Intrinsic value of Chesapeake Energy - CHK

Previous Close

$4.51

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$4.51

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of CHK 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 2017), $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 4.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  20.60
  19.04
  17.64
  16.37
  15.24
  14.21
  13.29
  12.46
  11.72
  11.04
  10.44
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
Revenue, $m
  11,452
  13,633
  16,037
  18,663
  21,506
  24,562
  27,827
  31,294
  34,960
  38,821
  42,874
  47,117
  51,548
  56,170
  60,983
  65,991
  71,198
  76,610
  82,234
  88,079
  94,154
  100,468
  107,035
  113,867
  120,977
  128,381
  136,094
  144,133
  152,516
  161,263
Variable operating expenses, $m
  17,865
  21,267
  25,018
  29,114
  33,549
  38,317
  43,409
  48,819
  54,538
  60,561
  66,883
  73,502
  80,415
  87,625
  95,133
  102,946
  111,069
  119,512
  128,286
  137,403
  146,880
  156,731
  166,975
  177,632
  188,724
  200,274
  212,306
  224,848
  237,926
  251,570
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
  17,865
  21,267
  25,018
  29,114
  33,549
  38,317
  43,409
  48,819
  54,538
  60,561
  66,883
  73,502
  80,415
  87,625
  95,133
  102,946
  111,069
  119,512
  128,286
  137,403
  146,880
  156,731
  166,975
  177,632
  188,724
  200,274
  212,306
  224,848
  237,926
  251,570
Operating income, $m
  -6,413
  -7,634
  -8,981
  -10,451
  -12,043
  -13,755
  -15,583
  -17,525
  -19,578
  -21,740
  -24,009
  -26,385
  -28,867
  -31,455
  -34,150
  -36,955
  -39,871
  -42,902
  -46,051
  -49,324
  -52,726
  -56,262
  -59,940
  -63,765
  -67,747
  -71,893
  -76,213
  -80,715
  -85,409
  -90,307
EBITDA, $m
  -5,129
  -6,106
  -7,183
  -8,359
  -9,632
  -11,001
  -12,464
  -14,017
  -15,659
  -17,388
  -19,203
  -21,104
  -23,089
  -25,158
  -27,314
  -29,557
  -31,890
  -34,314
  -36,833
  -39,451
  -42,171
  -45,000
  -47,941
  -51,001
  -54,186
  -57,502
  -60,956
  -64,557
  -68,312
  -72,230
Interest expense (income), $m
  344
  539
  569
  708
  861
  1,028
  1,209
  1,403
  1,611
  1,832
  2,065
  2,310
  2,568
  2,838
  3,120
  3,414
  3,720
  4,039
  4,370
  4,714
  5,072
  5,444
  5,830
  6,232
  6,650
  7,084
  7,536
  8,007
  8,498
  9,009
  9,543
Earnings before tax, $m
  -6,952
  -8,204
  -9,689
  -11,312
  -13,071
  -14,964
  -16,986
  -19,136
  -21,409
  -23,805
  -26,320
  -28,953
  -31,705
  -34,575
  -37,564
  -40,675
  -43,909
  -47,272
  -50,765
  -54,396
  -58,170
  -62,092
  -66,172
  -70,415
  -74,831
  -79,430
  -84,220
  -89,213
  -94,419
  -99,850
Tax expense, $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
Net income, $m
  -6,952
  -8,204
  -9,689
  -11,312
  -13,071
  -14,964
  -16,986
  -19,136
  -21,409
  -23,805
  -26,320
  -28,953
  -31,705
  -34,575
  -37,564
  -40,675
  -43,909
  -47,272
  -50,765
  -54,396
  -58,170
  -62,092
  -66,172
  -70,415
  -74,831
  -79,430
  -84,220
  -89,213
  -94,419
  -99,850

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  14,990
  17,844
  20,991
  24,427
  28,149
  32,149
  36,422
  40,961
  45,760
  50,813
  56,118
  61,671
  67,472
  73,521
  79,821
  86,375
  93,191
  100,275
  107,637
  115,287
  123,238
  131,503
  140,098
  149,040
  158,347
  168,038
  178,133
  188,656
  199,629
  211,077
Adjusted assets (=assets-cash), $m
  14,990
  17,844
  20,991
  24,427
  28,149
  32,149
  36,422
  40,961
  45,760
  50,813
  56,118
  61,671
  67,472
  73,521
  79,821
  86,375
  93,191
  100,275
  107,637
  115,287
  123,238
  131,503
  140,098
  149,040
  158,347
  168,038
  178,133
  188,656
  199,629
  211,077
Revenue / Adjusted assets
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
  0.764
Average production assets, $m
  12,838
  15,282
  17,977
  20,921
  24,108
  27,534
  31,194
  35,081
  39,191
  43,519
  48,062
  52,818
  57,786
  62,966
  68,362
  73,976
  79,813
  85,880
  92,185
  98,737
  105,546
  112,625
  119,986
  127,645
  135,615
  143,915
  152,561
  161,573
  170,971
  180,776
Working capital, $m
  -790
  -941
  -1,107
  -1,288
  -1,484
  -1,695
  -1,920
  -2,159
  -2,412
  -2,679
  -2,958
  -3,251
  -3,557
  -3,876
  -4,208
  -4,553
  -4,913
  -5,286
  -5,674
  -6,077
  -6,497
  -6,932
  -7,385
  -7,857
  -8,347
  -8,858
  -9,390
  -9,945
  -10,524
  -11,127
Total debt, $m
  10,543
  13,111
  15,944
  19,037
  22,386
  25,986
  29,832
  33,917
  38,236
  42,784
  47,558
  52,556
  57,776
  63,221
  68,890
  74,790
  80,924
  87,299
  93,925
  100,810
  107,966
  115,405
  123,141
  131,188
  139,564
  148,286
  157,372
  166,842
  176,718
  187,021
Total liabilities, $m
  13,491
  16,059
  18,892
  21,985
  25,334
  28,934
  32,780
  36,865
  41,184
  45,732
  50,506
  55,504
  60,724
  66,169
  71,838
  77,738
  83,872
  90,247
  96,873
  103,758
  110,914
  118,353
  126,089
  134,136
  142,512
  151,234
  160,320
  169,790
  179,666
  189,969
Total equity, $m
  1,499
  1,784
  2,099
  2,443
  2,815
  3,215
  3,642
  4,096
  4,576
  5,081
  5,612
  6,167
  6,747
  7,352
  7,982
  8,638
  9,319
  10,027
  10,764
  11,529
  12,324
  13,150
  14,010
  14,904
  15,835
  16,804
  17,813
  18,866
  19,963
  21,108
Total liabilities and equity, $m
  14,990
  17,843
  20,991
  24,428
  28,149
  32,149
  36,422
  40,961
  45,760
  50,813
  56,118
  61,671
  67,471
  73,521
  79,820
  86,376
  93,191
  100,274
  107,637
  115,287
  123,238
  131,503
  140,099
  149,040
  158,347
  168,038
  178,133
  188,656
  199,629
  211,077
Debt-to-equity ratio
  7.030
  7.350
  7.600
  7.790
  7.950
  8.080
  8.190
  8.280
  8.360
  8.420
  8.470
  8.520
  8.560
  8.600
  8.630
  8.660
  8.680
  8.710
  8.730
  8.740
  8.760
  8.780
  8.790
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
Adjusted equity ratio
  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
  -6,952
  -8,204
  -9,689
  -11,312
  -13,071
  -14,964
  -16,986
  -19,136
  -21,409
  -23,805
  -26,320
  -28,953
  -31,705
  -34,575
  -37,564
  -40,675
  -43,909
  -47,272
  -50,765
  -54,396
  -58,170
  -62,092
  -66,172
  -70,415
  -74,831
  -79,430
  -84,220
  -89,213
  -94,419
  -99,850
Depreciation, amort., depletion, $m
  1,284
  1,528
  1,798
  2,092
  2,411
  2,753
  3,119
  3,508
  3,919
  4,352
  4,806
  5,282
  5,779
  6,297
  6,836
  7,398
  7,981
  8,588
  9,218
  9,874
  10,555
  11,263
  11,999
  12,764
  13,562
  14,391
  15,256
  16,157
  17,097
  18,078
Funds from operations, $m
  -5,668
  -6,675
  -7,891
  -9,220
  -10,660
  -12,210
  -13,867
  -15,628
  -17,490
  -19,453
  -21,514
  -23,672
  -25,927
  -28,278
  -30,728
  -33,277
  -35,928
  -38,684
  -41,547
  -44,523
  -47,615
  -50,830
  -54,173
  -57,651
  -61,270
  -65,038
  -68,964
  -73,055
  -77,322
  -81,772
Change in working capital, $m
  -135
  -150
  -166
  -181
  -196
  -211
  -225
  -239
  -253
  -266
  -280
  -293
  -306
  -319
  -332
  -346
  -359
  -373
  -388
  -403
  -419
  -436
  -453
  -471
  -491
  -511
  -532
  -555
  -578
  -604
Cash from operations, $m
  -5,533
  -6,525
  -7,725
  -9,039
  -10,464
  -11,999
  -13,642
  -15,388
  -17,237
  -19,186
  -21,234
  -23,379
  -25,621
  -27,960
  -30,396
  -32,932
  -35,569
  -38,310
  -41,159
  -44,119
  -47,196
  -50,394
  -53,720
  -57,179
  -60,779
  -64,527
  -68,432
  -72,501
  -76,743
  -81,169
Maintenance CAPEX, $m
  -1,064
  -1,284
  -1,528
  -1,798
  -2,092
  -2,411
  -2,753
  -3,119
  -3,508
  -3,919
  -4,352
  -4,806
  -5,282
  -5,779
  -6,297
  -6,836
  -7,398
  -7,981
  -8,588
  -9,218
  -9,874
  -10,555
  -11,263
  -11,999
  -12,764
  -13,562
  -14,391
  -15,256
  -16,157
  -17,097
New CAPEX, $m
  -2,193
  -2,444
  -2,695
  -2,943
  -3,187
  -3,426
  -3,659
  -3,887
  -4,110
  -4,328
  -4,543
  -4,756
  -4,968
  -5,181
  -5,395
  -5,614
  -5,837
  -6,067
  -6,305
  -6,552
  -6,809
  -7,079
  -7,361
  -7,658
  -7,971
  -8,300
  -8,646
  -9,012
  -9,398
  -9,805
Cash from investing activities, $m
  -3,257
  -3,728
  -4,223
  -4,741
  -5,279
  -5,837
  -6,412
  -7,006
  -7,618
  -8,247
  -8,895
  -9,562
  -10,250
  -10,960
  -11,692
  -12,450
  -13,235
  -14,048
  -14,893
  -15,770
  -16,683
  -17,634
  -18,624
  -19,657
  -20,735
  -21,862
  -23,037
  -24,268
  -25,555
  -26,902
Free cash flow, $m
  -8,791
  -10,253
  -11,948
  -13,780
  -15,744
  -17,836
  -20,054
  -22,395
  -24,855
  -27,434
  -30,129
  -32,941
  -35,870
  -38,919
  -42,088
  -45,382
  -48,804
  -52,358
  -56,052
  -59,890
  -63,879
  -68,028
  -72,344
  -76,836
  -81,514
  -86,388
  -91,469
  -96,769
  -102,298
  -108,071
Issuance/(repayment) of debt, $m
  570
  2,569
  2,832
  3,093
  3,349
  3,600
  3,846
  4,085
  4,319
  4,548
  4,774
  4,998
  5,221
  5,444
  5,670
  5,899
  6,134
  6,376
  6,625
  6,885
  7,156
  7,439
  7,736
  8,048
  8,376
  8,722
  9,086
  9,470
  9,876
  10,303
Issuance/(repurchase) of shares, $m
  8,947
  8,489
  10,003
  11,656
  13,443
  15,364
  17,413
  19,590
  21,889
  24,310
  26,850
  29,509
  32,285
  35,180
  38,194
  41,330
  44,591
  47,980
  51,502
  55,161
  58,965
  62,919
  67,031
  71,309
  75,762
  80,399
  85,230
  90,265
  95,516
  100,995
Cash from financing (excl. dividends), $m  
  9,517
  11,058
  12,835
  14,749
  16,792
  18,964
  21,259
  23,675
  26,208
  28,858
  31,624
  34,507
  37,506
  40,624
  43,864
  47,229
  50,725
  54,356
  58,127
  62,046
  66,121
  70,358
  74,767
  79,357
  84,138
  89,121
  94,316
  99,735
  105,392
  111,298
Total cash flow (excl. dividends), $m
  726
  805
  887
  969
  1,049
  1,128
  1,205
  1,280
  1,353
  1,425
  1,495
  1,566
  1,635
  1,705
  1,776
  1,848
  1,921
  1,997
  2,075
  2,157
  2,241
  2,330
  2,423
  2,521
  2,624
  2,732
  2,846
  2,966
  3,093
  3,227
Retained Cash Flow (-), $m
  -8,947
  -8,489
  -10,003
  -11,656
  -13,443
  -15,364
  -17,413
  -19,590
  -21,889
  -24,310
  -26,850
  -29,509
  -32,285
  -35,180
  -38,194
  -41,330
  -44,591
  -47,980
  -51,502
  -55,161
  -58,965
  -62,919
  -67,031
  -71,309
  -75,762
  -80,399
  -85,230
  -90,265
  -95,516
  -100,995
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
  47
  57
  68
  80
  93
  108
  123
  139
  156
  175
  194
  214
  236
  258
  281
  305
  330
  356
  383
  411
  440
  471
  502
  535
  569
  605
  642
  680
  721
  763
Cash available for distribution, $m
  -8,221
  -7,684
  -9,116
  -10,687
  -12,394
  -14,236
  -16,209
  -18,310
  -20,536
  -22,885
  -25,355
  -27,943
  -30,650
  -33,475
  -36,418
  -39,482
  -42,670
  -45,983
  -49,426
  -53,005
  -56,723
  -60,589
  -64,608
  -68,788
  -73,138
  -77,667
  -82,383
  -87,298
  -92,423
  -97,767
Discount rate, %
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
  60.51
PV of cash for distribution, $m
  -7,167
  -5,767
  -5,809
  -5,700
  -5,448
  -5,074
  -4,604
  -4,069
  -3,502
  -2,934
  -2,391
  -1,894
  -1,458
  -1,089
  -789
  -554
  -376
  -247
  -157
  -96
  -56
  -32
  -17
  -9
  -4
  -2
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  7.5
  1.1
  0.2
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Chesapeake Energy Corporation produces natural gas, oil and natural gas liquids (NGL) in the United States. It operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. Exploration and production is engaged in finding and producing oil, natural gas and NGL. Marketing, gathering and compression is engaged in marketing, gathering and compression of oil, natural gas and NGL. As of December 31, 2016, it owned interests in approximately 22,700 oil and natural gas wells. It has a diverse resource base of onshore the United States unconventional natural gas and liquids assets. It has positions in resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania.

FINANCIAL RATIOS  of  Chesapeake Energy (CHK)

Valuation Ratios
P/E Ratio -0.9
Price to Sales 0.5
Price to Book -2.8
Price to Tangible Book
Price to Cash Flow -19.8
Price to Free Cash Flow -1.7
Growth Rates
Sales Growth Rate -38.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.8%
Cap. Spend. - 3 Yr. Gr. Rate -22.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity -680.7%
Total Debt to Equity -715.1%
Interest Coverage -12
Management Effectiveness
Return On Assets -26.8%
Ret/ On Assets - 3 Yr. Avg. -24%
Return On Total Capital -40.4%
Ret/ On T. Cap. - 3 Yr. Avg. -34.9%
Return On Equity -1298.2%
Return On Equity - 3 Yr. Avg. -480.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 74.4%
EBITDA Margin -39.9%
EBITDA Margin - 3 Yr. Avg. -47.8%
Operating Margin -54.5%
Oper. Margin - 3 Yr. Avg. -62.3%
Pre-Tax Margin -58.3%
Pre-Tax Margin - 3 Yr. Avg. -64.7%
Net Profit Margin -55.9%
Net Profit Margin - 3 Yr. Avg. -54.2%
Effective Tax Rate 4.1%
Eff/ Tax Rate - 3 Yr. Avg. 21.1%
Payout Ratio 0%

CHK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHK stock intrinsic value calculation we used $9496 million for the last fiscal year's total revenue generated by Chesapeake Energy. The default revenue input number comes from 2017 income statement of Chesapeake 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 CHK stock valuation model: a) initial revenue growth rate of 20.6% 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 14.7%, whose default value for CHK is calculated based on our internal credit rating of Chesapeake 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 Chesapeake 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 CHK stock the variable cost ratio is equal to 156%.

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 CHK 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 5.4% for Chesapeake Energy.

Corporate tax rate of 27% is the nominal tax rate for Chesapeake 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 CHK stock is equal to 0.5%.

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 CHK are equal to 112.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Chesapeake 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 CHK is equal to -6.9%. 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 - $-496 million for Chesapeake 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 906 million for Chesapeake 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 Chesapeake Energy at the current share price and the inputted number of shares is $4.1 billion.

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