Denbury Resources Inc. (DNR)

DNR 
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Denbury Resources (DNR)

Q3 2012 Earnings Call

November 06, 2012 11:00 am ET

Executives

Jack T. Collins - Executive Director of Investor Relations

Phil Rykhoek - Chief Executive Officer, President and Director

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer and Assistant Secretary

Craig J. McPherson - Chief Operating Officer and Senior Vice President

Robert L. Cornelius - Senior Vice President of Co(2) Operations and Assistant Secretary

Analysts

David Deckelbaum - KeyBanc Capital Markets Inc., Research Division

Robert Bellinski - Morningstar Inc., Research Division

Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division

Ryan Oatman - SunTrust Robinson Humphrey, Inc., Research Division

Hsulin Peng - Robert W. Baird & Co. Incorporated, Research Division

Pearce W. Hammond - Simmons & Company International, Research Division

Jason A. Wangler - Wunderlich Securities Inc., Research Division

Andrew Coleman - Raymond James & Associates, Inc., Research Division

Noel A. Parks - Ladenburg Thalmann & Co. Inc., Research Division

Presentation

Operator

Ladies and gentlemen, good morning, thank you for standing by, and welcome to the Third Quarter 2012 Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Denbury's Executive Director of Investor Relations, Mr. Jack Collins. Please go ahead.

Jack T. Collins

Okay. Thank you, Tom, and good morning, everyone, and thank you for joining us on today's call. With me on the today from Denbury are: Phil Rykhoek, our President and Chief Executive Officer; Mark Allen, our Senior Vice President and Chief Financial Officer; Craig McPherson, our Senior Vice President and Chief Operating Officer; and Bob Cornelius, our Senior Vice President of CO2 Operations.

Before we begin the call, let me remind you that today's call will include forward-looking statements that are based on the best and most reasonable information we have today. There are numerous factors that could cause the actual result to differ materially from what is discussed on today's call. You can read our full disclosure on forward-looking statements and the risk factors associated with our business in our corporate presentation, our latest 10-K and today's press release, all of which are available on our website at www.denbury.com.

Also, over the course of today's call, we will reference certain non-GAAP measures. Reconciliations of and disclosure on these measures are provided in today's press release.

With that out of the way, let me turn the call over to Phil.

Phil Rykhoek

Thanks, Jack, and thank you for joining us on Election Day. Today, we're going to focus primarily on third quarter, which bottom line, I think, you'll find are generally in line with expectations. We'll be looking at 2013 guidance, give a full update on our future plans and so forth at our analyst meeting, which is next Monday, November 12. We hope you can join us at that. But if you can't, be aware that the presentation will be webcast.

We also will be doing a repeat, but a somewhat summarized version of that presentation in New York the morning of Wednesday, November 14. If you'd like to attend either of these meetings and haven't previously registered, please contact investor relations or Jack Collins.

As you know, this quarter we announced the Exxon Mobil transaction asset sale and exchange that includes our Bakken area asset. This transaction is on schedule. We expect it to close around the end of November. If you recall, we'll receive about $1.6 billion in cash, and we'll receivable operating interest in 2 future EOR floods located in our core areas, Webster and Hartzog Draw. In addition, we will acquire additional CO2 from Exxon's LaBarge Field in Southwestern Wyoming, which depending on the form that it takes could reduce those cash proceeds. We are continuing to pursue opportunities to use the cash proceeds to buy additional oil fields that would be EOR candidates in our 2 areas. We love to make that part of a like-kind exchange, and of course, that would reduce our tax leakage. However, it's still too early to know which, if any, of these potential deals could be consummated.

We have until 45 days after closing to identify any such candidates, which means probably about mid-January. And then we have 180 days after closing the Exxon Mobil deal to close any incremental transaction which would be late May.

If we can't do a like-kind exchange transaction, we would initially use the cash proceeds to fully repay our credit facility, and we would have cash left over. Shortly after announcing the Bakken transaction, we resumed our share repurchase program, and we've added about another 4.6 million shares to our total purchases to date. To recap that program, we have now repurchased nearly 19 million shares or approximately 5% of our outstanding shares, and we have an average purchase price of just under $14.50 a share. We have approximately $230 million of remaining purchase -- repurchases authorized under that $500 million program, but as part of the recent bank amendment, which was required in order to authorize the Exxon Mobil transaction, we increased the total stock repurchases allowed under that agreement by an additional $700 million or a revised total of $1.2 billion. Bottom line, that gives us the flexibility to easily expand our repurchase program beyond the $500 million currently approved by our board.

When we look at our stock repurchase program, it's our practice to set aside capital for that program and until we get a little further along, we are uncertain how much incremental liquidity we will have from the Exxon Mobil deal. As such, we have intentionally repurchased our stock at a bit of a slow pace during the last month or 2 pending a more definitive answer regarding the magnitude of potential asset purchases.

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