Denbury Rescs a Lower-Target Buy

Plano, Texas-based Denbury Resources Inc. (DNR - Analyst Report) 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 U.S. Gulf Coast region. It is the largest oil and gas producer in Mississippi, and also has properties in Louisiana, Alabama and the Barnett Shale area of Texas.

Denbury's third-quarter results were significantly above the year-earlier level due to production gains and higher realized prices for crude and natural gas. Production rose 12%, after adjusting for the sale of Louisiana natural-gas properties, while average realized crude oil and natural gas prices increased 53% and 10% year-over-year, respectively. These gains were partly offset by a 30% increase in unit G&A expenses.

Importantly, in response to the credit market turmoil, Denbury reduced its capital budget for 2008 and 2009 to bring its projected outlays within operating cash flows. We have lowered our 2008 ($1.72 vs. $2.20) and 2009 ($2.30 vs. $2.92) EPS estimates to reflect a lower commodity-price deck.

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