Denbury Resources Inc.
) has reported first-quarter 2012 adjusted earnings of 41 cents per
share (excluding one-time items), beating our expectation of 38
cents. The quarterly results were also well above the year-earlier
adjusted earnings of 26 cents, attributable to record output from
tertiary oil and the Bakken output.
Total revenue jumped 35% to $645.1 million from the year-ago
level of $514.2 million and comfortably surpassed the Zacks
Consensus Estimate of $610 million.
During the quarter, production averaged 71,532 barrels of oil
equivalent per day (Boe/d), up 12% year over year, attributable to
the increased output in Bakken and tertiary. Oil production
averaged 66,857 barrels (up 14% from the year-ago level) and
natural gas averaged 28,052 thousand cubic feet (down 9%), on a
Oil price realization (including the impact of hedges) averaged
$101.16 per barrel in the quarter, showing an improvement of 9%
year over year, while gas prices decreased 8% to $6.59 per Mcf. On
an oil equivalent basis, the overall price realization was $97.14
per barrel, up 10% from the year-earlier level of $88.70 per
Cash flow from operations was $291.7 million in the reported
quarter versus $124.8 million in the year-ago quarter. Oil &
natural gas capital investments were $302.8 million, up from the
year-earlier level of $220.1 million. Denbury's 2012 capital
expenditure budget has been hiked by $150 million to $1.5 billion.
Of the $150 million increase, $80 million is allocated for Bakken
development while the remainder will be expended toward tertiary
Cash balance as of March 31, 2012was $77.4 million and long-term
debt was $2,496.4 million, representing a debt-to-capitalization
ratio of 33.6% (unchanged from the preceding quarter).
With its own in-house CO2 reserve base, Denbury enjoys a
significant competitive advantage in acquiring and exploiting
mature oil reservoirs. Tertiary operations remain the company's
principal focus with particular emphasis on the Gulf Coast, Rocky
Mountains and Bakken Shale holdings.
Denbury reduced its 2012 production guidance to 68,625-73,625
Boe/d from its earlier estimate of 70,250-75,250 Boe/d. The
company's tertiary production target remains unchanged in the
33,000-36,000 Boe/d range, while the Bakken production guidance has
been increased to the range of 14,350-16,350 Boe/d from
12,750-14,750 Boe/d previously.
However, we see limited upside potential for Denbury shares due
to its sensitivity to oil price volatility, along with drilling
results, costs, geo-political risks and project timing delays.
Additionally, competition from
Pioneer Natural Resources
Newfield Exploration Co.
) is also a cause for concern.
We currently reiterate our long-term Neutral rating on Denbury
shares. The company carries a Zacks #2 Rank (short-term Buy
DENBURY RES INC (DNR): Free Stock Analysis
NEWFIELD EXPL (NFX): Free Stock Analysis Report
PIONEER NAT RES (PXD): Free Stock Analysis
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