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Denbury Resources Inc.’s (DNR - Analyst Report) first-quarter 2014 adjusted earnings of 25 cents per share (excluding one-time items) came in line with the Zacks Consensus Estimate. However, quarterly results were 24.2% lower than the year-earlier adjusted earnings of 33 cents. The decline was mainly due to lower price realization as well as higher lease operating expenses and depletion, depreciation and amortization.

First-quarter total revenue of $641.7 million increased from $583.1 million a year ago and surpassed the Zacks Consensus Estimate of $607.0 million.
 
Operational Performance

During the reported quarter, production averaged 73,718 barrels of oil equivalent per day (Boe/d) versus 63,823 Boe/d in the prior-year quarter.

Oil production averaged 69,834 barrels per day, up 17.2% from the year-ago level. Natural gas production averaged 23,299 thousand cubic feet (down 8.5%), on a daily basis.

The company’s production from tertiary operations averaged 39,892 barrels per day, representing a 2.0% increase year over year. Contributions from continued field development and expansion of facilities in Heidelberg, Oyster Bayou and Tinsley fields as well as production in the Rocky Mountain region in Bell Creek Field, supported the increase.

Oil price realization (including the impact of hedges) averaged $93.46 per barrel in the quarter, reflecting a fall of 11.5% year over year, while gas prices expanded 34.5% year over year to $4.41 per Mcf. On an oil equivalent basis, the overall price realization was $89.93 per barrel, down almost 10.0% from the year-earlier level of $99.87 per barrel.

Financials

Cash flow from operations was $215.0 million in the reported quarter versus $269.0 million in the year-ago quarter. Oil & natural gas capital investments were approximately $203.0 million (before acquisitions and capitalized interest), down from the year-earlier level of $240.0 million.

Cash balance as of Mar 31, 2014, was $7.9 million and total debt was $3,548.4 million, representing a debt-to-capitalization ratio of 40.8%.

Guidance

Denbury expects 2014 production in the range of 76,500–78,500 Boe/d. The company expects tertiary production at the lower end of the estimated range of 42,000–44,000 Boe/d. The capital expenditure budget has been reiterated at $1 billion, of which about 78% is apportioned for tertiary projects. The remainder is for conventional projects, with special emphasis on Cedar Creek Anticline and Hartzog Draw fields.

Zacks Rank

Denbury carries a Zacks #3 Rank (Hold). There are other stocks in the oil and gas sector like, RSP Permian, Inc. (RSPP - Snapshot Report), Clayton Williams Energy, Inc. (CWEI - Snapshot Report) and Matrix Service Company (MTRX - Snapshot Report), which hold a Zacks Rank #1 (Strong Buy) and are expected to outperform the market.

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