Intrinsic value of Resolute Energy - REN

Previous Close

$28.29

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$28.29

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of REN 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 0.7

 

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, %
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  317
  331
  346
  362
  378
  396
  414
  434
  455
  476
  499
  523
  548
  575
  603
  632
  663
  696
  730
  766
  803
  843
  885
  929
  975
  1,023
  1,074
  1,127
  1,183
  1,242
Variable operating expenses, $m
  98
  103
  107
  112
  117
  123
  128
  135
  141
  148
  155
  162
  170
  178
  187
  196
  206
  216
  226
  237
  249
  261
  274
  288
  302
  317
  333
  349
  367
  385
Fixed operating expenses, $m
  215
  219
  224
  229
  234
  239
  245
  250
  255
  261
  267
  273
  279
  285
  291
  297
  304
  311
  318
  325
  332
  339
  346
  354
  362
  370
  378
  386
  395
  403
Total operating expenses, $m
  313
  322
  331
  341
  351
  362
  373
  385
  396
  409
  422
  435
  449
  463
  478
  493
  510
  527
  544
  562
  581
  600
  620
  642
  664
  687
  711
  735
  762
  788
Operating income, $m
  4
  9
  15
  20
  27
  34
  41
  50
  58
  68
  78
  88
  100
  112
  125
  139
  154
  169
  186
  204
  223
  243
  264
  287
  311
  336
  363
  391
  421
  453
EBITDA, $m
  101
  110
  120
  131
  143
  155
  168
  182
  197
  213
  230
  248
  267
  288
  309
  332
  357
  382
  409
  438
  469
  501
  535
  571
  609
  649
  691
  736
  783
  833
Interest expense (income), $m
  51
  45
  36
  38
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  80
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  145
  152
  161
  169
Earnings before tax, $m
  -41
  -26
  -23
  -20
  -16
  -11
  -6
  -1
  5
  11
  17
  25
  32
  41
  50
  59
  69
  80
  92
  105
  118
  132
  147
  163
  181
  199
  218
  239
  261
  284
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  5
  7
  9
  11
  13
  16
  19
  22
  25
  28
  32
  36
  40
  44
  49
  54
  59
  65
  70
  77
Net income, $m
  -41
  -26
  -23
  -20
  -16
  -11
  -6
  -1
  3
  8
  13
  18
  24
  30
  36
  43
  51
  59
  67
  76
  86
  96
  108
  119
  132
  145
  159
  174
  190
  207

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
  671
  701
  733
  766
  802
  839
  878
  919
  963
  1,009
  1,057
  1,108
  1,162
  1,218
  1,277
  1,340
  1,405
  1,474
  1,546
  1,622
  1,702
  1,786
  1,874
  1,967
  2,065
  2,167
  2,274
  2,387
  2,506
  2,631
Adjusted assets (=assets-cash), $m
  671
  701
  733
  766
  802
  839
  878
  919
  963
  1,009
  1,057
  1,108
  1,162
  1,218
  1,277
  1,340
  1,405
  1,474
  1,546
  1,622
  1,702
  1,786
  1,874
  1,967
  2,065
  2,167
  2,274
  2,387
  2,506
  2,631
Revenue / Adjusted assets
  0.472
  0.472
  0.472
  0.473
  0.471
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
Average production assets, $m
  485
  506
  529
  553
  579
  606
  634
  664
  695
  729
  764
  800
  839
  880
  922
  967
  1,015
  1,064
  1,117
  1,172
  1,229
  1,290
  1,354
  1,421
  1,491
  1,565
  1,643
  1,724
  1,810
  1,900
Working capital, $m
  -91
  -95
  -99
  -103
  -108
  -113
  -119
  -124
  -130
  -136
  -143
  -150
  -157
  -164
  -172
  -181
  -190
  -199
  -209
  -219
  -230
  -241
  -253
  -266
  -279
  -293
  -307
  -322
  -338
  -355
Total debt, $m
  439
  465
  494
  524
  556
  589
  625
  662
  701
  742
  786
  832
  880
  931
  984
  1,040
  1,099
  1,161
  1,226
  1,294
  1,366
  1,442
  1,521
  1,605
  1,693
  1,785
  1,881
  1,983
  2,090
  2,202
Total liabilities, $m
  604
  631
  660
  690
  721
  755
  790
  828
  867
  908
  952
  997
  1,046
  1,096
  1,150
  1,206
  1,265
  1,326
  1,392
  1,460
  1,532
  1,608
  1,687
  1,771
  1,858
  1,950
  2,047
  2,149
  2,255
  2,368
Total equity, $m
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
  187
  197
  206
  217
  227
  239
  251
  263
Total liabilities and equity, $m
  671
  701
  733
  767
  801
  839
  878
  920
  963
  1,009
  1,058
  1,108
  1,162
  1,218
  1,278
  1,340
  1,406
  1,473
  1,547
  1,622
  1,702
  1,787
  1,874
  1,968
  2,064
  2,167
  2,274
  2,388
  2,506
  2,631
Debt-to-equity ratio
  6.530
  6.640
  6.740
  6.840
  6.930
  7.030
  7.110
  7.200
  7.280
  7.360
  7.430
  7.510
  7.570
  7.640
  7.700
  7.760
  7.820
  7.880
  7.930
  7.980
  8.030
  8.070
  8.120
  8.160
  8.200
  8.240
  8.270
  8.310
  8.340
  8.370
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
  -41
  -26
  -23
  -20
  -16
  -11
  -6
  -1
  3
  8
  13
  18
  24
  30
  36
  43
  51
  59
  67
  76
  86
  96
  108
  119
  132
  145
  159
  174
  190
  207
Depreciation, amort., depletion, $m
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  203
  213
  223
  234
  246
  258
  271
  284
  298
  313
  329
  345
  362
  380
Funds from operations, $m
  56
  75
  83
  91
  100
  110
  121
  132
  142
  154
  165
  178
  191
  206
  221
  237
  254
  271
  291
  311
  332
  354
  378
  403
  430
  458
  488
  519
  552
  587
Change in working capital, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from operations, $m
  60
  79
  87
  96
  105
  115
  126
  137
  148
  160
  172
  185
  199
  213
  229
  245
  262
  281
  300
  321
  343
  366
  390
  416
  443
  472
  502
  534
  568
  604
Maintenance CAPEX, $m
  -93
  -97
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -160
  -168
  -176
  -184
  -193
  -203
  -213
  -223
  -234
  -246
  -258
  -271
  -284
  -298
  -313
  -329
  -345
  -362
New CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -90
Cash from investing activities, $m
  -114
  -119
  -124
  -130
  -136
  -143
  -149
  -157
  -164
  -172
  -181
  -190
  -199
  -209
  -219
  -229
  -240
  -253
  -265
  -278
  -292
  -307
  -322
  -338
  -354
  -372
  -391
  -411
  -431
  -452
Free cash flow, $m
  -54
  -40
  -37
  -34
  -31
  -28
  -24
  -19
  -16
  -12
  -9
  -5
  0
  5
  10
  16
  22
  28
  35
  43
  51
  59
  68
  78
  89
  100
  112
  124
  138
  152
Issuance/(repayment) of debt, $m
  -112
  27
  28
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  76
  79
  83
  88
  92
  97
  102
  107
  112
Issuance/(repurchase) of shares, $m
  182
  29
  26
  23
  19
  15
  10
  5
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  70
  56
  54
  53
  51
  49
  45
  42
  40
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  76
  79
  83
  88
  92
  97
  102
  107
  112
Total cash flow (excl. dividends), $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  29
  35
  41
  48
  55
  63
  72
  81
  90
  100
  111
  123
  135
  148
  162
  176
  192
  209
  226
  245
  264
Retained Cash Flow (-), $m
  -182
  -29
  -26
  -23
  -19
  -15
  -10
  -5
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
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
  -166
  -13
  -9
  -4
  1
  6
  12
  18
  20
  24
  30
  36
  43
  50
  57
  65
  74
  83
  93
  103
  115
  126
  139
  152
  167
  182
  198
  215
  233
  252
Discount rate, %
  12.30
  12.92
  13.56
  14.24
  14.95
  15.70
  16.48
  17.31
  18.17
  19.08
  20.04
  21.04
  22.09
  23.19
  24.35
  25.57
  26.85
  28.19
  29.60
  31.08
  32.64
  34.27
  35.98
  37.78
  39.67
  41.65
  43.73
  45.92
  48.22
  50.63
PV of cash for distribution, $m
  -148
  -10
  -6
  -3
  0
  2
  4
  5
  4
  4
  4
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  34.7
  25.2
  19.2
  15.4
  13.0
  11.6
  10.9
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8
  10.8

Resolute Energy Corporation is an independent oil and gas company. The Company is engaged in the exploitation, development, exploration for and acquisition of oil and gas properties. The Company's assets are located primarily in the Delaware Basin in west Texas (the Permian Properties or Permian Basin Properties) and Aneth Field located in the Paradox Basin in southeast Utah (the Aneth Field Properties or Aneth Field). The Company has an interest in gas gathering and compression facilities located within and adjacent to its Aneth Field Properties. The Aneth field is an oil field located in southeast Utah. The Aneth field is connected by pipeline to a refinery located near Gallup, New Mexico. As of December 31, 2016, the Company had interests in approximately 23,900 gross (20,000 net) acres in the Permian Basin of Texas and southeast New Mexico.

FINANCIAL RATIOS  of  Resolute Energy (REN)

Valuation Ratios
P/E Ratio -3.8
Price to Sales 3.8
Price to Book -8.2
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow -4.4
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 229.4%
Cap. Spend. - 3 Yr. Gr. Rate -15.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -534.2%
Total Debt to Equity -694.7%
Interest Coverage -2
Management Effectiveness
Return On Assets -22.7%
Ret/ On Assets - 3 Yr. Avg. -32.2%
Return On Total Capital -42.4%
Ret/ On T. Cap. - 3 Yr. Avg. -45.6%
Return On Equity 116.1%
Return On Equity - 3 Yr. Avg. -115.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 51.8%
Gross Margin - 3 Yr. Avg. 47.2%
EBITDA Margin -37.2%
EBITDA Margin - 3 Yr. Avg. -129%
Operating Margin -56.1%
Oper. Margin - 3 Yr. Avg. -197%
Pre-Tax Margin -98.8%
Pre-Tax Margin - 3 Yr. Avg. -200.1%
Net Profit Margin -98.8%
Net Profit Margin - 3 Yr. Avg. -194.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 6.1%
Payout Ratio 0%

REN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REN stock intrinsic value calculation we used $303.478 million for the last fiscal year's total revenue generated by Resolute Energy. The default revenue input number comes from 0001 income statement of Resolute 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 REN stock valuation model: a) initial revenue growth rate of 4.4% 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 12.3%, whose default value for REN is calculated based on our internal credit rating of Resolute 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 Resolute 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 REN stock the variable cost ratio is equal to 31%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $210 million in the base year in the intrinsic value calculation for REN 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 8.1% for Resolute Energy.

Corporate tax rate of 27% is the nominal tax rate for Resolute 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 REN 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 REN are equal to 153%.

Life of production assets of 5 years is the average useful life of capital assets used in Resolute 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 REN is equal to -28.6%. 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 - $-74.409 million for Resolute 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 23.166 million for Resolute 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 Resolute Energy at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Resolute Energy: 3Q Earnings Snapshot   [06:50PM  Associated Press]
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▶ Resolute Energy Corporation to Host Earnings Call   [Aug-07-18 08:00AM  ACCESSWIRE]
▶ Resolute Energy: 2Q Earnings Snapshot   [07:44PM  Associated Press]
▶ Resolute Energy Corporation Announces Exchange Offer   [May-09-18 06:00AM  GlobeNewswire]
▶ Resolute Energy: 1Q Earnings Snapshot   [May-07-18 06:11PM  Associated Press]
▶ An E&P Pair Trade Idea From Goldman Sachs   [Apr-15-18 04:59PM  Benzinga]
▶ Resolute Energy Corporation to Host Earnings Call   [Mar-13-18 07:30AM  ACCESSWIRE]
▶ Your Upstream Losers This Week: EXXI, REN, EPE, CPE, and UNT   [Nov-15-17 02:40PM  Market Realist]
▶ Resolute Energy Corporation Announces Exchange Offer   [Jun-05-17 04:34PM  GlobeNewswire]
▶ Top 5 Small-Cap Oil Stocks for 2017   [Jun-01-17 06:00AM  Investopedia]
▶ The Winner In Trump Vs. OPEC: Lower Oil Prices   [May-31-17 03:12PM  Forbes]

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