Denbury Resources Inc.
) is set to report its third-quarter 2013 results on Nov 5. Let's
see how things are shaping up prior to the announcement.
In the second quarter, the company's earnings of 41 cents per
share increased 17.1% year over year from 35 cents. The quarterly
results were aided by higher liquid production cum realizations.
Also, the results were ahead of the Zacks Consensus Estimate of
Denbury has a relatively low-risk business model -- it produces
oil by applying tertiary recovery techniques to mature fields.
Tertiary operations remain the company's principal focus. The
third quarter saw increased production from tertiary operations
on continued field development and expansion of facilities in
Delhi, Hastings, and Oyster Bayou fields.
Denbury expects 2013 production in the range of 68,700-71,700
barrels of oil equivalent per day (Boe/d). Strong growth from the
company's high-growth projects at Delhi, Hastings and Oyster
Bayou should drive production toward the higher end of the guided
range. This will aid the company in effectively replacing all of
the sold Bakken production. The tertiary production growth was
set at 6-14%, reflecting normal year-to-year variability. Capital
expenditure was set at $1.06 billion for the year, of which
approximately 85% of the total capital outlay for tertiary
projects. The balance will likely be for conventional projects,
primarily in the Cedar Creek Anticline.
With its in-house CO2 reserve base, Denbury has a significant
competitive advantage in acquiring and exploiting mature oil
reservoirs. CO2 is more effective in extracting oil using
tertiary recovery techniques from mature reservoirs. Following
the Bakken or CCA deals, Denbury has successfully transformed
itself into a pure EOR entity associated with stable and highly
visible long-term oil growth. This secure, high-margin tertiary
growth as well as share buyback plan will likely continue to
enhance the company's per-share metrics, helping it to outperform
Our proven model conclusively shows that Denbury is likely to
beat earnings estimates this quarter. This is because a stock
needs to have both a positive Earnings ESP and a Zacks Rank #1, 2
or 3 for this to happen. This is the case here as you will see
Zacks ESP, which represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate, is +4.67%.
This is because the Most Accurate estimate is at 43 cents while
the Zacks Consensus Estimate currently stands at 41 cents.
Zacks Rank: Denbury's Zacks Rank #2 (Buy) increases the
predictive power of ESP because the Rank when combined with an
ESP of +4.67% indicates the possibility of positive results. We
caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies you may want to consider as our
model shows these have the right combination of elements to post
an earnings beat this quarter.
Ocean Rig UDW Inc.
), earnings ESP of +20.00% and a Zacks Rank #1 (Strong Buy).
Emerge Energy Services LP Commo
), earnings ESP of +9.09% and a Zacks Rank #1 (Strong Buy).
Stone Energy Corp.
), earnings ESP of +1.94% and a Zacks Rank #2 (Buy).
DENBURY RES INC (DNR): Free Stock Analysis
EMERGE ENRG SVC (EMES): Free Stock Analysis
OCEAN RIG UDW (ORIG): Free Stock Analysis
STONE ENERGY CP (SGY): Free Stock Analysis
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