We are reiterating our Neutral recommendation for Denbury
Resources. With its unique profile, compelling economics and
unmatched infrastructure, Denbury is nicely positioned to deliver
long-term sustainable growth. The Cedar Creek Anticline (CCA) deal
adds to Denbury's inventory of tertiary projects and emphasizes its
synergies with the existing carbon dioxide infrastructure.
Additional positives for Denbury include a strong financial
position, low-risk investments and an active divestment policy.
However, the company's fourth quarter 2013 earnings missed the
Zacks Consensus Estimate due to lower price realization, as well as
higher lease operating expenses and depletion, depreciation and
amortization. We also remain cautious due to high cost levels
associated with the tertiary oil recovery method and harsh weather
conditions that may restrict the activity level.
Plano, Texas-based Denbury Resources Inc. (DNR) is a growing
exploration and production (E&P) company engaged in the
acquisition, development, operation, and exploration of oil and
natural gas properties in the Gulf Coast and Rocky Mountain regions
of U.S. It is the largest oil producer in Mississippi, with further
properties in Louisiana, Alabama and Southeast Texas. As of
year-end 2013, the company had approximately 468 million
oil-equivalent barrels (MMBOE) in proved reserves, of which 83% was
liquid, 62% was proved developed and 49% was proved tertiary oil
Denbury is the leading carbon dioxide (CO2) Enhanced Oil
Recovery' (EOR) company in the U.S. with a unique profile. Its
proved carbon dioxide reserves were 9.6 trillion cubic feet (Tcf)
as of December 31, 2013, unchanged from the year-end 2012
The scarcity of CO2 in the Gulf Coast states, and its
effectiveness in extracting oil through tertiary recovery
techniques from mature reservoirs, has made it a valuable resource
for the company. The CO2 is injected into the reservoir, where it
acts like a solvent, causing the oil to expand and become mobile,
enabling a greater percentage of oil to be recovered from a
reservoir. Denbury Resources owns the only significant reserves of
CO2 from Florida to East Texas. The CO2 reserves are located in
Mississippi, where Denbury owns a number of mature oil fields and
is the largest producer.
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DENBURY RES INC (DNR): Free Stock Analysis
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