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On Aug 29, Zacks Investment Research upgraded Denbury Resources Inc. (DNR - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Denbury Resources has been witnessing rising earnings estimates following the announcement of robust second-quarter 2013 results. Moreover, this exploration and production (E&P) company has delivered an average beat of 19.5% in the past four quarters.

Denbury Resources reported second-quarter 2013 results on Aug 6. Earnings per share of 41 cents surpassed the Zacks Consensus Estimate by 7 cents.

The company has a relatively low-risk business model as it produces oil by applying tertiary recovery techniques to mature fields. Tertiary operations remain the company’s principal focus. The company’s production from tertiary operations averaged 38,752 barrels per day in the second quarter, which represents more than a 10% increase year over year. The upside came from contributions from continued field development and expansion of facilities in Delhi, Hastings, and Oyster Bayou fields.

Denbury reaffirmed its 2013 production 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 2013, with approximately 85% of the total capital outlay apportioned for tertiary projects. The balance will likely be for conventional projects, primarily in the Cedar Creek Anticline.

Additionally, following the earnings release, the Zacks Consensus Estimate for the third quarter of 2013 increased 8.8% to 37 cents per share over the last 30 days. Similarly, for full-year 2013, the Zacks Consensus Estimate advanced 8.5% to $1.40 per share over the same time period.

Positive earnings surprises and favorable estimate revisions stimulated the rank upgrade.

Other Stocks to Consider

While we prefer Denbury Resources, other stocks looking more attractive with a Zacks Rank #1 (Buy rating) include Carrizo Oil & Gas Inc. (CRZO - Snapshot Report), Matador Resources Company (MTDR - Snapshot Report), and Range Resources Corporation .
 

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