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Denbury Resources Inc (DNR): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Posted
12/16/2013 7:00:00 AM
By: Zacks.com
Referenced Stocks:CCA;DNR

Summary:
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.

Overview:

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 reserves.

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 level.

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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