Investment Research Presentation
Month Day, 20XX
1
Halcon Resources NYSE: HK
Sector: EnergySenior Analysts: Robert Bonigli-Hinson Junior Analysts: Andrew Lambrecht, Christian Metzger, Nick Aubin
Spring 2018
2
Valuation Summary
REIT’s
Recommendation BUY
Target Price: $10.59
Target Price: $9.07
Key Drivers for Price Target:
Abundance of cash for growth Well poised to take advantage of positive
industry trends Strong performance from new land
acquisitions Increased emphasis on controlling costs
and improving margins
3
Agenda
REIT’s
Industry Definition & Breakdown
Company Overview
Revenue Generation Model
Industry & Company Trends
Risk Analysis
Comparables & DCF Valuation
Summary/Recommendation
4
Industry Definition
The Oil Drilling & Gas Extraction industry consists of companies that operate and develop oil and gas field properties, primarily concerned with the drilling and extraction of raw materials used for Gas and Oil products or services. - Some Services are contracted solely as drillers and work as intermediaries for Oil E&P
companies- Some others act as an integrated companies that both buy, extract, and sell the oil and
Natural Gas Liquids (NGLs) that they produce and refine from their wells
Sources: IBISWorld, CNBC
NYSE: REN
Market Cap: 807MNYSE: GPOR
Market Cap: 1.8BNYSE: ECR
Market Cap: 407M
NYSE: CPE
Market Cap: 2.5B
NYSE: FANG
Market Cap: 11BNYSE: SRCI
Market Cap: 2.5B
5
Industry Breakdown
REIT’sOil & Natural Gas breakdown by sales
Source: REIT.com, InvestSnips
Crude Oil & Lease
Condensate
Natural Gas Liquids
Dry Natural Gas
59.4%
Total Size: 255.7B
34.4%
6.2%
0 1 2 3 4 5 6 7 8 9 1011
Russia
Saudi Arabia
U.S
Iraq
China
Canada
Nigeria
Mexico
Venezuela
Production (Mb/d)
Oil Production by country
6
REIT’s
Supply cuts coupled with increasing demand allow the U.S to grab market share in Oil market. Increased efficiency allows them to stay in the oil market.
• Shift in production capabilities of drillers: - Increased efficiency of rigs in low periods of activity
- Declining Rig counts due to oil price buts led to higher emphasis on cost control and containment
- Aggregate number of rigs doubled last year while costs have increased only 3% on average the last 2 years
- In addition to rig efficiency land acquisitions have increased 13% while total deal value decreased 58%- signaling careful selection of oil rich wells
• Supply cuts & strong global demand:- OPEC Production cut agreements continue to reduce share of
supply
- OPEC & Non-OPEC countries agreement to cut production to stabilize prices has been extended past 2018
- Since production cuts U.S has increased Production on average 9.85% and is projected to increase production 14.5% from 2017-2018
- Increased Global Demand for Oil fuels growth
- Global Demand for oil has been steadily increasing at a rate of 1.2% and 1.7% annually for the years 2016 & 2017 respectively. Expectations for 2018 are 1.5%
Industry Trends: Shifts in production & supply create favorable environment for U.S oil
Source: Bloomberg.com, University of Michigan
0100200300400500600700800
0
100
200
300
400
500
600
700
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Jan-1
8
Barr
els
/day
Rig
Co
un
t
Oil Rig Efficiency: Permian Basin
Rig Count Oil Production/Rig
-2
0
2
4
Jan-15 Jun-15 Nov-15 May-16 Oct-16 Apr-17 Sep-17
Mb/d
OPEC and Non-OPEC Oil SupplyChange Y-O-Y
OPEC Non-OPEC NGL Total
7
Company Overview
Halcon Resources
2016 2017
Revenue $418 million $378 million
Rig Count 3 4
Net Debt 1.1 Billion 409 million
Net Acreage 150,000+ net Acres 67,000 net Acres
Cash on hand $8 Million $424 Million
Halcon Resources is a Texas based energy company that drills, extracts, and refines its own oils and NGLs. It has been based in most of the south and west but has sold off assets and become a Delaware Basin Pure-Play; allowing an abundance of cash.
• Currently operating about 3 rigs with 1 on standby and plan to increase with increase in drilling in new wells
• Delaware pure-play so primarily focused on wells in west Texas that have rich, dense oil
• After suffering losses (as most oil companies did in the last few years) Halcon has restructured itself to hedge against instability in price changes
Source: STAG 10k, Seeking Alpha
CEO: Floyd C. Wilson
VP: Stephen W. Herod
CFO: Mark J. Mize
Management Team
8
Revenue Generation Model
REIT’s
• Companies typically go to a specific basin and bid for or purchase the land that they believe is rich with good oilExplore/Site Purchase
• Drilling for Shale oil- Typically done through hydraulic fracturing. This is either done vertically or horizontally depending on the well type.
Drilling/
Extraction
• Maintaining oil Rig upkeep is an important part of the drilling company this includes things such as: Perforating, logging, fracturing, cementing, casing etc.
Maintenance
• Halcon may hold reserves, and may have a certain reserve requirement as inventory. They unload these reserves when demand creeps up and prices rise
Reserves
• The End Users are the companies who use the crude or shale oil for their everyday business operations these are typically construction companies, auto industries, and machinery industries
End Users
9
Company Trends Overview
REIT’s
Restructuring of Company
Increased emphasis on costs and
efficiency
10
Restructuring of company leading to greater liquidity to execute growth plans
Company restructuring and cash
abundance
Divestiture in both Eagle and Williston
wells have led to greater liquidity and
essentially a clearing of balance sheets
(678 M in liquidity)
With massive amounts of cash on hand
Halcon has been primarily focused on
increasing its footprint in the Delaware
Basin and deleveraging ( eliminating 60%
of debt)
Clearing of Balance sheets has allowed
restructuring of debt and allowing Halcon
to become more flexible in growth
strategies
Growth strategy and CapEx
Y-O-Y change in production capabilities is
expected to grow at a CAGR of 154% over
the next 3 years
Between $280-320 Million and $30 Million is
expected to be spent of drilling completion
(Land, Equipment) & Infrastructure
respectively
Price of oil can fall to $40 before limiting
growth plan
0
10000
20000
30000
40000
50000
2017 2018 E 2019 E 2020 E
Production Growth: Boe/d
$25.00
$35.00
$45.00
$55.00
$65.00
$75.00
8-Jan-16 8-Jan-17 8-Jan-18
Price of oil per barrel (WTI)
Ideal Lower level
price
Growth-limiting price
Key Takeaway:
Halcon’s restructuring allowed it do deleverage
and implement massive growth strategy. Because
of this restructuring of balance sheets it can
hedge itself against fluctuations in price of oil.
Sources: Capital-IQ, Halcon 10-k, Earnings Call, Seeking Alpha
11
Increased emphasis on efficient land acquisition: Higher cuts of oil
Emphasis on 3 new draw regions and
increased oil differentials
Divestiture in Eagle Ford and Willington
regions to focus on 3 draw regions (West
Quito, Momentum, & Hackberry)
These new draws have led to wells with
higher quality oil with differentials increasing
from 90% to 95%
The higher quality of wells has increased
recovery rate of oil by over 10% and strong
performance by each well most 30IP are
over 1400 Boe/d exceeding expectations
Land Acquisitions at cheap prices
▪ Cost inflation poses serious risk to Drilling
industry, Halcon has shifted focus on
controlling costs and improving EBITDA
Margins
▪ Halcon has been able to acquire land in
Delaware Basin for 17,000/ net acre where
as the average cost to other producers were
over 30,000/ne acre
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2013 2014 2015 2016 2017
Halcon EBITDA Margins
Large increase in margins
due to high oil prices
Increased margins
likely due to price
stabilization
Sources: Capital-IQ, Halcon 10-k, Merrill Lynch Analyst,
SEC.gov
$40,571
$40,567
$34,884
$32,832
$32,019
$31,690
$27,372
$24,845
$22,319
$17,001
OXY
OAS
Silver Run
CPE
PE
NE
FANG
FANG 2
CRZO
HK
$ /Adjusted Acre
12
Risks
REIT’s
• Price fluctuations may pose one of the greatest risks. If OPEC nations do not comply then supply shocks will disrupt the price of oil and drag down to unsustainable levels. Halcon can withstand this but this does limit growth opportunities
Price Fluctuations
• Cost inflation seems to be a large problem in the very machinery heavy industry of oil production. Plus at this time in restructuring their company, Halcon needs to maintain costs in order to grow the way they need to.
Cost inflation
• Litigation surrounding the hydraulic fracturing methods to produce shale oil has become stringent but has been fought by the current administration. However with growing concerns about the climate, renewables have had a large push.
Litigation/Renewables
With the current climate of political standing and the ability of oil companies to contain costs, Halcon is poised to do very well. However, though Halcon has done well to hedge against these risks they do pose a long term concern.
Key Takeaway
13
Comparable Analysis
REIT’s
Comparable Company Analysis
LTM data ( MM-DD-YYYY )
Company Ticker EV Market Cap Revenue EBITDA Net Income P/E EV/EBITDA EV/Revenue
Halcon Resources HK 744.4 759.3 378.0 30.10% 141.70% 1.4x 6.5x 2.0x
Resolute Energy REN 1,354.0 807.1 303.5 45.10% (4.00%) 9.9x 4.5x
Gulfport Energy GPOR 3,779.6 1,840.4 1,085.5 84.50% 40.10% 4.2x 4.1x 3.5x
Eclipse Resources ECR 885.2 407.4 383.7 53.60% 15.10% 7.0x 4.3x 2.3x
Callon Petroleum CPE 3,189.3 2,597.0 366.6 66.80% 33.00% 21.5x 13.0x 8.7x
High 21.5x 13.0x 8.7x
Mean 10.9x 7.8x 4.7x
Median 7.0x 7.1x 4.0x
Low 4.2x 4.1x 2.3x
14
DCF Valuation
REIT’s
15
Recommendation Summary
Recommendation BUY
Key Takeaways Summary:
Halcon is able to differentiate itself from
other oil drillers through:
• Its unique and rapid growth plans
• Improved and strongly performing
wells
• Increased liquidity
• Strong emphasis on cost efficiency in
operations and in land acquisition
16
Thank You
17
Appendix
18
Income Statement
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Revenue 1,000.0 1,093.0 549.8 395.3 415.3 225.4 597.9 955.1 1,088.7 1,222.6
% growth 9.3% -49.7% -28.1% 5.1% -45.7% 165.2% 59.8% 14.0% 12.3%
COGS (excl. D&A) (245.8) (279.4) (213.7) (186.0) (155.0) (72.5) (199.7) (286.5) (299.4) (317.9)
% of Revenue 24.58% 25.56% 38.87% 47.05% 37.32% 32.16% 33.40% 30.00% 27.50% 26.00%
Gross Profit 754.2 813.6 336.1 209.3 260.3 152.9 398.2 668.6 789.3 904.8
% Margin 75.4% 74.4% 61.1% 52.9% 62.7% 67.8% 66.6% 70.0% 72.5% 74.0%
SG&A (132.4) (116.5) (87.8) (125.0) (110.4) -44.21872902 (117.3) (187.3) (213.5) (239.8)
% of Revenue 13.24% 10.66% 15.97% 31.62% 26.58% 19.61% 19.61% 19.61% 19.61% 19.61%
EBITDA 621.8 697.1 248.3 84.3 149.9 108.7 280.9 481.2 575.7 664.9
% Margin 62.2% 63.8% 45.2% 21.3% 36.1% 48.2% 47.0% 50.4% 52.9% 54.4%
Depreciation (463.7) (534.4) (364.2) (167.5) (110.2) (50.4) (133.7) (213.6) (243.5) (273.5)
Amort. of Intangibles - - - - - - - - - -
Total D&A (463.7) (534.4) (364.2) (167.5) (110.2) (50.4) (133.7) (213.6) (243.5) (273.5)
Other Operating Expenses (31.2) 519.0 310.3 (45.7) 1.3 150.7 150.7 150.7 150.7 150.7
Total Operating Expenses (627.3) (131.9) (141.7) (338.2) (219.3) 56.1 (100.3) (250.3) (306.3) (362.6)
Operating Income (EBIT) 126.9 681.7 194.4 (128.9) 41.0 209.0 297.9 418.3 483.0 542.2
% Margin 12.7% 62.4% 35.4% -32.6% 9.9% 92.7% 49.8% 43.8% 44.4% 44.3%
Interest Expense (55.2) (148.8) (224.6) (156.1) (71.1) (25.8) (25.8) (25.8) (25.8) (25.8)
Interest Income - - - - - - - - - -
Net Interest Inc. (Exp) (55.2) (148.8) (224.6) (156.1) (71.1) (25.8) (25.8) (25.8) (25.8) (25.8)
Other Non-Operating Income (3.0) 3.1 (8.3) 5.0 - - - - - -
EBT Excl. Unusual Items 68.7 536.0 (38.5) (280.0) (30.1) 183.3 272.1 392.6 457.2 516.4
% Margin 6.9% 49.0% -7.0% -70.8% -7.2% 81.3% 45.5% 41.1% 42.0% 42.2%
Unusual Items (1,444.1) (275.0) (1,872.7) (210.7) 596.7 - - - - -
EBT Incl. Unusual Items (1,375.4) 261.0 (1,911.2) (490.7) 566.6 183.3 272.1 392.6 457.2 516.4
Income Tax Expense 157.7 1.1 (9.1) 3.9 5.0 -64.13865192 (95.2) (137.4) (160.0) (180.7)
Earnings from Cont. Ops (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7
Earnings from Discounted Ops. - - - - - - - - - -
Extraord Item & Acct. Change - - - - - - - - - -
Net Income to Company (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7
Minority Int. in Earnings - - - - - 0 0 0 0 0
Net Income (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7
% Margin -121.8% 24.0% -349.3% -123.1% 137.6% 52.8% 29.6% 26.7% 27.3% 27.5%
EPS $ (511.83) $ 91.64 $ (572.74) $ (5.83) $ 3.52 $ 0.80 $ 1.19 $ 1.72 $ 2.00 $ 2.26
19
Balance Sheet
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cash And Equivalents 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4 349.9
Accounts Receivable 300.3 244.7 122.8 126.3 26.4 51.0 135.2 216.0 246.2 276.5
Other Recievables 22.7 8.9 3.9 2.9 16.2 (1.2) (3.4) (4.8) (5.0) (5.4)
Total Receivables 323.0 253.6 126.7 129.2 42.6 49.8 131.8 211.1 241.1 271.1
Inventory 5.1 4.7 4.6 - 4.3 1.3 3.5 5.0 5.2 5.5
Prepaid Exp. 5.6 6.0 4.6 6.7 - 1.5 4.1 5.8 6.1 6.5
Other Current Assets 2.1 394.7 412.7 24.8 0.8 50.6 139.4 200.1 209.0 221.9
Total Current Assets 338.6 702.7 556.6 160.7 471.8 1,299.3 956.2 669.3 739.8 855.0
Gross Property, Plant & Equipment 7,114.3 8,347.4 8,832.2 1,624.1 1,744.4 1,075.5 1,954.1 2,882.3 3,392.8 3,934.3
Accumulated Depreciation (2,198.0) (2,967.8) (5,956.1) (467.0) (574.2) (624.6) (758.4) (972.0) (1,215.5) (1,489.0)
Net Property, Plant & Equipment 4,916.3 5,379.6 2,876.1 1,157.1 1,170.2 450.9 1,195.7 1,910.2 2,177.3 2,445.3
Long-term Investments 4.5 4.3 - - - - - -
Goodwill - - - - - - - -
Other Intangibles - - - - - - - -
Deferred Tax Assets, Current & LT 8.5 136.8 - - - - - -
Deferred Charges, LT 64.3 4.7 7.6 - - - - - -
Other Long-Term Assets 24.2 155.2 18.4 1.9 1.7 1.7 1.6 1.6 1.6 1.5
Total Assets 5,356.4 6,383.3 3,458.7 1,319.7 1,643.7 1,751.9 2,153.5 2,581.2 2,918.8 3,301.8
Accounts Payable 87.7 60.5 47.3 24.4 35.7 16.8 46.2 66.3 69.2 73.5
Accrued Exp. 106.3 115.8 111.4 48.7 22.8 32.4 85.9 137.2 156.4 175.6
Curr. Income Taxes Payable - - 9.2 - 13.0 19.3 27.8 32.4 36.5
ST Debt 9.9 136.8 -
Other Current Liabilities 460.5 431.6 127.5 134.5 91.8 77.3 212.9 305.5 319.2 338.9
Total Current Liabilities 664.4 744.7 295.4 207.6 150.3 139.4 364.2 536.7 577.1 624.6
Long Term Debt 3,183.0 3,695.5 2,873.6 964.7 409.2 409.2 409.2 409.2 409.2 409.2
Capital Leases & Current Portion - - - - - - - -
Unearned Revenue, Non-Current - - - - - - - -
Def. Tax Liability, Non-Curr. - - - - - - - -
Other Non-Current Liabilities 60.7 53.7 53.4 34.8 12.1 12.1 12.1 12.1 12.1 12.1
Total Liabilities 3,908.1 4,493.9 3,222.4 1,207.1 571.6 560.7 785.5 958.0 998.4 1,045.9
Common Stock - - - - - - - -
Additional Paid In Capital 2,953.8 2,995.4 3,283.1 592.7 1,016.3 1,016.3 1,016.3 1,016.3 1,016.3 1,016.3
Retained Earnings (1,506.2) (1,223.3) (3,230.7) (480.0) 55.7 174.8 351.7 606.9 904.0 1,239.7
Treasury Stock - - - - - - - -
Comprehensive Inc. and Other - - - - - - - -
Total Common Equity 1,447.6 1,772.1 52.4 112.7 1,072.0 1,191.1 1,368.0 1,623.2 1,920.3 2,256.0
Minority Interest - 117.2 184.0 - - - - - -
Total Equity 1,447.6 1,889.3 236.4 112.7 1,072.0 1,191.1 1,368.0 1,623.2 1,920.3 2,256.0
Total Liabilities and Equity 5,355.7 6,383.2 3,458.8 1,319.8 1,643.6 1,751.8 2,153.5 2,581.2 2,918.8 3,301.9
Balance Check OK OK OK OK OK OK OK OK OK OK
20
Revenue Estimates
Segment I
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Volume 890.0 939.0 474.0 330.7 340.7 140.0 500.0 843.0 960.2 1,075.4
Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total 890.0 939.0 474.0 330.7 340.7 140.0 500.0 843.0 960.2 1,075.4
% Growth 5.5% -49.5% -30.2% 3.0% -58.9% 257.1% 68.6% 13.9% 12.0%
Volume Growth 5.5% -49.5% -30.2% 3.0% -58.9% 257.1% 68.6% 13.9% 12.0%
Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Segment II
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Volume 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9
Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9
% Growth 52.4% -63.7% 2.2% 36.7% 16.0% 16.0% 16.0% 16.0% 16.0%
Volume Growth 52.4% -63.7% 2.2% 36.7% 16.0% 16.0% 16.0% 16.0% 16.0%
Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Segment III
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Volume 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7
Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7
% Growth 29.9% -38.5% -24.3% -0.5% 13.0% 13.0% 13.0% 13.0% 13.0%
Volume Growth 29.9% -38.5% -24.3% -0.5% 13.0% 13.0% 13.0% 13.0% 13.0%
Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Revenues
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Segment I 945.0 1,016.0 511.9 363.0 378.0 182.7 548.9 899.1 1,024.4 1,149.0
Segment II 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9
Segment III 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7
Total 1,000.0 1,093.0 549.8 395.3 415.3 225.4 597.9 955.1 1,088.7 1,222.6
-45.72% 165.20% 59.76% 13.98% 12.31%
Cost of Goods Sold Estimates (excl. D&A)
Total COGS
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Segment I (11.7) (26.7) (40.3) (14.7) (40.8) (16.91) (38.86) (52.53) (59.88) (61.13)
Segment II (139.2) (130.2) (103.6) (22.4) (61.7) (29.31) (85.50) (128.94) (130.64) (146.72)
Segment III (94.9) (122.5) (69.8) (148.9) (52.5) (26.3) (75.3) (105.1) (108.9) (110.0)
Total COGS (245.8) (279.4) (213.7) (186.0) (155.0) (72.5) (199.7) (286.5) (299.4) (317.9)
Segment I % COGS 1.17% 2.44% 7.33% 3.72% 9.82% 7.50% 6.50% 5.50% 5.50% 5.00%
Segment II % COGS 13.92% 11.91% 18.84% 5.67% 14.86% 13.00% 14.30% 13.50% 12.00% 12.00%
Segment III % COGS 9.49% 11.21% 12.70% 37.67% 12.64% 11.66% 12.60% 11.00% 10.00% 9.00%
21
Statement of Cash Flows
Historical Forecasted
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net Income (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7
Add: Depreciation & Amortization 463.7 534.4 364.2 167.5 110.2 50.4 133.7 213.6 243.5 273.5
Less: Change in Net Working Capital - (242.9) (338.9) 300.1 55.7 (66.3) 49.1 29.3 1.0 3.8
Less: Capital Expenditures - - - - - 668.9 (878.6) (928.2) (510.6) (541.5)
Operating Cash Flow (754.0) 553.6 (1,895.0) (19.2) 737.5 772.1 (518.9) (430.1) 31.1 71.5
Initial Cash Balance - 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4
Cash Available for Investors (754.0) 556.4 (1,851.3) (11.2) 737.5 1,196.2 677.4 247.3 278.4 349.9
Debt Additions (Repayments) - - - - - - - - - -
Dividend Payments 10.7 33.0 84.3 45.5 48.0 - - - - -
Equity Additions (Share Repurchase) - - - - - - - - - -
Historical Cash Adjustment 746.1 (545.7) 1,775.0 (34.3) (361.4) - - - - -
Ending Cash Balance 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4 349.9
22
Capital Asset Pricing Model Notes
Beta 2.21 Regression Beta (5Y, Weekly) from Internet: Use Google Finance, Reuters, Bloomberg, or CapIQ
Risk-free Rate 2.77% Use most recent yield on 10-Year U.S. Treasuries (http://data.cnbc.com/quotes/US10Y)
Base Risk Premium 1.77% Use historical equity risk premium from Ibbotson Associates
Market Cap 772.72$
Size Premium 1.77%
CAPM 8.45%
Cost of Debt
You can use morningstar.com or bloomberg to find bonds and yield of companies
Debt Tranche Type of Debt Value % of Total Coupon Yield Maturity Seniority Callable Convertible Currency
1 Senior Secured Notes 409 100% 6.8% 6.30% Feb-17-2025 Senior No No USD
2 0%
3 0%
4 0%
5 0%
Total Value of Debt 409.2
Cost of Debt 6.30% Weighted average of the different yields
23
Discounted Cash Flow Analysis
Key Statistics: Perpetuity Growth Method Exit Multiple Method
Current Trading Price (04-17-2018) 5.20$ Growth Rate 2.00% EBITDA Multiple 6.50x
Market Cap 772.72$ Undiscounted TEV 1,821.7$ Undiscounted TEV 4,322.1$
Net Debt (14.93)$ Discounted TEV 1,302.3$ Discounted TEV 3,089.8$
Beta 2.21 DCF Value 1,362.7$ DCF Value 3,150.2$
Shares Outstanding 148.60 Equity Value 1,377.7$ Equity Value 3,165.1$
Marginal Tax Rate 35.00% Share Price 9.27$ Share Price 21.30$
Implied Exit Multple 2.74 Implied Growth Rate 4.80%
Growth Rate Sens. Ref 2.00% Exit Mutliple Sens. Ref 6.50x
Forecasted
WACC Calculation: 2018 2019 2020 2021 2022
Cost of Debt 4.10% EBIT 209.03$ 297.92$ 418.33$ 482.96$ 542.19$
% Weight 35% - Taxes -73.16 -104.27 -146.42 -169.04 -189.77
135.87$ 193.64$ 271.92$ 313.93$ 352.42$
Cost of Equity 8.45% + D&A 50.43 133.74 213.65 243.52 273.49
% Weight 65% - CAPEX 668.90 (878.59) (928.16) (510.58) (541.47)
- Δ in NWC (66.30) 49.12 29.28 0.99 3.84
WACC 6.94% Unlevered FCF 788.89$ (502.10)$ (413.32)$ 47.85$ 88.29$
WACC Sens. Ref. 6.94% Net Present Value $60.43
Risks - Sensitivity Analysis [Hidden]