Intrinsic value of Laredo Petroleum - LPI

Previous Close

$4.25

  Intrinsic Value

$0.81

stock screener

  Rating & Target

str. sell

-81%

Previous close

$4.25

 
Intrinsic value

$0.81

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of LPI 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 1.0

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,315
  2,032
  3,039
  4,410
  6,222
  8,554
  11,482
  15,076
  19,399
  24,503
  30,427
  37,200
  44,838
  53,349
  62,729
  72,969
  84,054
  95,966
  108,687
  122,196
  136,477
  151,514
  167,296
  183,816
  201,071
  219,064
  237,802
  257,297
  277,568
  298,637
Variable operating expenses, $m
  1,509
  2,331
  3,486
  5,058
  7,137
  9,811
  13,169
  17,292
  22,251
  28,105
  34,900
  42,668
  51,430
  61,191
  71,950
  83,695
  96,410
  110,073
  124,664
  140,159
  156,539
  173,787
  191,889
  210,837
  230,629
  251,266
  272,759
  295,120
  318,371
  342,537
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
  1,509
  2,331
  3,486
  5,058
  7,137
  9,811
  13,169
  17,292
  22,251
  28,105
  34,900
  42,668
  51,430
  61,191
  71,950
  83,695
  96,410
  110,073
  124,664
  140,159
  156,539
  173,787
  191,889
  210,837
  230,629
  251,266
  272,759
  295,120
  318,371
  342,537
Operating income, $m
  -193
  -299
  -447
  -648
  -915
  -1,257
  -1,688
  -2,216
  -2,852
  -3,602
  -4,473
  -5,468
  -6,591
  -7,842
  -9,221
  -10,726
  -12,356
  -14,107
  -15,977
  -17,963
  -20,062
  -22,273
  -24,593
  -27,021
  -29,557
  -32,202
  -34,957
  -37,823
  -40,803
  -43,900
EBITDA, $m
  60
  93
  139
  201
  284
  390
  524
  688
  885
  1,118
  1,388
  1,697
  2,046
  2,434
  2,862
  3,329
  3,835
  4,379
  4,959
  5,575
  6,227
  6,913
  7,633
  8,387
  9,174
  9,995
  10,850
  11,740
  12,664
  13,626
Interest expense (income), $m
  89
  66
  129
  220
  348
  522
  753
  1,049
  1,421
  1,878
  2,428
  3,077
  3,830
  4,692
  5,663
  6,745
  7,938
  9,240
  10,649
  12,164
  13,782
  15,500
  17,315
  19,228
  21,234
  23,335
  25,529
  27,817
  30,200
  32,679
  35,256
Earnings before tax, $m
  -259
  -427
  -667
  -996
  -1,437
  -2,010
  -2,737
  -3,638
  -4,730
  -6,030
  -7,550
  -9,299
  -11,283
  -13,505
  -15,966
  -18,664
  -21,596
  -24,756
  -28,141
  -31,745
  -35,562
  -39,588
  -43,820
  -48,255
  -52,892
  -57,732
  -62,774
  -68,022
  -73,481
  -79,156
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
  -259
  -427
  -667
  -996
  -1,437
  -2,010
  -2,737
  -3,638
  -4,730
  -6,030
  -7,550
  -9,299
  -11,283
  -13,505
  -15,966
  -18,664
  -21,596
  -24,756
  -28,141
  -31,745
  -35,562
  -39,588
  -43,820
  -48,255
  -52,892
  -57,732
  -62,774
  -68,022
  -73,481
  -79,156

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
  3,240
  5,006
  7,486
  10,862
  15,325
  21,068
  28,280
  37,133
  47,782
  60,352
  74,943
  91,626
  110,440
  131,401
  154,505
  179,726
  207,029
  236,370
  267,702
  300,976
  336,151
  373,188
  412,060
  452,749
  495,250
  539,567
  585,719
  633,738
  683,666
  735,560
Adjusted assets (=assets-cash), $m
  3,240
  5,006
  7,486
  10,862
  15,325
  21,068
  28,280
  37,133
  47,782
  60,352
  74,943
  91,626
  110,440
  131,401
  154,505
  179,726
  207,029
  236,370
  267,702
  300,976
  336,151
  373,188
  412,060
  452,749
  495,250
  539,567
  585,719
  633,738
  683,666
  735,560
Revenue / Adjusted assets
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
Average production assets, $m
  2,509
  3,876
  5,796
  8,410
  11,865
  16,312
  21,896
  28,750
  36,994
  46,727
  58,024
  70,940
  85,507
  101,736
  119,624
  139,151
  160,291
  183,008
  207,266
  233,029
  260,262
  288,938
  319,034
  350,538
  383,443
  417,755
  453,488
  490,666
  529,323
  569,502
Working capital, $m
  -247
  -382
  -571
  -829
  -1,170
  -1,608
  -2,159
  -2,834
  -3,647
  -4,607
  -5,720
  -6,994
  -8,430
  -10,030
  -11,793
  -13,718
  -15,802
  -18,042
  -20,433
  -22,973
  -25,658
  -28,485
  -31,452
  -34,557
  -37,801
  -41,184
  -44,707
  -48,372
  -52,183
  -56,144
Total debt, $m
  1,549
  2,648
  4,191
  6,290
  9,066
  12,639
  17,124
  22,631
  29,254
  37,073
  46,149
  56,525
  68,228
  81,266
  95,636
  111,324
  128,306
  146,557
  166,045
  186,741
  208,620
  231,657
  255,835
  281,144
  307,579
  335,145
  363,851
  393,719
  424,774
  457,053
Total liabilities, $m
  2,015
  3,114
  4,656
  6,756
  9,532
  13,105
  17,590
  23,097
  29,720
  37,539
  46,615
  56,991
  68,693
  81,732
  96,102
  111,790
  128,772
  147,022
  166,511
  187,207
  209,086
  232,123
  256,301
  281,610
  308,045
  335,610
  364,317
  394,185
  425,240
  457,518
Total equity, $m
  1,225
  1,892
  2,830
  4,106
  5,793
  7,964
  10,690
  14,036
  18,061
  22,813
  28,329
  34,634
  41,746
  49,670
  58,403
  67,936
  78,257
  89,348
  101,191
  113,769
  127,065
  141,065
  155,759
  171,139
  187,204
  203,956
  221,402
  239,553
  258,426
  278,042
Total liabilities and equity, $m
  3,240
  5,006
  7,486
  10,862
  15,325
  21,069
  28,280
  37,133
  47,781
  60,352
  74,944
  91,625
  110,439
  131,402
  154,505
  179,726
  207,029
  236,370
  267,702
  300,976
  336,151
  373,188
  412,060
  452,749
  495,249
  539,566
  585,719
  633,738
  683,666
  735,560
Debt-to-equity ratio
  1.270
  1.400
  1.480
  1.530
  1.570
  1.590
  1.600
  1.610
  1.620
  1.630
  1.630
  1.630
  1.630
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
Adjusted equity ratio
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -259
  -427
  -667
  -996
  -1,437
  -2,010
  -2,737
  -3,638
  -4,730
  -6,030
  -7,550
  -9,299
  -11,283
  -13,505
  -15,966
  -18,664
  -21,596
  -24,756
  -28,141
  -31,745
  -35,562
  -39,588
  -43,820
  -48,255
  -52,892
  -57,732
  -62,774
  -68,022
  -73,481
  -79,156
Depreciation, amort., depletion, $m
  253
  391
  585
  849
  1,199
  1,648
  2,212
  2,904
  3,737
  4,720
  5,861
  7,166
  8,637
  10,276
  12,083
  14,056
  16,191
  18,486
  20,936
  23,538
  26,289
  29,186
  32,226
  35,408
  38,732
  42,197
  45,807
  49,562
  53,467
  57,525
Funds from operations, $m
  -6
  -36
  -81
  -147
  -238
  -362
  -525
  -733
  -993
  -1,310
  -1,689
  -2,133
  -2,646
  -3,229
  -3,883
  -4,609
  -5,405
  -6,271
  -7,205
  -8,206
  -9,273
  -10,402
  -11,594
  -12,847
  -14,161
  -15,534
  -16,967
  -18,460
  -20,014
  -21,631
Change in working capital, $m
  -93
  -135
  -189
  -258
  -341
  -438
  -550
  -676
  -813
  -959
  -1,114
  -1,273
  -1,436
  -1,600
  -1,763
  -1,925
  -2,084
  -2,240
  -2,391
  -2,540
  -2,685
  -2,827
  -2,967
  -3,106
  -3,244
  -3,383
  -3,523
  -3,665
  -3,811
  -3,961
Cash from operations, $m
  87
  99
  108
  111
  102
  76
  25
  -58
  -181
  -351
  -575
  -860
  -1,210
  -1,629
  -2,120
  -2,683
  -3,321
  -4,031
  -4,814
  -5,667
  -6,588
  -7,575
  -8,627
  -9,742
  -10,917
  -12,151
  -13,444
  -14,795
  -16,203
  -17,670
Maintenance CAPEX, $m
  -158
  -253
  -391
  -585
  -849
  -1,199
  -1,648
  -2,212
  -2,904
  -3,737
  -4,720
  -5,861
  -7,166
  -8,637
  -10,276
  -12,083
  -14,056
  -16,191
  -18,486
  -20,936
  -23,538
  -26,289
  -29,186
  -32,226
  -35,408
  -38,732
  -42,197
  -45,807
  -49,562
  -53,467
New CAPEX, $m
  -941
  -1,367
  -1,920
  -2,614
  -3,455
  -4,447
  -5,583
  -6,855
  -8,244
  -9,733
  -11,297
  -12,916
  -14,567
  -16,229
  -17,888
  -19,527
  -21,139
  -22,717
  -24,258
  -25,763
  -27,233
  -28,676
  -30,096
  -31,503
  -32,905
  -34,312
  -35,733
  -37,178
  -38,657
  -40,179
Cash from investing activities, $m
  -1,099
  -1,620
  -2,311
  -3,199
  -4,304
  -5,646
  -7,231
  -9,067
  -11,148
  -13,470
  -16,017
  -18,777
  -21,733
  -24,866
  -28,164
  -31,610
  -35,195
  -38,908
  -42,744
  -46,699
  -50,771
  -54,965
  -59,282
  -63,729
  -68,313
  -73,044
  -77,930
  -82,985
  -88,219
  -93,646
Free cash flow, $m
  -1,012
  -1,522
  -2,204
  -3,088
  -4,202
  -5,569
  -7,206
  -9,124
  -11,329
  -13,820
  -16,592
  -19,637
  -22,942
  -26,495
  -30,284
  -34,294
  -38,516
  -42,939
  -47,557
  -52,365
  -57,359
  -62,540
  -67,909
  -73,471
  -79,230
  -85,195
  -91,375
  -97,780
  -104,422
  -111,315
Issuance/(repayment) of debt, $m
  758
  1,098
  1,543
  2,100
  2,776
  3,572
  4,486
  5,507
  6,623
  7,819
  9,076
  10,376
  11,702
  13,038
  14,370
  15,688
  16,983
  18,250
  19,488
  20,697
  21,878
  23,037
  24,178
  25,309
  26,435
  27,565
  28,707
  29,868
  31,056
  32,278
Issuance/(repurchase) of shares, $m
  718
  1,095
  1,604
  2,272
  3,124
  4,181
  5,463
  6,984
  8,755
  10,782
  13,065
  15,605
  18,395
  21,429
  24,699
  28,198
  31,916
  35,847
  39,984
  44,322
  48,858
  53,588
  58,514
  63,636
  68,958
  74,483
  80,219
  86,173
  92,354
  98,772
Cash from financing (excl. dividends), $m  
  1,476
  2,193
  3,147
  4,372
  5,900
  7,753
  9,949
  12,491
  15,378
  18,601
  22,141
  25,981
  30,097
  34,467
  39,069
  43,886
  48,899
  54,097
  59,472
  65,019
  70,736
  76,625
  82,692
  88,945
  95,393
  102,048
  108,926
  116,041
  123,410
  131,050
Total cash flow (excl. dividends), $m
  464
  672
  943
  1,284
  1,697
  2,184
  2,742
  3,367
  4,049
  4,780
  5,549
  6,344
  7,155
  7,972
  8,786
  9,591
  10,383
  11,158
  11,915
  12,654
  13,376
  14,085
  14,783
  15,474
  16,163
  16,853
  17,551
  18,261
  18,987
  19,735
Retained Cash Flow (-), $m
  -718
  -1,095
  -1,604
  -2,272
  -3,124
  -4,181
  -5,463
  -6,984
  -8,755
  -10,782
  -13,065
  -15,605
  -18,395
  -21,429
  -24,699
  -28,198
  -31,916
  -35,847
  -39,984
  -44,322
  -48,858
  -53,588
  -58,514
  -63,636
  -68,958
  -74,483
  -80,219
  -86,173
  -92,354
  -98,772
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
  -255
  -423
  -661
  -988
  -1,427
  -1,997
  -2,720
  -3,617
  -4,706
  -6,001
  -7,516
  -9,261
  -11,240
  -13,457
  -15,913
  -18,606
  -21,533
  -24,689
  -28,069
  -31,668
  -35,481
  -39,503
  -43,731
  -48,162
  -52,795
  -57,630
  -62,668
  -67,912
  -73,367
  -79,037
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  -243
  -383
  -564
  -793
  -1,068
  -1,388
  -1,743
  -2,122
  -2,509
  -2,884
  -3,230
  -3,525
  -3,755
  -3,905
  -3,968
  -3,941
  -3,827
  -3,635
  -3,376
  -3,067
  -2,724
  -2,366
  -2,008
  -1,665
  -1,348
  -1,065
  -820
  -615
  -449
  -319
Current shareholders' claim on cash, %
  58.2
  34.5
  20.9
  13.0
  8.2
  5.3
  3.5
  2.3
  1.6
  1.1
  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

Laredo Petroleum, Inc. (Laredo) is an independent energy company. The Company is focused on the acquisition, exploration and development of oil and natural gas properties, and the transportation of oil and natural gas from such properties primarily in the Permian Basin in West Texas. It operates through two segments: Exploration and production of oil and natural gas properties, and Midstream and marketing. The exploration and production of oil and natural gas properties are conducted by it through the exploration and development of its acreage in the Permian Basin. As of December 31, 2016, it had assembled 127,847 net acres in the Permian Basin and had total proved reserves, presented on a three-stream basis, of 167,100 thousand of barrels of oil equivalent (MBOE). The Midstream and marketing segment's operations are conducted by its subsidiary, Laredo Midstream Services, LLC, which buys, sells, gathers and transports oil, natural gas and water primarily for the account of Laredo.

FINANCIAL RATIOS  of  Laredo Petroleum (LPI)

Valuation Ratios
P/E Ratio -3.9
Price to Sales 1.7
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 2.9
Price to Free Cash Flow -7.2
Growth Rates
Sales Growth Rate -1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.3%
Cap. Spend. - 3 Yr. Gr. Rate -8.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 748.1%
Total Debt to Equity 748.1%
Interest Coverage -2
Management Effectiveness
Return On Assets -9.6%
Ret/ On Assets - 3 Yr. Avg. -24.3%
Return On Total Capital -16.9%
Ret/ On T. Cap. - 3 Yr. Avg. -32.7%
Return On Equity -167.3%
Return On Equity - 3 Yr. Avg. -136.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 53.3%
Gross Margin - 3 Yr. Avg. 57.7%
EBITDA Margin -4%
EBITDA Margin - 3 Yr. Avg. -78.2%
Operating Margin -14.9%
Oper. Margin - 3 Yr. Avg. -132.9%
Pre-Tax Margin -43.7%
Pre-Tax Margin - 3 Yr. Avg. -127.6%
Net Profit Margin -43.7%
Net Profit Margin - 3 Yr. Avg. -124.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 15.2%
Payout Ratio 0%

LPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LPI stock intrinsic value calculation we used $822.162 million for the last fiscal year's total revenue generated by Laredo Petroleum. The default revenue input number comes from 0001 income statement of Laredo 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 LPI stock valuation model: a) initial revenue growth rate of 60% 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 4.9%, whose default value for LPI is calculated based on our internal credit rating of Laredo 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 Laredo 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 LPI stock the variable cost ratio is equal to 114.7%.

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 LPI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8.3% for Laredo Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Laredo 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 LPI 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 LPI are equal to 190.7%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Laredo 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 LPI is equal to -18.8%. 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 - $765.579 million for Laredo 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 235.151 million for Laredo 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 Laredo Petroleum at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Laredo Petroleum: 3Q Earnings Snapshot   [Nov-05-18 06:45PM  Associated Press]
▶ Steven Cohen Dives Deeper Into Extraction Oil & Gas   [Sep-05-18 01:54PM  GuruFocus.com]
▶ Laredo Petroleum: 2Q Earnings Snapshot   [07:51PM  Associated Press]
▶ OPEC Losing Control After Libya Outages   [Jul-03-18 03:00PM  Oilprice.com]
▶ Are Laredo Petroleum Incs (NYSE:LPI) Interest Costs Too High?   [Jun-27-18 12:09PM  Simply Wall St.]
▶ After-hours buzz: RHT, CMC & more   [Jun-21-18 06:00PM  CNBC]
▶ Why Laredo Petroleum Inc's Stock Is Plunging Today   [May-03-18 11:08AM  Motley Fool]
▶ Laredo Petroleum: 1Q Earnings Snapshot   [May-02-18 07:18PM  Associated Press]
▶ Laredo CEO on Permian Assets, Saudi's Ambition for $80 Oil   [Apr-12-18 09:26PM  Bloomberg Video]
▶ What to Watch When EOG Resource Inc Reports Q4 Results   [Feb-26-18 11:35AM  Motley Fool]
▶ Laredo Petroleum, Inc. to Host Earnings Call   [Feb-15-18 06:40AM  ACCESSWIRE]
▶ Laredo Petroleum beats Street 4Q forecasts   [Feb-14-18 05:57PM  Associated Press]
▶ Pioneer Natural Resources Obliterates Expectations   [Feb-07-18 10:31AM  Motley Fool]
▶ Laredo Petroleum Announces Management Transition   [Feb-05-18 04:15PM  GlobeNewswire]
▶ Here's Why Laredo Petroleum Inc's Stock Is Sinking Today   [Jan-25-18 11:50AM  Motley Fool]
▶ Traders Could Start Booking a Profit in Crude Oil Futures   [Jan-17-18 10:00AM  Market Realist]
▶ How Our Top 5 Upstream Stocks Performed in 2017   [Jan-10-18 11:10AM  Market Realist]
▶ US Dollar Could Pressure Crude Oil Futures in 2018   [Dec-27-17 09:00AM  Market Realist]
▶ US Crude Oil Futures and the S&P 500 Diverged Last Week   [Dec-18-17 09:07AM  Market Realist]
▶ Permian Cash Flows Driven by Low Costs, High Productivity   [Dec-15-17 09:03AM  Market Realist]
▶ FOMCs Meeting Could Impact the Dollar and Oil Prices   [Dec-11-17 11:05AM  Market Realist]
▶ Crude Oil Prices Are Positive before OPECs Meeting   [Nov-30-17 10:55AM  Market Realist]
▶ Should You Buy Laredo Petroleum Inc (LPI)?   [Nov-17-17 10:04AM  Simply Wall St.]
▶ These Energy Stocks Fell the Most Last Week   [Nov-06-17 11:16AM  Market Realist]
▶ Laredo Petroleum misses 3Q profit forecasts   [Nov-01-17 05:39PM  Associated Press]
▶ Oil Jumps To Highest Level Since 2015; Data, Earnings On Tap   [08:42AM  Investor's Business Daily]

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