Intrinsic value of Torchlight Energy Resources, Inc. - TRCH

Previous Close

$1.71

  Intrinsic Value

$0.06

stock screener

  Rating & Target

str. sell

-97%

Previous close

$1.71

 
Intrinsic value

$0.06

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of TRCH 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 0.1

 

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
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
Variable operating expenses, $m
  35
  54
  81
  118
  166
  229
  307
  403
  519
  656
  814
  995
  1,200
  1,428
  1,679
  1,953
  2,249
  2,568
  2,908
  3,270
  3,652
  4,054
  4,477
  4,919
  5,380
  5,862
  6,363
  6,885
  7,427
  7,991
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
  35
  54
  81
  118
  166
  229
  307
  403
  519
  656
  814
  995
  1,200
  1,428
  1,679
  1,953
  2,249
  2,568
  2,908
  3,270
  3,652
  4,054
  4,477
  4,919
  5,380
  5,862
  6,363
  6,885
  7,427
  7,991
Operating income, $m
  -34
  -52
  -78
  -113
  -159
  -218
  -293
  -385
  -496
  -626
  -777
  -950
  -1,145
  -1,363
  -1,602
  -1,864
  -2,147
  -2,451
  -2,776
  -3,121
  -3,486
  -3,870
  -4,273
  -4,695
  -5,136
  -5,595
  -6,074
  -6,572
  -7,090
  -7,628
EBITDA, $m
  -33
  -50
  -75
  -110
  -155
  -212
  -285
  -374
  -482
  -608
  -756
  -924
  -1,113
  -1,325
  -1,558
  -1,812
  -2,087
  -2,383
  -2,699
  -3,034
  -3,389
  -3,762
  -4,154
  -4,565
  -4,993
  -5,440
  -5,905
  -6,389
  -6,893
  -7,416
Interest expense (income), $m
  1
  1
  1
  2
  2
  4
  5
  7
  9
  12
  16
  20
  25
  31
  37
  44
  52
  61
  70
  80
  91
  102
  114
  126
  140
  153
  168
  183
  198
  215
  232
Earnings before tax, $m
  -34
  -53
  -79
  -115
  -162
  -224
  -300
  -395
  -508
  -642
  -798
  -975
  -1,176
  -1,400
  -1,647
  -1,916
  -2,208
  -2,521
  -2,856
  -3,212
  -3,588
  -3,984
  -4,400
  -4,835
  -5,289
  -5,763
  -6,257
  -6,770
  -7,305
  -7,860
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
  -34
  -53
  -79
  -115
  -162
  -224
  -300
  -395
  -508
  -642
  -798
  -975
  -1,176
  -1,400
  -1,647
  -1,916
  -2,208
  -2,521
  -2,856
  -3,212
  -3,588
  -3,984
  -4,400
  -4,835
  -5,289
  -5,763
  -6,257
  -6,770
  -7,305
  -7,860

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
  46
  71
  106
  153
  216
  297
  399
  524
  674
  852
  1,057
  1,293
  1,558
  1,854
  2,180
  2,536
  2,921
  3,335
  3,777
  4,247
  4,743
  5,265
  5,814
  6,388
  6,988
  7,613
  8,264
  8,941
  9,646
  10,378
Adjusted assets (=assets-cash), $m
  46
  71
  106
  153
  216
  297
  399
  524
  674
  852
  1,057
  1,293
  1,558
  1,854
  2,180
  2,536
  2,921
  3,335
  3,777
  4,247
  4,743
  5,265
  5,814
  6,388
  6,988
  7,613
  8,264
  8,941
  9,646
  10,378
Revenue / Adjusted assets
  0.043
  0.028
  0.038
  0.033
  0.037
  0.034
  0.035
  0.034
  0.036
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
  0.035
Average production assets, $m
  28
  43
  65
  94
  133
  182
  245
  321
  413
  522
  648
  792
  955
  1,136
  1,336
  1,554
  1,790
  2,044
  2,315
  2,602
  2,906
  3,227
  3,563
  3,915
  4,282
  4,665
  5,064
  5,479
  5,911
  6,360
Working capital, $m
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -19
  -22
  -25
  -27
  -30
  -34
  -37
  -40
  -44
  -48
  -52
  -56
  -60
Total debt, $m
  18
  29
  45
  66
  94
  130
  175
  231
  298
  377
  468
  573
  691
  823
  968
  1,126
  1,298
  1,482
  1,678
  1,887
  2,108
  2,341
  2,585
  2,840
  3,107
  3,385
  3,675
  3,977
  4,290
  4,616
Total liabilities, $m
  20
  31
  47
  68
  96
  132
  178
  233
  300
  379
  471
  575
  693
  825
  970
  1,128
  1,300
  1,484
  1,681
  1,890
  2,111
  2,343
  2,587
  2,843
  3,109
  3,388
  3,677
  3,979
  4,292
  4,618
Total equity, $m
  25
  39
  59
  85
  120
  165
  221
  291
  374
  473
  587
  717
  865
  1,029
  1,210
  1,407
  1,621
  1,851
  2,096
  2,357
  2,632
  2,922
  3,227
  3,545
  3,878
  4,225
  4,587
  4,963
  5,353
  5,760
Total liabilities and equity, $m
  45
  70
  106
  153
  216
  297
  399
  524
  674
  852
  1,058
  1,292
  1,558
  1,854
  2,180
  2,535
  2,921
  3,335
  3,777
  4,247
  4,743
  5,265
  5,814
  6,388
  6,987
  7,613
  8,264
  8,942
  9,645
  10,378
Debt-to-equity ratio
  0.710
  0.740
  0.760
  0.770
  0.780
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
Adjusted equity ratio
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -34
  -53
  -79
  -115
  -162
  -224
  -300
  -395
  -508
  -642
  -798
  -975
  -1,176
  -1,400
  -1,647
  -1,916
  -2,208
  -2,521
  -2,856
  -3,212
  -3,588
  -3,984
  -4,400
  -4,835
  -5,289
  -5,763
  -6,257
  -6,770
  -7,305
  -7,860
Depreciation, amort., depletion, $m
  1
  1
  2
  3
  4
  6
  8
  11
  14
  17
  22
  26
  32
  38
  45
  52
  60
  68
  77
  87
  97
  108
  119
  130
  143
  156
  169
  183
  197
  212
Funds from operations, $m
  -33
  -51
  -77
  -112
  -158
  -217
  -292
  -384
  -494
  -625
  -776
  -949
  -1,144
  -1,362
  -1,602
  -1,864
  -2,148
  -2,453
  -2,779
  -3,125
  -3,491
  -3,876
  -4,281
  -4,704
  -5,146
  -5,608
  -6,088
  -6,588
  -7,107
  -7,648
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from operations, $m
  -33
  -51
  -77
  -112
  -158
  -217
  -292
  -383
  -493
  -624
  -775
  -948
  -1,143
  -1,360
  -1,600
  -1,862
  -2,146
  -2,451
  -2,776
  -3,122
  -3,488
  -3,873
  -4,278
  -4,701
  -5,143
  -5,604
  -6,084
  -6,584
  -7,103
  -7,643
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -3
  -4
  -6
  -8
  -11
  -14
  -17
  -22
  -26
  -32
  -38
  -45
  -52
  -60
  -68
  -77
  -87
  -97
  -108
  -119
  -130
  -143
  -156
  -169
  -183
  -197
New CAPEX, $m
  -11
  -15
  -21
  -29
  -39
  -50
  -62
  -77
  -92
  -109
  -126
  -144
  -163
  -181
  -200
  -218
  -236
  -254
  -271
  -288
  -304
  -320
  -336
  -352
  -367
  -383
  -399
  -415
  -432
  -449
Cash from investing activities, $m
  -12
  -16
  -22
  -31
  -42
  -54
  -68
  -85
  -103
  -123
  -143
  -166
  -189
  -213
  -238
  -263
  -288
  -314
  -339
  -365
  -391
  -417
  -444
  -471
  -497
  -526
  -555
  -584
  -615
  -646
Free cash flow, $m
  -44
  -68
  -100
  -143
  -199
  -271
  -360
  -468
  -596
  -746
  -918
  -1,114
  -1,332
  -1,573
  -1,838
  -2,125
  -2,434
  -2,764
  -3,115
  -3,487
  -3,879
  -4,290
  -4,721
  -5,171
  -5,641
  -6,130
  -6,639
  -7,168
  -7,718
  -8,289
Issuance/(repayment) of debt, $m
  8
  11
  16
  21
  28
  36
  45
  56
  67
  79
  92
  105
  118
  132
  145
  158
  171
  184
  197
  209
  221
  233
  244
  255
  267
  278
  290
  301
  313
  326
Issuance/(repurchase) of shares, $m
  44
  67
  99
  141
  197
  269
  357
  464
  591
  740
  912
  1,106
  1,324
  1,564
  1,828
  2,114
  2,422
  2,751
  3,101
  3,472
  3,863
  4,274
  4,704
  5,153
  5,622
  6,110
  6,618
  7,146
  7,695
  8,266
Cash from financing (excl. dividends), $m  
  52
  78
  115
  162
  225
  305
  402
  520
  658
  819
  1,004
  1,211
  1,442
  1,696
  1,973
  2,272
  2,593
  2,935
  3,298
  3,681
  4,084
  4,507
  4,948
  5,408
  5,889
  6,388
  6,908
  7,447
  8,008
  8,592
Total cash flow (excl. dividends), $m
  7
  10
  14
  20
  26
  33
  42
  52
  62
  73
  85
  97
  110
  122
  135
  147
  159
  171
  183
  194
  205
  216
  227
  237
  248
  258
  269
  280
  291
  303
Retained Cash Flow (-), $m
  -44
  -67
  -99
  -141
  -197
  -269
  -357
  -464
  -591
  -740
  -912
  -1,106
  -1,324
  -1,564
  -1,828
  -2,114
  -2,422
  -2,751
  -3,101
  -3,472
  -3,863
  -4,274
  -4,704
  -5,153
  -5,622
  -6,110
  -6,618
  -7,146
  -7,695
  -8,266
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
  -37
  -56
  -84
  -122
  -171
  -235
  -315
  -412
  -529
  -667
  -827
  -1,009
  -1,214
  -1,442
  -1,693
  -1,966
  -2,262
  -2,580
  -2,919
  -3,278
  -3,658
  -4,058
  -4,477
  -4,916
  -5,374
  -5,852
  -6,349
  -6,866
  -7,404
  -7,963
Discount rate, %
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
  -34
  -48
  -66
  -86
  -109
  -133
  -157
  -179
  -198
  -213
  -222
  -224
  -221
  -211
  -196
  -178
  -156
  -134
  -111
  -90
  -70
  -54
  -40
  -28
  -20
  -13
  -9
  -5
  -3
  -2
Current shareholders' claim on cash, %
  73.3
  54.3
  40.7
  30.8
  23.5
  18.1
  14.1
  11.0
  8.7
  6.9
  5.5
  4.4
  3.5
  2.8
  2.3
  1.9
  1.5
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1

Torchlight Energy Resources, Inc. (Torchlight) is engaged in the acquisition, exploration, exploitation and/or development of oil and natural gas properties in the United States. The Company focuses on drilling and working interest programs within the United States. The Company has interests in approximately four oil and gas projects: the Marcelina Creek Field Development in Wilson County, Texas; the Ring Energy Joint Venture in Southwest Kansas; Hunton wells in partnership with Husky Ventures in Central Oklahoma, and the Orogrande Project in Hudspeth County, Texas. The Company also operates through two other subsidiaries, including Torchlight Energy Operating, LLC, a Texas limited liability company, and Hudspeth Oil Corporation, a Texas corporation. The Marcelina Creek Field Development is located over the Austin Chalk, Buda and Eagle Ford Formations.

FINANCIAL RATIOS  of  Torchlight Energy Resources, Inc. (TRCH)

Valuation Ratios
P/E Ratio -11.8
Price to Sales 0
Price to Book 13.5
Price to Tangible Book
Price to Cash Flow -18.8
Price to Free Cash Flow -13.5
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -27.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 57.1%
Interest Coverage -7
Management Effectiveness
Return On Assets -66.7%
Ret/ On Assets - 3 Yr. Avg. -103.3%
Return On Total Capital -88.9%
Ret/ On T. Cap. - 3 Yr. Avg. -128.3%
Return On Equity -160%
Return On Equity - 3 Yr. Avg. -221.7%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 38.9%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. -750%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -733.3%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -805.6%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -805.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TRCH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRCH stock intrinsic value calculation we used $1 million for the last fiscal year's total revenue generated by Torchlight Energy Resources, Inc.. The default revenue input number comes from 0001 income statement of Torchlight Energy Resources, Inc.. 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 TRCH 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 7.8%, whose default value for TRCH is calculated based on our internal credit rating of Torchlight Energy Resources, Inc., 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 Torchlight Energy Resources, Inc..
    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 TRCH stock the variable cost ratio is equal to 2200%.

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 TRCH 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 Torchlight Energy Resources, Inc..

Corporate tax rate of 27% is the nominal tax rate for Torchlight Energy Resources, Inc.. 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 TRCH 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 TRCH are equal to 1750.9%.

Life of production assets of 174.8 years is the average useful life of capital assets used in Torchlight Energy Resources, Inc. 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 TRCH is equal to -16.5%. 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 - $15.959305 million for Torchlight Energy Resources, Inc. - 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 70.115 million for Torchlight Energy Resources, Inc. 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 Torchlight Energy Resources, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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