Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We have maintained our long-term Neutral recommendation on Denbury Resources Inc. (DNR - Analyst Report) — an exploration and production company engaged in the acquisition, development, operation, and exploration of oil and natural gas properties in the Gulf Coast and Rocky Mountain regions of the U.S.

In the first quarter, Denbury posted better-than-expected results given record tertiary oil production and the Bakken output. Its quarterly production rose 12% on an annualized basis and as the company’s production is fairly oil-weighted, we view strong earnings and cash flow visibility in the future.

Denbury raised its 2012 annual production guidance to the range of 69,775–74,775 barrels of oil equivalent per day (Boe/d) fromthe previous expectation of68,325–73,625 Boe/d. The increment in production estimate was made following the closure of its purchase of Thompson Field in Fort Bend County, Texas.

The raised guidance reflects average daily production of about 2,000 barrels of oil from the properties acquired, for the remainder of 2012. Denbury targets total production in the upper half of the estimated range.

With its in-house CO2 reserve base, Denbury has a significant competitive advantage in acquiring and exploiting mature oil reservoirs. Notably, the acquisition of Thompson Field in Fort Bend County, Texas is beneficial to the company. The 8,454 acre oilfield, which produces oil from the Frio zone, is located 18 miles west of the Hastings field, and will be used to enhance oil recovery by pumping CO2. It lies close to the company’s network of the existing CO2pipelines. Hence, Denbury is expected to reap benefits from the vast CO2infrastructure it has built over the last decade.

With its unique profile, compelling economics and unmatched infrastructure, Denbury is nicely positioned to deliver long-term sustainable growth. Denbury has a relatively low-risk business model –– it produces oil by applying tertiary recovery techniques to mature fields that remains its principal focus. The company is continuously expanding its tertiary floods in several CO2projects, namely Tinsley, Hastings, Heidelberg, Bell Creek, and Delhi that are expected to generate meaningful production.

However, we remain on the sidelines due to high cost levels associated with the tertiary oil recovery method. In addition to industry-wide oilfield cost inflation, Denbury’s growing outlays also reflect its exposure to higher energy costs (electrical and fuel charges), resulting from continuing emphasis on CO2 flooding techniques.

Denbury holds a Zacks #3 Rank, which translates to a Hold rating for a period of one to three months. The company competes with Newfield Exploration Co. (NFX - Analyst Report) and QEP Resources, Inc. (QEP - Snapshot Report) and Plains Exploration & Production Company .

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.28 +14.66%
ANI PHARMACE ANIP 24.64 +13.97%
E HOUSECHINA EJ 11.01 +9.44%
CANADIAN SOL CSIQ 26.90 +6.87%
KNIGHTSBRIDG VLCCF 12.47 +5.50%