Calculating EV/EBITDA

Need a little help on this EV/EBITDA calculation for Chesapeake Energy. Not sure if I’m doing this right.

Using yesterday’s closing price and current outstanding shares, I got a diluted equity value of $6.132B. Then, I used the most recent 10-Q to calculate the EV. Does this look right? I appreciate any help.

Diluted Equity Value: 6,131,864,900

Less Cash & Cash Equiv: (4,000,000)

Less: Net Value of Hedges: 121,000,000

Plus: Debt 9,678,000,000

Plus: Asset Retire. Ob. 403,000,000

Plus: Non-controlling Int. 259,000,000

Plus: Preferred Stock 3,036,000,000

Enterprise Value 19,624,864,900

EBITDA 298,000,000


sometimes EV/EBITDA ratios are a pretty crappy metric to use. This looks like one of those scenarios

Yea, but the important thing I’m looking for here is the calculation of the actual enterprise value. With EBITDA I’m just taking op. income and adding back DD&A, impairments and other non-cash charges.

It’s a commodity company. EBITDA and earnings will swing wildly. You should use forward EBITDA when calculating EV/EBITDA for Chesapeake. I think people expect CHK to be above $2B in EBITDA in 2017 with higher commodity prices giving you a more reasonable EV/EBITDA multiple.


I second that. If not mistaken, they had a hugely negative EBITDA last year, and generally have a huge balance sheet in relation with the P&L.

Conventional (say industrial) valuation ranges don’t apply to such corporations.