Denbury Resources Inc. (NYSE: DNR) operates as an independent oil and natural gas company in the United States. It holds interests in various oil and natural gas properties located in Mississippi, Texas, Louisiana, and Alabama in the Gulf Coast region; and in Montana, North Dakota, and Wyoming in the Rocky Mountain region.
In mid-April, DNR shares were trading at $2.84 per share and have been steadily climbing since, rising to today’s level of $6.64. Profitable operations and rising oil prices could be catalysts driving the company shares.
Denbury’s production averaged 61,994 BOE/d during second quarter 2018, up 4% from second quarter 2017 due principally to higher production from the redevelopment project at Hastings Field in mid-2017, production response from continued expansion at Bell Creek Field, and a full quarter of production from the mid-2017 acquisition at Salt Creek Field. Sequentially, production increased 3% from first quarter 2018, due primarily to production increases at Cedar Creek Anticline, which benefited from the strong performance of two new Mission Canyon wells completed during March and April of 2018, and also due in part to higher production in the Gulf Coast region due to non-recurring weather downtime which lowered first quarter 2018’s production.
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2018 SECOND QUARTER HIGHLIGHTS
- Production of 61,994 barrels of oil equivalent (“BOE”) per day in Q2 2018, up 3% from Q1 2018
and 4% from Q2 2017
- Adjusted cash flow from operations (1) (a non-GAAP measure) of $134 million for Q2 2018, up 7%
from Q1 2018 and 106% from Q2 2017
- Adjusted EBITDAX (1) (a non-GAAP measure) of $153 million for Q2 2018, up from $142 million in
Q1 2018 and $86 million in Q2 2017
- Reduced debt principal by $189 million in Q2 2018, and over $1 billion since Q4 2014
- Continued improvement in leverage metrics, debt to annualized Q2 2018 Adjusted EBITDAX of
4.1x (including hedge settlements) and 3.0x (excluding hedge settlements)
- Sanctioned the enhanced oil recovery (“EOR”) development project at Cedar Creek Anticline, with
total recoverable oil potential estimated to be in excess of 400 million barrels
The company’s primary focus is on enhanced oil recovery utilizing carbon dioxide (“CO2 EOR”), and their operations are focused in two key operating areas: The Gulf Coast and Rocky Mountain regions. Currently their properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming.
Denbury is unique among domestic oil and gas companies in that its primary corporate strategy and focus are aimed at developing significant stranded reserves of American oil from depleted reservoirs through CO2 EOR (carbon dioxide enhanced oil recovery).
Denbury Resources Inc. operates as an independent oil and natural gas company in the United States. It holds interests in various oil and natural gas properties located in Mississippi, Texas, Louisiana, and Alabama in the Gulf Coast region; and in Montana, North Dakota, and Wyoming in the Rocky Mountain region. As of December 31, 2017, the company had 259.7 million barrels of oil equivalent of estimated proved oil and natural gas reserves. Denbury Resources Inc. was founded in 1951 and is headquartered in Plano, Texas.
9 Wall Street analysts have issued ratings and price targets for Denbury Resources in the last 12 months. Their average twelve-month price target is $4.5167, suggesting that the stock has a possible downside of 28.76%. The high price target for DNR is $9.00 and the low price target for DNR is $1.00. There are currently 7 hold ratings and 2 buy ratings for the stock, resulting in a consensus rating of “Hold.”
Date Brokerage Action Rating Price Target
10/3/2018 Oppenheimer Initiated Coverage Outperform $9.00
8/20/2018 KLR Group Reiterated Rating Hold $5.00
8/15/2018 Johnson Rice Upgrade Hold ➝ Accumulate
8/1/2018 Stifel Nicolaus Boost Price Target Hold ➝ Hold $1.30 ➝ $4.60
7/13/2018 Royal Bank of Canada Reiterated Hold $5.00
3/7/2018 UBS Group Initiated Neutral $2.50
1/16/2018 Mizuho Upgrade Neutral ➝ Buy
Total revenues of $387.1 million rose from $261.2 million a year ago.
Gross profit $261,369,000
Operating income $ 54,058,000
Net income $ 30,222,000
Shareholder equity $885,645,000
Adjusted cash flow from operations was $134 million in Q2 compared with $65 million in the year-ago quarter. The company’s capital spending decreased to $90.4 million from the year-earlier quarter’s $152.6 million. As of Jun 30, 2018, cash balance was $4.5 billion and total debt was $2.5 billion.
The Company had $415 million outstanding under its $1.05 billion senior secured bank credit facility as of June 30, 2018, a decrease of $35 million from the level outstanding as of March 31, 2018 and a decrease of $60 million from December 31, 2017. At June 30, 2018, the Company had $573 million of liquidity available under its bank credit facility after consideration of $62 million of outstanding letters of credit. In addition to reductions of senior secured bank credit facility debt outstanding, the Company has reduced the outstanding principal of its long-term notes by $329 million over the last 7 months through a series of exchange transactions completed in December 2017 and January 2018 and related conversions of all of its convertible notes into equity in April and May 2018.
Stock influences and risk factors
Continuing strength in oil prices may act as a catalyst for the company shares.
A financial downturn in one or more of the world’s major markets could negatively affect their business and financial condition.
Inability to meet financial performance covenants in their bank agreements may require borrowing base reductions.
Their future performance depends upon their ability to effectively develop existing oil and natural gas reserves and find or acquire additional oil and natural gas reserves that are economically recoverable.
On Tuesday, October 9, 2018, DNR shares were at $6.64 per share on traded volume of 3.4 million shares. The current RSI (14) is 69.84
At $6.64, DNR shares are trading above their 50 DMA and 200 DMA of $5.30 and $3.77 respectively.