Intrinsic value of Cimarex Energy - XEC

Previous Close

$113.28

  Intrinsic Value

$3.73

stock screener

  Rating & Target

str. sell

-97%

Previous close

$113.28

 
Intrinsic value

$3.73

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of XEC 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 10.8

 

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, %
  -13.49
  52.50
  47.75
  43.48
  39.63
  36.16
  33.05
  30.24
  27.72
  25.45
  23.40
  21.56
  19.91
  18.42
  17.07
  15.87
  14.78
  13.80
  12.92
  12.13
  11.42
  10.77
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.49
  7.24
Revenue, $m
  1,257
  1,917
  2,832
  4,064
  5,674
  7,726
  10,279
  13,388
  17,099
  21,450
  26,470
  32,177
  38,582
  45,688
  53,488
  61,975
  71,135
  80,953
  91,413
  102,501
  114,203
  126,508
  139,409
  152,900
  166,982
  181,658
  196,936
  212,826
  229,346
  246,515
  264,356
Variable operating expenses, $m
 
  7,173
  10,569
  15,137
  21,110
  28,722
  38,194
  49,726
  63,493
  79,634
  98,256
  119,367
  143,128
  169,486
  198,424
  229,907
  263,887
  300,308
  339,113
  380,245
  423,656
  469,305
  517,162
  567,211
  619,450
  673,893
  730,568
  789,517
  850,800
  914,490
  980,675
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
  1,829
  7,173
  10,569
  15,137
  21,110
  28,722
  38,194
  49,726
  63,493
  79,634
  98,256
  119,367
  143,128
  169,486
  198,424
  229,907
  263,887
  300,308
  339,113
  380,245
  423,656
  469,305
  517,162
  567,211
  619,450
  673,893
  730,568
  789,517
  850,800
  914,490
  980,675
Operating income, $m
  -572
  -5,256
  -7,736
  -11,073
  -15,436
  -20,996
  -27,915
  -36,339
  -46,394
  -58,184
  -71,787
  -87,190
  -104,546
  -123,799
  -144,936
  -167,932
  -192,752
  -219,355
  -247,700
  -277,744
  -309,453
  -342,796
  -377,753
  -414,310
  -452,468
  -492,235
  -533,632
  -576,691
  -621,454
  -667,976
  -716,319
EBITDA, $m
  -180
  -4,704
  -6,950
  -9,971
  -13,923
  -18,958
  -25,223
  -32,852
  -41,958
  -52,635
  -64,953
  -78,959
  -94,676
  -112,111
  -131,253
  -152,078
  -174,555
  -198,646
  -224,315
  -251,523
  -280,238
  -310,434
  -342,090
  -375,196
  -409,752
  -445,764
  -483,253
  -522,247
  -562,784
  -604,914
  -648,693
Interest expense (income), $m
  80
  80
  140
  225
  339
  487
  677
  913
  1,200
  1,543
  1,945
  2,409
  2,937
  3,529
  4,185
  4,906
  5,690
  6,537
  7,444
  8,411
  9,435
  10,517
  11,654
  12,846
  14,093
  15,394
  16,750
  18,162
  19,631
  21,157
  22,744
Earnings before tax, $m
  -623
  -5,336
  -7,877
  -11,298
  -15,775
  -21,484
  -28,592
  -37,252
  -47,595
  -59,728
  -73,732
  -89,599
  -107,483
  -127,327
  -149,121
  -172,838
  -198,442
  -225,892
  -255,144
  -286,155
  -318,888
  -353,313
  -389,407
  -427,156
  -466,561
  -507,629
  -550,382
  -594,853
  -641,085
  -689,133
  -739,063
Tax expense, $m
  -214
  0
  0
  0
  0
  0
  0
  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
  -409
  -5,336
  -7,877
  -11,298
  -15,775
  -21,484
  -28,592
  -37,252
  -47,595
  -59,728
  -73,732
  -89,599
  -107,483
  -127,327
  -149,121
  -172,838
  -198,442
  -225,892
  -255,144
  -286,155
  -318,888
  -353,313
  -389,407
  -427,156
  -466,561
  -507,629
  -550,382
  -594,853
  -641,085
  -689,133
  -739,063

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  653
  0
  0
  0
  0
  0
  0
  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
  4,238
  5,461
  8,069
  11,577
  16,165
  22,011
  29,285
  38,142
  48,715
  61,111
  75,412
  91,673
  109,922
  130,164
  152,388
  176,567
  202,663
  230,634
  260,436
  292,025
  325,365
  360,422
  397,176
  435,613
  475,733
  517,545
  561,070
  606,343
  653,408
  702,322
  753,151
Adjusted assets (=assets-cash), $m
  3,585
  5,461
  8,069
  11,577
  16,165
  22,011
  29,285
  38,142
  48,715
  61,111
  75,412
  91,673
  109,922
  130,164
  152,388
  176,567
  202,663
  230,634
  260,436
  292,025
  325,365
  360,422
  397,176
  435,613
  475,733
  517,545
  561,070
  606,343
  653,408
  702,322
  753,151
Revenue / Adjusted assets
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
Average production assets, $m
  2,766
  4,217
  6,231
  8,940
  12,483
  16,997
  22,614
  29,453
  37,617
  47,190
  58,234
  70,790
  84,881
  100,513
  117,674
  136,345
  156,496
  178,096
  201,109
  225,502
  251,247
  278,318
  306,699
  336,381
  367,361
  399,648
  433,258
  468,218
  504,562
  542,333
  581,583
Working capital, $m
  447
  -314
  -464
  -666
  -931
  -1,267
  -1,686
  -2,196
  -2,804
  -3,518
  -4,341
  -5,277
  -6,328
  -7,493
  -8,772
  -10,164
  -11,666
  -13,276
  -14,992
  -16,810
  -18,729
  -20,747
  -22,863
  -25,076
  -27,385
  -29,792
  -32,297
  -34,904
  -37,613
  -40,428
  -43,354
Total debt, $m
  1,500
  2,647
  4,243
  6,390
  9,198
  12,776
  17,227
  22,648
  29,118
  36,705
  45,457
  55,409
  66,577
  78,965
  92,566
  107,364
  123,335
  140,453
  158,692
  178,025
  198,428
  219,883
  242,377
  265,900
  290,454
  316,042
  342,680
  370,387
  399,191
  429,126
  460,233
Total liabilities, $m
  2,195
  3,342
  4,938
  7,085
  9,893
  13,471
  17,922
  23,343
  29,813
  37,400
  46,152
  56,104
  67,272
  79,660
  93,261
  108,059
  124,030
  141,148
  159,387
  178,720
  199,123
  220,578
  243,072
  266,595
  291,149
  316,737
  343,375
  371,082
  399,886
  429,821
  460,928
Total equity, $m
  2,043
  2,119
  3,131
  4,492
  6,272
  8,540
  11,363
  14,799
  18,901
  23,711
  29,260
  35,569
  42,650
  50,504
  59,127
  68,508
  78,633
  89,486
  101,049
  113,306
  126,241
  139,844
  154,104
  169,018
  184,584
  200,807
  217,695
  235,261
  253,522
  272,501
  292,223
Total liabilities and equity, $m
  4,238
  5,461
  8,069
  11,577
  16,165
  22,011
  29,285
  38,142
  48,714
  61,111
  75,412
  91,673
  109,922
  130,164
  152,388
  176,567
  202,663
  230,634
  260,436
  292,026
  325,364
  360,422
  397,176
  435,613
  475,733
  517,544
  561,070
  606,343
  653,408
  702,322
  753,151
Debt-to-equity ratio
  0.734
  1.250
  1.360
  1.420
  1.470
  1.500
  1.520
  1.530
  1.540
  1.550
  1.550
  1.560
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
Adjusted equity ratio
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -409
  -5,336
  -7,877
  -11,298
  -15,775
  -21,484
  -28,592
  -37,252
  -47,595
  -59,728
  -73,732
  -89,599
  -107,483
  -127,327
  -149,121
  -172,838
  -198,442
  -225,892
  -255,144
  -286,155
  -318,888
  -353,313
  -389,407
  -427,156
  -466,561
  -507,629
  -550,382
  -594,853
  -641,085
  -689,133
  -739,063
Depreciation, amort., depletion, $m
  392
  552
  787
  1,102
  1,513
  2,038
  2,692
  3,487
  4,436
  5,549
  6,833
  8,231
  9,870
  11,688
  13,683
  15,854
  18,197
  20,709
  23,385
  26,221
  29,215
  32,363
  35,663
  39,114
  42,716
  46,471
  50,379
  54,444
  58,670
  63,062
  67,626
Funds from operations, $m
  573
  -4,783
  -7,090
  -10,196
  -14,262
  -19,446
  -25,901
  -33,765
  -43,158
  -54,179
  -66,899
  -81,368
  -97,613
  -115,640
  -135,438
  -156,984
  -180,245
  -205,183
  -231,759
  -259,934
  -289,674
  -320,951
  -353,744
  -388,042
  -423,844
  -461,158
  -500,003
  -540,409
  -582,415
  -626,071
  -671,437
Change in working capital, $m
  -26
  -108
  -150
  -202
  -264
  -337
  -419
  -510
  -609
  -714
  -823
  -936
  -1,050
  -1,165
  -1,279
  -1,392
  -1,502
  -1,610
  -1,716
  -1,818
  -1,919
  -2,018
  -2,116
  -2,213
  -2,309
  -2,407
  -2,506
  -2,606
  -2,709
  -2,816
  -2,926
Cash from operations, $m
  599
  -4,675
  -6,940
  -9,994
  -13,998
  -19,109
  -25,482
  -33,255
  -42,550
  -53,465
  -66,075
  -80,432
  -96,562
  -114,474
  -134,159
  -155,592
  -178,743
  -203,573
  -230,043
  -258,115
  -287,755
  -318,932
  -351,628
  -385,830
  -421,535
  -458,751
  -497,498
  -537,803
  -579,705
  -623,255
  -668,511
Maintenance CAPEX, $m
  0
  -322
  -490
  -725
  -1,040
  -1,451
  -1,976
  -2,630
  -3,425
  -4,374
  -5,487
  -6,771
  -8,231
  -9,870
  -11,688
  -13,683
  -15,854
  -18,197
  -20,709
  -23,385
  -26,221
  -29,215
  -32,363
  -35,663
  -39,114
  -42,716
  -46,471
  -50,379
  -54,444
  -58,670
  -63,062
New CAPEX, $m
  -722
  -1,452
  -2,014
  -2,709
  -3,543
  -4,514
  -5,617
  -6,839
  -8,164
  -9,573
  -11,044
  -12,556
  -14,091
  -15,631
  -17,161
  -18,671
  -20,152
  -21,599
  -23,013
  -24,393
  -25,745
  -27,072
  -28,381
  -29,681
  -30,980
  -32,287
  -33,610
  -34,960
  -36,344
  -37,771
  -39,250
Cash from investing activities, $m
  -692
  -1,774
  -2,504
  -3,434
  -4,583
  -5,965
  -7,593
  -9,469
  -11,589
  -13,947
  -16,531
  -19,327
  -22,322
  -25,501
  -28,849
  -32,354
  -36,006
  -39,796
  -43,722
  -47,778
  -51,966
  -56,287
  -60,744
  -65,344
  -70,094
  -75,003
  -80,081
  -85,339
  -90,788
  -96,441
  -102,312
Free cash flow, $m
  -93
  -6,448
  -9,444
  -13,428
  -18,580
  -25,075
  -33,075
  -42,724
  -54,139
  -67,412
  -82,606
  -99,760
  -118,885
  -139,976
  -163,007
  -187,946
  -214,748
  -243,370
  -273,765
  -305,894
  -339,720
  -375,219
  -412,372
  -451,174
  -491,629
  -533,755
  -577,579
  -623,141
  -670,493
  -719,696
  -770,823
Issuance/(repayment) of debt, $m
  0
  1,147
  1,596
  2,147
  2,808
  3,578
  4,452
  5,420
  6,470
  7,587
  8,753
  9,951
  11,168
  12,388
  13,601
  14,797
  15,971
  17,118
  18,239
  19,333
  20,404
  21,455
  22,493
  23,524
  24,553
  25,589
  26,638
  27,707
  28,804
  29,935
  31,107
Issuance/(repurchase) of shares, $m
  5
  6,065
  8,889
  12,659
  17,555
  23,752
  31,414
  40,688
  51,697
  64,538
  79,281
  95,908
  114,563
  135,181
  157,744
  182,219
  208,568
  236,745
  266,707
  298,412
  331,824
  366,915
  403,667
  442,070
  482,127
  523,852
  567,270
  612,419
  659,346
  708,111
  758,784
Cash from financing (excl. dividends), $m  
  5
  7,212
  10,485
  14,806
  20,363
  27,330
  35,866
  46,108
  58,167
  72,125
  88,034
  105,859
  125,731
  147,569
  171,345
  197,016
  224,539
  253,863
  284,946
  317,745
  352,228
  388,370
  426,160
  465,594
  506,680
  549,441
  593,908
  640,126
  688,150
  738,046
  789,891
Total cash flow (excl. dividends), $m
  -89
  764
  1,040
  1,378
  1,783
  2,255
  2,791
  3,385
  4,028
  4,713
  5,427
  6,100
  6,846
  7,594
  8,337
  9,071
  9,790
  10,494
  11,180
  11,851
  12,507
  13,152
  13,788
  14,420
  15,051
  15,686
  16,329
  16,984
  17,657
  18,350
  19,069
Retained Cash Flow (-), $m
  415
  -6,065
  -8,889
  -12,659
  -17,555
  -23,752
  -31,414
  -40,688
  -51,697
  -64,538
  -79,281
  -95,908
  -114,563
  -135,181
  -157,744
  -182,219
  -208,568
  -236,745
  -266,707
  -298,412
  -331,824
  -366,915
  -403,667
  -442,070
  -482,127
  -523,852
  -567,270
  -612,419
  -659,346
  -708,111
  -758,784
Prev. year cash balance distribution, $m
 
  653
  0
  0
  0
  0
  0
  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
 
  -4,648
  -7,848
  -11,281
  -15,772
  -21,497
  -28,623
  -37,303
  -47,668
  -59,825
  -73,854
  -89,808
  -107,717
  -127,587
  -149,406
  -173,149
  -198,777
  -226,251
  -255,526
  -286,561
  -319,317
  -353,763
  -389,879
  -427,650
  -467,076
  -508,166
  -550,941
  -595,434
  -641,689
  -689,761
  -739,716
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
 
  -4,456
  -7,185
  -9,817
  -12,987
  -16,663
  -20,773
  -25,202
  -29,794
  -34,366
  -38,719
  -42,649
  -45,967
  -48,511
  -50,158
  -50,833
  -50,514
  -49,229
  -47,058
  -44,122
  -40,575
  -36,591
  -32,350
  -28,029
  -23,789
  -19,768
  -16,074
  -12,780
  -9,928
  -7,529
  -5,570
Current shareholders' claim on cash, %
  100
  54.8
  30.5
  17.3
  9.9
  5.8
  3.4
  2.0
  1.2
  0.7
  0.5
  0.3
  0.2
  0.1
  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

Cimarex Energy Co. is an independent oil and gas exploration and production company. The Company operates in exploration and production (E&P) segment. Its operations are located in Oklahoma, Texas and New Mexico. Its E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Its Permian Basin region encompasses west Texas and southeast New Mexico. Its Mid-Continent region consists of Oklahoma and the Texas Panhandle. As of fiscal year ended December 31, 2016 (fiscal 2016), its activities in the Mid-Continent were focused in the Woodford shale and the Meramec horizon, both in Oklahoma. During fiscal 2016, production from the Mid-Continent averaged 457 millions of cubic feet equivalent (MMcfe) per day, or 47% of total company production. All of the Company's oil and gas assets are located in the United States. As of December 31, 2016, 63% of its total proved reserves were located in the Mid-Continent region and 37% were in the Permian Basin.

FINANCIAL RATIOS  of  Cimarex Energy (XEC)

Valuation Ratios
P/E Ratio -26.3
Price to Sales 8.6
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow -87.6
Growth Rates
Sales Growth Rate -13.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.2%
Cap. Spend. - 3 Yr. Gr. Rate -15%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 73.4%
Total Debt to Equity 73.4%
Interest Coverage -7
Management Effectiveness
Return On Assets -8%
Ret/ On Assets - 3 Yr. Avg. -12.8%
Return On Total Capital -10.9%
Ret/ On T. Cap. - 3 Yr. Avg. -17.7%
Return On Equity -18.2%
Return On Equity - 3 Yr. Avg. -26.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 63.9%
Gross Margin - 3 Yr. Avg. 68.2%
EBITDA Margin -12%
EBITDA Margin - 3 Yr. Avg. -55.2%
Operating Margin -45.5%
Oper. Margin - 3 Yr. Avg. -95.5%
Pre-Tax Margin -49.6%
Pre-Tax Margin - 3 Yr. Avg. -98%
Net Profit Margin -32.5%
Net Profit Margin - 3 Yr. Avg. -62.8%
Effective Tax Rate 34.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.9%
Payout Ratio -9.3%

XEC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XEC stock intrinsic value calculation we used $1257 million for the last fiscal year's total revenue generated by Cimarex Energy. The default revenue input number comes from 2016 income statement of Cimarex 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 XEC stock valuation model: a) initial revenue growth rate of 52.5% 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 XEC is calculated based on our internal credit rating of Cimarex 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 Cimarex 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 XEC stock the variable cost ratio is equal to 375.9%.

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 XEC 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 5.3% for Cimarex Energy.

Corporate tax rate of 27% is the nominal tax rate for Cimarex 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 XEC 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 XEC are equal to 220%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Cimarex 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 XEC is equal to -16.4%. 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 - $2043 million for Cimarex 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 95.279 million for Cimarex 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 Cimarex Energy at the current share price and the inputted number of shares is $10.8 billion.

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COMPANY NEWS

▶ Anadarko Petroleum: Analyzing the Short Interest Trends   [Dec-13-17 07:34AM  Market Realist]
▶ Cimarex Energy Declares Quarterly Cash Dividend   [Dec-08-17 04:05PM  PR Newswire]
▶ Gauging the Short Interest Trend in Apache Stock   [Nov-24-17 09:00AM  Market Realist]
▶ Where Apaches Relative Valuation Stands next to Peers   [Nov-23-17 09:00AM  Market Realist]
▶ Still Bullish on Cimarex Energy   [Nov-17-17 03:07PM  TheStreet.com]
▶ Cimarex tops Street 3Q forecasts   [Nov-07-17 04:36PM  Associated Press]
▶ Cimarex Energy Sees IBD RS Rating Improve To 72   [03:00AM  Investor's Business Daily]
▶ Current Short Interest in Whiting Stock: What It Tells Us   [Nov-02-17 07:33AM  Market Realist]
▶ Don't Underestimate Cimarex Energy   [Nov-01-17 01:33PM  TheStreet.com]
▶ Whiting Petroleum Stock: Recent Short Interest Trends   [Oct-25-17 07:39AM  Market Realist]
▶ Short Interest Trends in Anadarko Petroleum Stock   [Oct-20-17 09:11AM  Market Realist]
▶ Shorting Whiting Petroleum Stock: What Are the Trends?   [Oct-12-17 07:36AM  Market Realist]
▶ Oil Q3 Earnings: This Might Hurt   [10:10AM  Barrons.com]
▶ US Natural Gas Prices Could Recover   [Sep-25-17 09:09AM  Market Realist]
▶ Was Goldman Sachs Wrong About Oil Demand?   [Sep-24-17 07:00PM  Oilprice.com]
▶ Why US Natural Gas Prices Could Rise in 2018   [07:38AM  Market Realist]
▶ Cimarex Energy Is Slowly Improving   [Sep-12-17 04:22PM  TheStreet.com]
▶ Cimarex Energy Declares Quarterly Cash Dividend   [Sep-01-17 04:05PM  PR Newswire]
▶ Harvey causes gas prices to spike   [11:51AM  Yahoo Finance Video]
▶ Harvey has broken all US records for rainfall   [Aug-31-17 01:35PM  Yahoo Finance Video]
▶ Energy markets resilient despite Harveys battering   [01:35PM  Yahoo Finance Video]
▶ Yahoo Finance Live: Midday Movers - Aug 29th, 2017   [Aug-29-17 09:40AM  Yahoo Finance Video]
▶ Cimarex Energy Has Improved Enough to Probe the Long Side   [Aug-24-17 08:22AM  TheStreet.com]
▶ Short Interest Trends: Whiting Petroleum Stock   [Aug-23-17 11:53AM  Market Realist]
▶ Will US Natural Gas Futures Fall from Current Levels?   [Aug-15-17 10:36AM  Market Realist]
▶ These Energy Stocks Rose the Most between August 7 and 11   [Aug-14-17 04:08PM  Market Realist]
▶ Cimarex Is the Best of the Permian, Jim Cramer Says   [Aug-10-17 11:29AM  TheStreet.com]
▶ The Hot Stock: Cimarex Energy Jumps 7.5%   [Aug-09-17 04:38PM  Barrons.com]
▶ Cimarex tops Street 2Q forecasts   [Aug-08-17 04:56PM  Associated Press]
▶ Take a Pass on Cimarex Energy   [Jul-31-17 02:57PM  TheStreet.com]
▶ Short Interest Trends in Whiting Petroleum Stock   [Jul-26-17 07:41AM  Market Realist]
▶ An Oil Certainty: Higher Prices, Lower Supply   [Jul-24-17 01:00PM  TheStreet.com]
▶ How Is Short Interest in Whiting Stock Trending?   [Jul-20-17 07:39AM  Market Realist]
▶ After-hours buzz: AMG, MNK & more   [Jul-12-17 05:40PM  CNBC]
▶ Short Interest Trends: Whiting Petroleum Stock   [Jul-11-17 09:09AM  Market Realist]
▶ The Short Interest Trends in Whiting Petroleum Stock   [Jun-28-17 07:38AM  Market Realist]
▶ Cramer: Is This the 'Big Give-Up' on Oil?   [Jun-20-17 02:37PM  TheStreet.com]
▶ Waiting for Oil's Turnaround: Patience, Please   [Jun-19-17 01:00PM  TheStreet.com]
▶ Looking at Trends in Oasis Petroleum Stock   [Jun-16-17 03:31PM  Market Realist]
▶ Short Interest Trends in Whiting Petroleum Stock   [Jun-13-17 04:05PM  Market Realist]
▶ Analyzing Short Interest Trends in Whiting Petroleum Stock   [Jun-07-17 11:05AM  Market Realist]
▶ ETFs with exposure to Cimarex Energy Co. : May 31, 2017   [May-31-17 12:52PM  Capital Cube]
Financial statements of XEC
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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