Intrinsic value of Chesapeake Energy - CHK

Previous Close

$3.73

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$3.73

 
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 0001), $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 3.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  9,686
  9,909
  10,163
  10,449
  10,766
  11,114
  11,492
  11,902
  12,343
  12,817
  13,324
  13,864
  14,440
  15,052
  15,701
  16,389
  17,118
  17,888
  18,702
  19,561
  20,468
  21,424
  22,432
  23,494
  24,613
  25,790
  27,030
  28,334
  29,706
  31,150
Variable operating expenses, $m
  15,110
  15,458
  15,855
  16,301
  16,795
  17,337
  17,928
  18,567
  19,255
  19,994
  20,785
  21,629
  22,527
  23,481
  24,494
  25,568
  26,704
  27,905
  29,175
  30,516
  31,930
  33,422
  34,994
  36,651
  38,396
  40,233
  42,166
  44,201
  46,342
  48,593
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
  15,110
  15,458
  15,855
  16,301
  16,795
  17,337
  17,928
  18,567
  19,255
  19,994
  20,785
  21,629
  22,527
  23,481
  24,494
  25,568
  26,704
  27,905
  29,175
  30,516
  31,930
  33,422
  34,994
  36,651
  38,396
  40,233
  42,166
  44,201
  46,342
  48,593
Operating income, $m
  -5,424
  -5,549
  -5,691
  -5,852
  -6,029
  -6,224
  -6,436
  -6,665
  -6,912
  -7,177
  -7,461
  -7,764
  -8,087
  -8,429
  -8,793
  -9,178
  -9,586
  -10,017
  -10,473
  -10,954
  -11,462
  -11,998
  -12,562
  -13,157
  -13,783
  -14,442
  -15,137
  -15,867
  -16,635
  -17,444
EBITDA, $m
  -4,409
  -4,511
  -4,627
  -4,757
  -4,901
  -5,059
  -5,232
  -5,418
  -5,619
  -5,835
  -6,065
  -6,312
  -6,574
  -6,852
  -7,148
  -7,461
  -7,793
  -8,143
  -8,514
  -8,905
  -9,318
  -9,753
  -10,212
  -10,695
  -11,204
  -11,741
  -12,305
  -12,899
  -13,523
  -14,180
Interest expense (income), $m
  344
  539
  457
  471
  487
  506
  526
  548
  572
  598
  626
  656
  688
  723
  759
  798
  840
  883
  930
  979
  1,030
  1,085
  1,143
  1,204
  1,268
  1,335
  1,406
  1,481
  1,560
  1,643
  1,730
Earnings before tax, $m
  -5,963
  -6,006
  -6,163
  -6,339
  -6,534
  -6,749
  -6,983
  -7,237
  -7,510
  -7,803
  -8,117
  -8,452
  -8,809
  -9,189
  -9,591
  -10,018
  -10,469
  -10,947
  -11,452
  -11,985
  -12,547
  -13,140
  -13,766
  -14,424
  -15,118
  -15,849
  -16,618
  -17,427
  -18,279
  -19,174
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
  -5,963
  -6,006
  -6,163
  -6,339
  -6,534
  -6,749
  -6,983
  -7,237
  -7,510
  -7,803
  -8,117
  -8,452
  -8,809
  -9,189
  -9,591
  -10,018
  -10,469
  -10,947
  -11,452
  -11,985
  -12,547
  -13,140
  -13,766
  -14,424
  -15,118
  -15,849
  -16,618
  -17,427
  -18,279
  -19,174

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
  12,678
  12,969
  13,303
  13,677
  14,092
  14,547
  15,042
  15,578
  16,156
  16,776
  17,439
  18,147
  18,901
  19,702
  20,552
  21,452
  22,406
  23,414
  24,479
  25,604
  26,791
  28,042
  29,361
  30,751
  32,215
  33,757
  35,379
  37,086
  38,882
  40,772
Adjusted assets (=assets-cash), $m
  12,678
  12,969
  13,303
  13,677
  14,092
  14,547
  15,042
  15,578
  16,156
  16,776
  17,439
  18,147
  18,901
  19,702
  20,552
  21,452
  22,406
  23,414
  24,479
  25,604
  26,791
  28,042
  29,361
  30,751
  32,215
  33,757
  35,379
  37,086
  38,882
  40,772
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
  10,858
  11,108
  11,393
  11,714
  12,069
  12,458
  12,883
  13,342
  13,837
  14,368
  14,936
  15,542
  16,187
  16,873
  17,601
  18,373
  19,189
  20,053
  20,965
  21,928
  22,945
  24,016
  25,146
  26,337
  27,591
  28,911
  30,300
  31,762
  33,301
  34,919
Working capital, $m
  -804
  -822
  -844
  -867
  -894
  -922
  -954
  -988
  -1,024
  -1,064
  -1,106
  -1,151
  -1,199
  -1,249
  -1,303
  -1,360
  -1,421
  -1,485
  -1,552
  -1,624
  -1,699
  -1,778
  -1,862
  -1,950
  -2,043
  -2,141
  -2,243
  -2,352
  -2,466
  -2,585
Total debt, $m
  8,462
  8,725
  9,025
  9,361
  9,735
  10,144
  10,590
  11,072
  11,592
  12,150
  12,747
  13,384
  14,063
  14,784
  15,548
  16,359
  17,217
  18,124
  19,083
  20,095
  21,163
  22,290
  23,477
  24,728
  26,046
  27,433
  28,893
  30,430
  32,046
  33,746
Total liabilities, $m
  11,410
  11,673
  11,973
  12,309
  12,683
  13,092
  13,538
  14,020
  14,540
  15,098
  15,695
  16,332
  17,011
  17,732
  18,496
  19,307
  20,165
  21,072
  22,031
  23,043
  24,111
  25,238
  26,425
  27,676
  28,994
  30,381
  31,841
  33,378
  34,994
  36,694
Total equity, $m
  1,268
  1,297
  1,330
  1,368
  1,409
  1,455
  1,504
  1,558
  1,616
  1,678
  1,744
  1,815
  1,890
  1,970
  2,055
  2,145
  2,241
  2,341
  2,448
  2,560
  2,679
  2,804
  2,936
  3,075
  3,222
  3,376
  3,538
  3,709
  3,888
  4,077
Total liabilities and equity, $m
  12,678
  12,970
  13,303
  13,677
  14,092
  14,547
  15,042
  15,578
  16,156
  16,776
  17,439
  18,147
  18,901
  19,702
  20,551
  21,452
  22,406
  23,413
  24,479
  25,603
  26,790
  28,042
  29,361
  30,751
  32,216
  33,757
  35,379
  37,087
  38,882
  40,771
Debt-to-equity ratio
  6.670
  6.730
  6.780
  6.840
  6.910
  6.970
  7.040
  7.110
  7.180
  7.240
  7.310
  7.380
  7.440
  7.500
  7.570
  7.630
  7.680
  7.740
  7.800
  7.850
  7.900
  7.950
  8.000
  8.040
  8.080
  8.130
  8.170
  8.210
  8.240
  8.280
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
  -5,963
  -6,006
  -6,163
  -6,339
  -6,534
  -6,749
  -6,983
  -7,237
  -7,510
  -7,803
  -8,117
  -8,452
  -8,809
  -9,189
  -9,591
  -10,018
  -10,469
  -10,947
  -11,452
  -11,985
  -12,547
  -13,140
  -13,766
  -14,424
  -15,118
  -15,849
  -16,618
  -17,427
  -18,279
  -19,174
Depreciation, amort., depletion, $m
  1,015
  1,038
  1,065
  1,095
  1,128
  1,164
  1,204
  1,247
  1,293
  1,343
  1,396
  1,453
  1,513
  1,577
  1,645
  1,717
  1,793
  1,874
  1,959
  2,049
  2,144
  2,245
  2,350
  2,461
  2,579
  2,702
  2,832
  2,968
  3,112
  3,263
Funds from operations, $m
  -4,948
  -4,968
  -5,098
  -5,244
  -5,407
  -5,585
  -5,779
  -5,990
  -6,217
  -6,461
  -6,722
  -7,000
  -7,296
  -7,612
  -7,946
  -8,301
  -8,676
  -9,073
  -9,492
  -9,935
  -10,403
  -10,896
  -11,415
  -11,963
  -12,540
  -13,147
  -13,786
  -14,459
  -15,166
  -15,911
Change in working capital, $m
  -16
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
Cash from operations, $m
  -4,932
  -4,949
  -5,077
  -5,220
  -5,380
  -5,556
  -5,748
  -5,956
  -6,180
  -6,421
  -6,679
  -6,955
  -7,249
  -7,561
  -7,892
  -8,244
  -8,616
  -9,009
  -9,425
  -9,864
  -10,328
  -10,816
  -11,332
  -11,875
  -12,447
  -13,049
  -13,683
  -14,351
  -15,053
  -15,791
Maintenance CAPEX, $m
  -995
  -1,015
  -1,038
  -1,065
  -1,095
  -1,128
  -1,164
  -1,204
  -1,247
  -1,293
  -1,343
  -1,396
  -1,453
  -1,513
  -1,577
  -1,645
  -1,717
  -1,793
  -1,874
  -1,959
  -2,049
  -2,144
  -2,245
  -2,350
  -2,461
  -2,579
  -2,702
  -2,832
  -2,968
  -3,112
New CAPEX, $m
  -213
  -250
  -285
  -320
  -355
  -390
  -424
  -459
  -495
  -531
  -568
  -606
  -645
  -686
  -728
  -771
  -816
  -863
  -912
  -963
  -1,016
  -1,072
  -1,130
  -1,190
  -1,254
  -1,320
  -1,389
  -1,462
  -1,538
  -1,618
Cash from investing activities, $m
  -1,208
  -1,265
  -1,323
  -1,385
  -1,450
  -1,518
  -1,588
  -1,663
  -1,742
  -1,824
  -1,911
  -2,002
  -2,098
  -2,199
  -2,305
  -2,416
  -2,533
  -2,656
  -2,786
  -2,922
  -3,065
  -3,216
  -3,375
  -3,540
  -3,715
  -3,899
  -4,091
  -4,294
  -4,506
  -4,730
Free cash flow, $m
  -6,140
  -6,214
  -6,400
  -6,606
  -6,830
  -7,074
  -7,337
  -7,619
  -7,922
  -8,246
  -8,590
  -8,957
  -9,347
  -9,760
  -10,197
  -10,660
  -11,149
  -11,666
  -12,211
  -12,787
  -13,393
  -14,033
  -14,706
  -15,415
  -16,162
  -16,948
  -17,775
  -18,645
  -19,559
  -20,521
Issuance/(repayment) of debt, $m
  -1,511
  262
  300
  337
  373
  409
  446
  483
  520
  558
  597
  637
  678
  721
  765
  811
  858
  907
  959
  1,012
  1,068
  1,126
  1,187
  1,251
  1,318
  1,387
  1,460
  1,537
  1,616
  1,700
Issuance/(repurchase) of shares, $m
  7,726
  6,035
  6,196
  6,376
  6,576
  6,795
  7,033
  7,290
  7,568
  7,865
  8,184
  8,523
  8,885
  9,269
  9,676
  10,108
  10,565
  11,048
  11,558
  12,097
  12,666
  13,266
  13,898
  14,563
  15,265
  16,003
  16,780
  17,598
  18,458
  19,363
Cash from financing (excl. dividends), $m  
  6,215
  6,297
  6,496
  6,713
  6,949
  7,204
  7,479
  7,773
  8,088
  8,423
  8,781
  9,160
  9,563
  9,990
  10,441
  10,919
  11,423
  11,955
  12,517
  13,109
  13,734
  14,392
  15,085
  15,814
  16,583
  17,390
  18,240
  19,135
  20,074
  21,063
Total cash flow (excl. dividends), $m
  75
  84
  96
  107
  119
  131
  142
  154
  166
  178
  190
  203
  216
  230
  244
  258
  274
  289
  306
  323
  341
  359
  379
  399
  420
  442
  466
  490
  515
  542
Retained Cash Flow (-), $m
  -7,726
  -6,035
  -6,196
  -6,376
  -6,576
  -6,795
  -7,033
  -7,290
  -7,568
  -7,865
  -8,184
  -8,523
  -8,885
  -9,269
  -9,676
  -10,108
  -10,565
  -11,048
  -11,558
  -12,097
  -12,666
  -13,266
  -13,898
  -14,563
  -15,265
  -16,003
  -16,780
  -17,598
  -18,458
  -19,363
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
  -7,651
  -5,951
  -6,100
  -6,269
  -6,457
  -6,664
  -6,891
  -7,137
  -7,402
  -7,688
  -7,993
  -8,320
  -8,668
  -9,039
  -9,432
  -9,849
  -10,291
  -10,759
  -11,253
  -11,774
  -12,325
  -12,906
  -13,519
  -14,164
  -14,845
  -15,561
  -16,315
  -17,108
  -17,943
  -18,821
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
  -6,671
  -4,466
  -3,887
  -3,343
  -2,838
  -2,375
  -1,957
  -1,586
  -1,262
  -985
  -754
  -564
  -412
  -294
  -204
  -138
  -91
  -58
  -36
  -21
  -12
  -7
  -4
  -2
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  8.7
  1.5
  0.3
  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 -0.8
Price to Sales 0.4
Price to Book -2.3
Price to Tangible Book
Price to Cash Flow -16.4
Price to Free Cash Flow -1.4
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 0001 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 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 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%.

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 10.7 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 -8.3%. 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 912.274 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 $3.4 billion.

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