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Denbury Resources Inc.’s (DNR - Analyst Report) fourth-quarter 2012 adjusted earnings of 36 cents per share (excluding one-time items) beat the Zacks Consensus Estimate of 29 cents. However, the quarterly results were 20% below the year-earlier adjusted earnings of 45 cents. The decline was mainly due to lower oil and gas price realizations.

For full year 2012, adjusted profit was $1.45 per share versus $1.44 in the prior year. The reported figure comfortably surpassed our expectation of $1.38.

Fourth quarter total revenue of $609.2 million decreased 1.3% year over year but surpassed the Zacks Consensus Estimate of $573.0 million. Full year 2012 total revenue increased 6.4% year over year to $2,456.5 million, beating the Zacks Consensus Estimate of $2,420 million.

Operational Performance

During 2012, production averaged 71,689 barrels of oil equivalent per day (Boe/d) versus 65,660 Boe/d in prior year period.
During the fourth quarter, production averaged 70,116 Boe/d, reflecting an increase of 4.3% year over year. The increase was mainly related to the gains in tertiary.

Oil production averaged 65,368 barrels per day (up nearly 4% from the year-ago level), representing 93% of the total volume. Natural gas production averaged 28,486 thousand cubic feet (up 9.6%), on a daily basis.

The company’s production from tertiary operations averaged 37,550 barrels per day, which represents a 20.6% increase year over year. Contributions from new floods at Oyster Bayou and Hastings fields and existing floods at Tinsley and Delhi fields led to the increase.

Oil price realization (including the impact of hedges) averaged $97.54 per barrel in the quarter, showing a decline of 5.2% year over year, while gas prices contracted 25.2% to $5.72 per Mcf. On an oil equivalent basis, the overall price realization was $93.26 per barrel, down almost 6% from the year-earlier level of $99.18 per barrel.


Cash flow from operations was $316.0 million (including the increase in current income taxes related to the Bakken transaction) in the reported quarter versus $387.0 million in the year-ago quarter. Oil & natural gas capital investments were $381.7 million (before acquisitions and capitalized interest), down from the year-earlier level of $437.8 million.

Cash balance as of Dec 31, 2012 was $98.5 million and long-term debt was $3,145.39 million, representing a debt-to-capitalization ratio of 38.1%.


Denbury expects its 2013 production in the range of 68,700–71,700 Boe/d. The company’s tertiary production target is 36,500–39,500 Boe/d. Capital expenditure budget is reiterated at $1 billion, of which about 85% has been apportioned for tertiary projects, while the remainder is for conventional projects, with special emphasis on Cedar Creek Anticline.

Zacks Rank

Denbury carries a Zacks #3 Rank (short-term Hold rating). However, there are other stocks in the oil and gas sector – Access Midstream Partners, L.P. (ACMP - Snapshot Report), Susser Petroleum Partners L.P. (SUSP - Snapshot Report) and Calumet Specialty Products Partners L.P. (CLMT - Snapshot Report) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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