Intrinsic value of Callon Petroleum - CPE

Previous Close

$10.90

  Intrinsic Value

$2.11

stock screener

  Rating & Target

str. sell

-81%

Previous close

$10.90

 
Intrinsic value

$2.11

 
Up/down potential

-81%

 
Rating

str. sell

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

We calculate the intrinsic value of CPE 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  45.65
  51.80
  47.12
  42.91
  39.12
  35.71
  32.63
  29.87
  27.38
  25.15
  23.13
  21.32
  19.69
  18.22
  16.90
  15.71
  14.64
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
Revenue, $m
  201
  305
  449
  641
  892
  1,211
  1,606
  2,086
  2,657
  3,326
  4,095
  4,968
  5,946
  7,029
  8,217
  9,507
  10,899
  12,389
  13,975
  15,656
  17,428
  19,291
  21,244
  23,285
  25,415
  27,634
  29,945
  32,347
  34,845
  37,441
  40,138
Variable operating expenses, $m
 
  766
  1,128
  1,611
  2,242
  3,042
  4,035
  5,240
  6,675
  8,354
  10,286
  12,479
  14,936
  17,657
  20,640
  23,882
  27,378
  31,121
  35,106
  39,327
  43,780
  48,459
  53,364
  58,492
  63,842
  69,418
  75,221
  81,256
  87,531
  94,051
  100,827
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
  261
  766
  1,128
  1,611
  2,242
  3,042
  4,035
  5,240
  6,675
  8,354
  10,286
  12,479
  14,936
  17,657
  20,640
  23,882
  27,378
  31,121
  35,106
  39,327
  43,780
  48,459
  53,364
  58,492
  63,842
  69,418
  75,221
  81,256
  87,531
  94,051
  100,827
Operating income, $m
  -60
  -461
  -679
  -970
  -1,349
  -1,831
  -2,429
  -3,154
  -4,018
  -5,028
  -6,192
  -7,511
  -8,990
  -10,628
  -12,424
  -14,375
  -16,479
  -18,732
  -21,131
  -23,671
  -26,351
  -29,168
  -32,120
  -35,207
  -38,427
  -41,783
  -45,276
  -48,909
  -52,686
  -56,610
  -60,689
EBITDA, $m
  13
  -351
  -516
  -738
  -1,026
  -1,392
  -1,847
  -2,399
  -3,055
  -3,824
  -4,708
  -5,712
  -6,836
  -8,082
  -9,447
  -10,931
  -12,531
  -14,244
  -16,068
  -18,000
  -20,038
  -22,180
  -24,425
  -26,772
  -29,221
  -31,773
  -34,429
  -37,192
  -40,064
  -43,048
  -46,149
Interest expense (income), $m
  0
  14
  23
  37
  55
  78
  108
  145
  190
  243
  306
  378
  459
  550
  652
  763
  883
  1,013
  1,152
  1,301
  1,458
  1,623
  1,797
  1,980
  2,170
  2,369
  2,577
  2,793
  3,017
  3,250
  3,493
Earnings before tax, $m
  -92
  -475
  -702
  -1,007
  -1,404
  -1,909
  -2,537
  -3,299
  -4,208
  -5,272
  -6,497
  -7,889
  -9,449
  -11,178
  -13,075
  -15,138
  -17,362
  -19,745
  -22,283
  -24,972
  -27,809
  -30,791
  -33,918
  -37,186
  -40,598
  -44,153
  -47,853
  -51,702
  -55,703
  -59,861
  -64,182
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
  0
Net income, $m
  -92
  -475
  -702
  -1,007
  -1,404
  -1,909
  -2,537
  -3,299
  -4,208
  -5,272
  -6,497
  -7,889
  -9,449
  -11,178
  -13,075
  -15,138
  -17,362
  -19,745
  -22,283
  -24,972
  -27,809
  -30,791
  -33,918
  -37,186
  -40,598
  -44,153
  -47,853
  -51,702
  -55,703
  -59,861
  -64,182

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
  2,268
  2,461
  3,620
  5,173
  7,197
  9,767
  12,954
  16,824
  21,431
  26,820
  33,024
  40,064
  47,951
  56,686
  66,264
  76,672
  87,893
  99,910
  112,703
  126,255
  140,550
  155,574
  171,320
  187,781
  204,959
  222,858
  241,489
  260,865
  281,008
  301,941
  323,694
Adjusted assets (=assets-cash), $m
  1,615
  2,461
  3,620
  5,173
  7,197
  9,767
  12,954
  16,824
  21,431
  26,820
  33,024
  40,064
  47,951
  56,686
  66,264
  76,672
  87,893
  99,910
  112,703
  126,255
  140,550
  155,574
  171,320
  187,781
  204,959
  222,858
  241,489
  260,865
  281,008
  301,941
  323,694
Revenue / Adjusted assets
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
  0.124
Average production assets, $m
  1,012
  1,536
  2,260
  3,230
  4,493
  6,098
  8,088
  10,504
  13,380
  16,745
  20,618
  25,013
  29,938
  35,392
  41,371
  47,869
  54,875
  62,378
  70,365
  78,826
  87,751
  97,131
  106,962
  117,239
  127,964
  139,139
  150,771
  162,869
  175,444
  188,514
  202,095
Working capital, $m
  593
  -91
  -134
  -192
  -267
  -362
  -480
  -624
  -795
  -994
  -1,224
  -1,485
  -1,778
  -2,102
  -2,457
  -2,843
  -3,259
  -3,704
  -4,179
  -4,681
  -5,211
  -5,768
  -6,352
  -6,962
  -7,599
  -8,263
  -8,953
  -9,672
  -10,419
  -11,195
  -12,001
Total debt, $m
  390
  669
  1,053
  1,567
  2,237
  3,088
  4,143
  5,424
  6,949
  8,732
  10,786
  13,116
  15,727
  18,618
  21,788
  25,233
  28,948
  32,925
  37,160
  41,645
  46,377
  51,350
  56,562
  62,011
  67,696
  73,621
  79,788
  86,201
  92,869
  99,797
  106,998
Total liabilities, $m
  534
  814
  1,198
  1,712
  2,382
  3,233
  4,288
  5,569
  7,094
  8,877
  10,931
  13,261
  15,872
  18,763
  21,933
  25,378
  29,093
  33,070
  37,305
  41,790
  46,522
  51,495
  56,707
  62,156
  67,841
  73,766
  79,933
  86,346
  93,014
  99,942
  107,143
Total equity, $m
  1,733
  1,646
  2,422
  3,461
  4,815
  6,534
  8,666
  11,255
  14,337
  17,942
  22,093
  26,803
  32,079
  37,923
  44,331
  51,293
  58,800
  66,840
  75,398
  84,465
  94,028
  104,079
  114,613
  125,626
  137,118
  149,092
  161,556
  174,519
  187,994
  201,998
  216,551
Total liabilities and equity, $m
  2,267
  2,460
  3,620
  5,173
  7,197
  9,767
  12,954
  16,824
  21,431
  26,819
  33,024
  40,064
  47,951
  56,686
  66,264
  76,671
  87,893
  99,910
  112,703
  126,255
  140,550
  155,574
  171,320
  187,782
  204,959
  222,858
  241,489
  260,865
  281,008
  301,940
  323,694
Debt-to-equity ratio
  0.225
  0.410
  0.430
  0.450
  0.460
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Adjusted equity ratio
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -92
  -475
  -702
  -1,007
  -1,404
  -1,909
  -2,537
  -3,299
  -4,208
  -5,272
  -6,497
  -7,889
  -9,449
  -11,178
  -13,075
  -15,138
  -17,362
  -19,745
  -22,283
  -24,972
  -27,809
  -30,791
  -33,918
  -37,186
  -40,598
  -44,153
  -47,853
  -51,702
  -55,703
  -59,861
  -64,182
Depreciation, amort., depletion, $m
  73
  111
  163
  232
  323
  439
  582
  756
  963
  1,205
  1,483
  1,800
  2,154
  2,546
  2,976
  3,444
  3,948
  4,488
  5,062
  5,671
  6,313
  6,988
  7,695
  8,434
  9,206
  10,010
  10,847
  11,717
  12,622
  13,562
  14,539
Funds from operations, $m
  113
  -364
  -540
  -774
  -1,081
  -1,471
  -1,955
  -2,544
  -3,245
  -4,067
  -5,014
  -6,089
  -7,295
  -8,632
  -10,099
  -11,694
  -13,414
  -15,257
  -17,221
  -19,301
  -21,496
  -23,804
  -26,223
  -28,752
  -31,392
  -34,143
  -37,006
  -39,985
  -43,081
  -46,299
  -49,642
Change in working capital, $m
  -6
  -31
  -43
  -58
  -75
  -95
  -118
  -143
  -171
  -200
  -230
  -261
  -292
  -324
  -355
  -386
  -416
  -446
  -474
  -502
  -530
  -557
  -584
  -610
  -637
  -664
  -691
  -718
  -747
  -776
  -807
Cash from operations, $m
  119
  -333
  -497
  -717
  -1,006
  -1,375
  -1,837
  -2,400
  -3,074
  -3,867
  -4,784
  -5,828
  -7,003
  -8,308
  -9,744
  -11,308
  -12,998
  -14,812
  -16,746
  -18,799
  -20,966
  -23,247
  -25,639
  -28,142
  -30,755
  -33,479
  -36,315
  -39,266
  -42,334
  -45,522
  -48,836
Maintenance CAPEX, $m
  0
  -73
  -111
  -163
  -232
  -323
  -439
  -582
  -756
  -963
  -1,205
  -1,483
  -1,800
  -2,154
  -2,546
  -2,976
  -3,444
  -3,948
  -4,488
  -5,062
  -5,671
  -6,313
  -6,988
  -7,695
  -8,434
  -9,206
  -10,010
  -10,847
  -11,717
  -12,622
  -13,562
New CAPEX, $m
  -190
  -524
  -724
  -970
  -1,263
  -1,604
  -1,990
  -2,416
  -2,876
  -3,365
  -3,873
  -4,395
  -4,924
  -5,454
  -5,980
  -6,498
  -7,006
  -7,503
  -7,987
  -8,461
  -8,925
  -9,380
  -9,830
  -10,278
  -10,725
  -11,175
  -11,632
  -12,098
  -12,576
  -13,069
  -13,581
Cash from investing activities, $m
  -866
  -597
  -835
  -1,133
  -1,495
  -1,927
  -2,429
  -2,998
  -3,632
  -4,328
  -5,078
  -5,878
  -6,724
  -7,608
  -8,526
  -9,474
  -10,450
  -11,451
  -12,475
  -13,523
  -14,596
  -15,693
  -16,818
  -17,973
  -19,159
  -20,381
  -21,642
  -22,945
  -24,293
  -25,691
  -27,143
Free cash flow, $m
  -747
  -930
  -1,331
  -1,849
  -2,502
  -3,303
  -4,266
  -5,398
  -6,707
  -8,194
  -9,862
  -11,707
  -13,727
  -15,916
  -18,270
  -20,782
  -23,448
  -26,262
  -29,221
  -32,322
  -35,562
  -38,940
  -42,457
  -46,114
  -49,914
  -53,860
  -57,957
  -62,211
  -66,627
  -71,214
  -75,979
Issuance/(repayment) of debt, $m
  60
  279
  384
  514
  670
  851
  1,055
  1,281
  1,525
  1,784
  2,053
  2,330
  2,611
  2,891
  3,170
  3,445
  3,714
  3,978
  4,235
  4,486
  4,732
  4,973
  5,212
  5,449
  5,686
  5,925
  6,167
  6,414
  6,667
  6,929
  7,200
Issuance/(repurchase) of shares, $m
  1,358
  1,041
  1,478
  2,046
  2,758
  3,629
  4,669
  5,888
  7,290
  8,877
  10,647
  12,599
  14,726
  17,022
  19,483
  22,100
  24,869
  27,784
  30,842
  34,038
  37,372
  40,843
  44,451
  48,199
  52,090
  56,127
  60,317
  64,665
  69,178
  73,865
  78,734
Cash from financing (excl. dividends), $m  
  1,406
  1,320
  1,862
  2,560
  3,428
  4,480
  5,724
  7,169
  8,815
  10,661
  12,700
  14,929
  17,337
  19,913
  22,653
  25,545
  28,583
  31,762
  35,077
  38,524
  42,104
  45,816
  49,663
  53,648
  57,776
  62,052
  66,484
  71,079
  75,845
  80,794
  85,934
Total cash flow (excl. dividends), $m
  659
  390
  531
  711
  926
  1,176
  1,459
  1,771
  2,108
  2,466
  2,839
  3,222
  3,610
  3,998
  4,383
  4,763
  5,136
  5,500
  5,855
  6,202
  6,542
  6,876
  7,206
  7,534
  7,862
  8,192
  8,526
  8,868
  9,218
  9,580
  9,955
Retained Cash Flow (-), $m
  -1,370
  -1,041
  -1,478
  -2,046
  -2,758
  -3,629
  -4,669
  -5,888
  -7,290
  -8,877
  -10,647
  -12,599
  -14,726
  -17,022
  -19,483
  -22,100
  -24,869
  -27,784
  -30,842
  -34,038
  -37,372
  -40,843
  -44,451
  -48,199
  -52,090
  -56,127
  -60,317
  -64,665
  -69,178
  -73,865
  -78,734
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
 
  2
  -947
  -1,335
  -1,832
  -2,453
  -3,210
  -4,117
  -5,182
  -6,411
  -7,808
  -9,377
  -11,116
  -13,025
  -15,100
  -17,337
  -19,734
  -22,285
  -24,987
  -27,836
  -30,830
  -33,967
  -37,245
  -40,666
  -44,228
  -47,936
  -51,790
  -55,797
  -59,960
  -64,285
  -68,779
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
 
  2
  -867
  -1,162
  -1,508
  -1,901
  -2,330
  -2,781
  -3,239
  -3,683
  -4,094
  -4,453
  -4,744
  -4,952
  -5,069
  -5,090
  -5,015
  -4,849
  -4,602
  -4,286
  -3,918
  -3,513
  -3,090
  -2,665
  -2,253
  -1,865
  -1,511
  -1,198
  -928
  -702
  -518
Current shareholders' claim on cash, %
  100
  57.2
  33.7
  20.4
  12.6
  7.9
  5.1
  3.3
  2.2
  1.5
  1.0
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  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

Callon Petroleum Company is an independent oil and natural gas company. The Company is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The Company focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin. The Permian Basin is located in West Texas and southeastern New Mexico and consisted of three primary sub-basins: the Midland Basin, the Delaware Basin, and the Central Basin Platform as of December 31, 2016. The Company's drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. It owns additional immaterial properties in Louisiana. As of December 31, 2016, the Company had owned leaseholds in 39,570 net acres in the Permian Basin, all of which was located in the Midland Basin.

FINANCIAL RATIOS  of  Callon Petroleum (CPE)

Valuation Ratios
P/E Ratio -23.8
Price to Sales 10.9
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 18.4
Price to Free Cash Flow -30.9
Growth Rates
Sales Growth Rate 45.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 22.5%
Total Debt to Equity 22.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -6%
Ret/ On Assets - 3 Yr. Avg. -9.7%
Return On Total Capital -6.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10.9%
Return On Equity -8.8%
Return On Equity - 3 Yr. Avg. -19.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 75.1%
Gross Margin - 3 Yr. Avg. 76%
EBITDA Margin -9.5%
EBITDA Margin - 3 Yr. Avg. -8.9%
Operating Margin -29.9%
Oper. Margin - 3 Yr. Avg. -51.9%
Pre-Tax Margin -45.8%
Pre-Tax Margin - 3 Yr. Avg. -50.7%
Net Profit Margin -45.8%
Net Profit Margin - 3 Yr. Avg. -64.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.3%
Payout Ratio -7.6%

CPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPE stock intrinsic value calculation we used $201 million for the last fiscal year's total revenue generated by Callon Petroleum. The default revenue input number comes from 2016 income statement of Callon Petroleum. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CPE stock valuation model: a) initial revenue growth rate of 51.8% 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 CPE is calculated based on our internal credit rating of Callon Petroleum, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Callon Petroleum.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CPE stock the variable cost ratio is equal to 251.2%.

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 CPE 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 3.5% for Callon Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Callon Petroleum. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CPE 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 CPE are equal to 503.5%.

Life of production assets of 13.9 years is the average useful life of capital assets used in Callon Petroleum operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CPE is equal to -29.9%. 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 - $1733 million for Callon Petroleum - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 204.938 million for Callon Petroleum is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Callon Petroleum at the current share price and the inputted number of shares is $2.2 billion.

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Financial statements of CPE
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