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Denbury Resources Inc. (DNR - Analyst Report) 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 34 cents.

Growth Factors

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 during 2013.

Earnings Whispers?

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 below.
 
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. (ORIG - Snapshot Report), earnings ESP of +20.00% and a Zacks Rank #1 (Strong Buy).

Emerge Energy Services LP Commo (EMES - Snapshot Report), earnings ESP of +9.09% and a Zacks Rank #1 (Strong Buy).

Stone Energy Corp. (SGY - Analyst Report), earnings ESP of +1.94% and a Zacks Rank #2 (Buy).
 

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