,631
  29,261
  35,683
  42,910
  50,944
  59,786
  69,422
  79,839
  91,021
  102,950
  115,607
  128,978
  143,047
  157,806
  173,249
  189,374
  206,184
  223,687
  241,896
  260,827
  280,501
Debt-to-equity ratio
  -1.549
  5.450
  6.690
  7.450
  7.920
  8.230
  8.440
  8.580
  8.680
  8.750
  8.800
  8.840
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.959
  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
  -249
  -1,526
  -2,270
  -3,402
  -4,936
  -6,957
  -9,551
  -12,798
  -16,775
  -21,548
  -27,170
  -33,685
  -41,121
  -49,495
  -58,814
  -69,074
  -80,263
  -92,366
  -105,362
  -119,232
  -133,953
  -149,509
  -165,882
  -183,061
  -201,039
  -219,814
  -239,388
  -259,770
  -280,975
  -303,023
  -325,938
Depreciation, amort., depletion, $m
  212
  122
  188
  279
  403
  566
  775
  1,036
  1,355
  1,738
  2,188
  2,709
  3,304
  3,973
  4,717
  5,536
  6,428
  7,393
  8,428
  9,532
  10,704
  11,942
  13,245
  14,612
  16,042
  17,535
  19,091
  20,712
  22,398
  24,150
  25,972
Funds from operations, $m
  -139
  -1,404
  -2,083
  -3,123
  -4,533
  -6,392
  -8,776
  -11,763
  -15,420
  -19,810
  -24,982
  -30,975
  -37,817
  -45,522
  -54,097
  -63,538
  -73,835
  -84,973
  -96,934
  -109,699
  -123,249
  -137,567
  -152,637
  -168,450
  -184,998
  -202,279
  -220,297
  -239,058
  -258,578
  -278,872
  -299,966
Change in working capital, $m
  -153
  -24
  -34
  -48
  -64
  -85
  -109
  -136
  -166
  -199
  -234
  -271
  -310
  -348
  -387
  -426
  -464
  -502
  -539
  -575
  -610
  -644
  -678
  -711
  -744
  -777
  -810
  -844
  -878
  -912
  -948
Cash from operations, $m
  14
  -1,380
  -2,049
  -3,075
  -4,469
  -6,307
  -8,668
  -11,627
  -15,254
  -19,611
  -24,748
  -30,704
  -37,507
  -45,174
  -53,710
  -63,112
  -73,371
  -84,471
  -96,395
  -109,124
  -122,639
  -136,922
  -151,959
  -167,738
  -184,253
  -201,502
  -219,486
  -238,215
  -257,700
  -277,960
  -299,017
Maintenance CAPEX, $m
  0
  -77
  -122
  -188
  -279
  -403
  -566
  -775
  -1,036
  -1,355
  -1,738
  -2,188
  -2,709
  -3,304
  -3,973
  -4,717
  -5,536
  -6,428
  -7,393
  -8,428
  -9,532
  -10,704
  -11,942
  -13,245
  -14,612
  -16,042
  -17,535
  -19,091
  -20,712
  -22,398
  -24,150
New CAPEX, $m
  -49
  -453
  -655
  -915
  -1,238
  -1,629
  -2,087
  -2,610
  -3,193
  -3,827
  -4,504
  -5,214
  -5,946
  -6,691
  -7,440
  -8,186
  -8,922
  -9,646
  -10,354
  -11,045
  -11,720
  -12,380
  -13,027
  -13,666
  -14,299
  -14,930
  -15,565
  -16,206
  -16,859
  -17,529
  -18,218
Cash from investing activities, $m
  -82
  -530
  -777
  -1,103
  -1,517
  -2,032
  -2,653
  -3,385
  -4,229
  -5,182
  -6,242
  -7,402
  -8,655
  -9,995
  -11,413
  -12,903
  -14,458
  -16,074
  -17,747
  -19,473
  -21,252
  -23,084
  -24,969
  -26,911
  -28,911
  -30,972
  -33,100
  -35,297
  -37,571
  -39,927
  -42,368
Free cash flow, $m
  -68
  -1,911
  -2,826
  -4,177
  -5,986
  -8,339
  -11,321
  -15,012
  -19,482
  -24,793
  -30,989
  -38,106
  -46,163
  -55,169
  -65,123
  -76,015
  -87,829
  -100,545
  -114,141
  -128,597
  -143,891
  -160,006
  -176,929
  -194,649
  -213,164
  -232,474
  -252,586
  -273,512
  -295,271
  -317,886
  -341,386
Issuance/(repayment) of debt, $m
  72
  -301
  637
  889
  1,204
  1,584
  2,029
  2,537
  3,103
  3,720
  4,378
  5,068
  5,780
  6,504
  7,232
  7,957
  8,673
  9,376
  10,064
  10,736
  11,392
  12,033
  12,663
  13,283
  13,899
  14,512
  15,129
  15,753
  16,387
  17,038
  17,708
Issuance/(repurchase) of shares, $m
  0
  2,317
  2,341
  3,501
  5,070
  7,133
  9,776
  13,080
  17,120
  21,961
  27,656
  34,248
  41,763
  50,218
  59,618
  69,958
  81,227
  93,407
  106,480
  120,424
  135,219
  150,846
  167,289
  184,537
  202,583
  221,426
  241,069
  261,520
  282,796
  304,916
  327,905
Cash from financing (excl. dividends), $m  
  53
  2,016
  2,978
  4,390
  6,274
  8,717
  11,805
  15,617
  20,223
  25,681
  32,034
  39,316
  47,543
  56,722
  66,850
  77,915
  89,900
  102,783
  116,544
  131,160
  146,611
  162,879
  179,952
  197,820
  216,482
  235,938
  256,198
  277,273
  299,183
  321,954
  345,613
Total cash flow (excl. dividends), $m
  -15
  105
  152
  212
  287
  378
  484
  606
  741
  888
  1,045
  1,210
  1,380
  1,553
  1,727
  1,900
  2,071
  2,238
  2,403
  2,563
  2,720
  2,873
  3,023
  3,171
  3,318
  3,465
  3,612
  3,761
  3,912
  4,068
  4,228
Retained Cash Flow (-), $m
  133
  -2,317
  -2,341
  -3,501
  -5,070
  -7,133
  -9,776
  -13,080
  -17,120
  -21,961
  -27,656
  -34,248
  -41,763
  -50,218
  -59,618
  -69,958
  -81,227
  -93,407
  -106,480
  -120,424
  -135,219
  -150,846
  -167,289
  -184,537
  -202,583
  -221,426
  -241,069
  -261,520
  -282,796
  -304,916
  -327,905
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
 
  -2,212
  -2,189
  -3,288
  -4,782
  -6,755
  -9,292
  -12,475
  -16,379
  -21,073
  -26,611
  -33,038
  -40,383
  -48,665
  -57,891
  -68,058
  -79,156
  -91,169
  -104,078
  -117,861
  -132,499
  -147,973
  -164,266
  -181,366
  -199,265
  -217,961
  -237,457
  -257,760
  -278,884
  -300,848
  -323,678
Discount rate, %
 
  13.60
  14.28
  14.99
  15.74
  16.53
  17.36
  18.23
  19.14
  20.09
  21.10
  22.15
  23.26
  24.42
  25.64
  26.93
  28.27
  29.69
  31.17
  32.73
  34.37
  36.08
  37.89
  39.78
  41.77
  43.86
  46.05
  48.36
  50.78
  53.31
  55.98
PV of cash for distribution, $m
 
  -1,947
  -1,676
  -2,162
  -2,665
  -3,144
  -3,557
  -3,864
  -4,036
  -4,056
  -3,924
  -3,657
  -3,283
  -2,841
  -2,369
  -1,904
  -1,473
  -1,098
  -787
  -543
  -360
  -229
  -140
  -82
  -46
  -25
  -13
  -6
  -3
  -1
  -1
Current shareholders' claim on cash, %
  100
  50.0
  2.7
  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

W&T Offshore, Inc., an independent oil and natural gas producer, engages in the acquisition, exploration, and development of oil and natural gas properties in the Gulf of Mexico. The company sells crude oil, natural gas liquids, and natural gas. It holds working interests in approximately 54 offshore fields in federal and state waters. As of March 8, 2016, the company had interests in offshore leases covering approximately 900,000 gross acres, including approximately 550,000 gross acres in the Gulf of Mexico Shelf; and approximately 350,000 gross acres in the deepwater. It also has a total proved reserves of 76.4 million barrels of oil equivalent. The company was founded in 1983 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  W&T Offshore (WTI)

Valuation Ratios
P/E Ratio -1
Price to Sales 0.6
Price to Book -0.4
Price to Tangible Book
Price to Cash Flow 18.2
Price to Free Cash Flow -7.3
Growth Rates
Sales Growth Rate -21.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -78.8%
Cap. Spend. - 3 Yr. Gr. Rate -38.4%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity -153.7%
Total Debt to Equity -154.9%
Interest Coverage -2
Management Effectiveness
Return On Assets -16.3%
Ret/ On Assets - 3 Yr. Avg. -21.4%
Return On Total Capital -48.2%
Ret/ On T. Cap. - 3 Yr. Avg. -43.8%
Return On Equity 42%
Return On Equity - 3 Yr. Avg. 4111.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 99.5%
Gross Margin - 3 Yr. Avg. 99.4%
EBITDA Margin 4.3%
EBITDA Margin - 3 Yr. Avg. -28.5%
Operating Margin -51.8%
Oper. Margin - 3 Yr. Avg. -90.4%
Pre-Tax Margin -73%
Pre-Tax Margin - 3 Yr. Avg. -106.9%
Net Profit Margin -62.3%
Net Profit Margin - 3 Yr. Avg. -89.9%
Effective Tax Rate 14.7%
Eff/ Tax Rate - 3 Yr. Avg. 18.7%
Payout Ratio 0%

WTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WTI stock intrinsic value calculation we used $400 million for the last fiscal year's total revenue generated by W&T Offshore. The default revenue input number comes from 2016 income statement of W&T Offshore. 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 WTI stock valuation model: a) initial revenue growth rate of 59% 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 13.6%, whose default value for WTI is calculated based on our internal credit rating of W&T Offshore, 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 W&T Offshore.
    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 WTI stock the variable cost ratio is equal to 326%.

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 WTI 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 8.7% for W&T Offshore.

Corporate tax rate of 27% is the nominal tax rate for W&T Offshore. 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 WTI 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 WTI are equal to 192.1%.

Life of production assets of 10 years is the average useful life of capital assets used in W&T Offshore 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 WTI 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 - $-659 million for W&T Offshore - 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 133.882 million for W&T Offshore 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 W&T Offshore at the current share price and the inputted number of shares is $0.2 billion.

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Stock chart of WTI Financial statements of WTI
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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