Pine Cliff Energy Ltd T.PNE

Alternate Symbol(s): PIFYF

Energy Oil & Gas E&P

Pine Cliff Energy Ltd. is a Canada-based natural gas and crude oil company. The Company is engaged in the acquisition, exploration, development and production of natural gas and oil in the Western Canadian Sedimentary Basin and also conducts various activities jointly with others. The Company's operating areas include Central Assets, Edson Assets and Southern Assets. Its Central Assets include Ghost Pine and Viking Kinsella areas of Central Alberta. Its Southern Assets includes Monogram unit, Many Islands / Hatton properties, Pendor, Black Butte and Eagle Butte areas. Its Edson Assets include Pine Cliff with its first core area in the Western Canadian Sedimentary Basin. It operates and sells its natural gas to the common Alberta natural gas price hub.

TSX:PNE - Post by User

Pine Cliff Energy Ltd

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Post by zack50on May 16, 2022 12:41pm

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Post# 34686562

Share Price vs. Fair Value... Simply Wall St.

Below are the data sources, inputs and calculation used to determine the intrinsic value for Pine Cliff Energy.

**TSX:PNE Discounted Cash Flow Data Sources**
Data Point	Source	Value
Valuation Model		2 Stage Free Cash Flow to Equity
Levered Free Cash Flow	Extrapolated from most recent financials.	See below
Discount Rate (Cost of Equity)	See below	6.8%
Perpetual Growth Rate	5-Year Average of CA Long-Term Govt Bond Rate	1.6%

An important part of a discounted cash flow is the discount rate... below we explain how it has been calculated.

**Calculation of Discount Rate/ Cost of Equity for TSX:PNE**
Data Point	Calculation/ Source	Result
Risk-Free Rate	5-Year Average of CA Long-Term Govt Bond Rate	1.6%
Equity Risk Premium	S&P Global	4.2%
Oil and Gas Unlevered Beta	Simply Wall St/ S&P Global	1.29
Re-levered Beta	= 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate) (Debt/Market Equity))] = 0.33 + [(0.66 * 1.292) * (1 + (1 - 26.5%) (6.17%))]	1.235
Levered Beta	Levered Beta limited to 0.8 to 2.0 (practical range for a stable firm)	1.235
Discount Rate/ Cost of Equity	= Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium) = 1.56% + (1.235 * 4.24%)	6.80%

Discounted Cash Flow Calculation for TSX:PNE using 2 Stage Free Cash Flow to Equity

The calculations below outline how an intrinsic value for Pine Cliff Energy is arrived at by discounting future cash flows to their present value using the 2 stage method. We use analyst's estimates of cash flows going forward 10 years for the 1st stage, the 2nd stage assumes the company grows at a stable rate into perpetuity.

**TSX:PNE DCF 1st Stage: Next 10 years cash flow forecast**
	Levered FCF (CAD, Millions)	Source	Present Value Discounted (@ 6.80%)
2022	162.5	Analyst x2	152.16
2023	110.6	Analyst x2	96.97
2024	84.03	Est @ -24.02%	68.99
2025	70.29	Est @ -16.35%	54.03
2026	62.58	Est @ -10.98%	45.04
2027	58.06	Est @ -7.22%	39.13
2028	55.4	Est @ -4.58%	34.96
2029	53.88	Est @ -2.74%	31.84
2030	53.1	Est @ -1.45%	29.38
2031	52.81	Est @ -0.55%	27.36
Present value of next 10 years cash flows			CA$579

**TSX:PNE DCF 2nd Stage: Terminal Value**
	Calculation	Result
Terminal Value	FCF2031 × (1 + g) ÷ (Discount Rate – g) = CA$52.811 x (1 + 1.56%) ÷ (6.80% - 1.56% )	CA$1,024.21
Present Value of Terminal Value	= Terminal Value ÷ (1 + r)10 CA$1,024 ÷ (1 + 6.80%)10	CA$530.65

**TSX:PNE Total Equity Value**
	Calculation	Result
Total Equity Value	= Present value of next 10 years cash flows + Terminal Value = CA$579 + CA$531	CA$1,109.65
Equity Value per Share (CAD)	= Total value / Shares Outstanding = CA$1,110 / 343	CA$3.23