Denbury Resources Inc. (NYSE:DNR) Mounting a Big Turnaround

Denbury Resources Inc. (NYSE:DNR) Mounting a Big Turnaround

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Denbury Resources Inc. (NYSE:DNR) is starting to reverse higher and with a more positive outlook on oil price – especially in the craft oil sector – DNR is a stock to watch. Over the last 6 months, DNR is steadily adding value. The stock is up 97% over that time. Furthermore, DNR is shoring up its fundamentals.

A double bottom reversal is possible for DNR and, if so, its recent oil operations will be a big part of the turnaround. Mission Canyon is seeing success. It was well executed and the production results were strong with an initial 30-day average rate of 1,050 barrels of oil per day, according to management. It was also completed open-hole with no stimulation for a total drill and complete cost of $3.6 million.

Denbury Resources Inc. (NYSE:DNR) is an independent oil and natural gas company. The Company’s operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. Its properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. It had an estimated proved oil and natural gas reserves of 254.5 million barrels of oil equivalent (MMBOE) as of December 31, 2016. Its primary Gulf Coast carbon dioxide (CO2) source is Jackson Dome, which is located near Jackson, Mississippi. Its mature group of properties includes the initial CO2 field, Little Creek, and other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu and Soso fields. Its LaBarge Field is located in southwestern Wyoming. Its Riley Ridge Federal Unit is located in southwestern Wyoming and produces gas from the same LaBarge Field.

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In addition, as the price of oil remains at elevated levels, DNR believes they have around 24 additional locations. The company has a rig drilling the first well on a two-well pad and have a total of six Mission Canyon wells planned for 2018.

Here is a quote from Chirstian Kendall during the Q4 call in February about their fundamentals that I thought was interesting:

“We generated significant free cash flow and lowered our costs, reaching a nine-year low on G&A. We underspent on capital compared to budget, grew production for the second consecutive quarter, grew reserves, had a successful well with our first significant exploitation investment and improved our balance sheet. And 97% crude oil in our production mix, continued strengthening in the oil market drove our realized price above $55 per BOE. And crude differentials turned positive, up by about $2 from the third quarter.”

Lastly, DNR’s fourth quarter average realized oil price before hedges was $57 per barrel, a 20% increase from its realized price in the prior quarter, according to management. The company’s old price differential improved by over $2 per barrel from last quarter, which on its own equates to an $11 million uplift in revenues. Its overall differential of $1.70 above NYMEX prices is the best differential realized for the company since the second quarter of 2013.

DNR has strengthening fundamentals and a nice oil environment. The company has also been very smart in selling off assets during this boom in oil development. Commodities are no sure thing, but there is a lot to like for DNR right now.

Denbury Resources Inc. (NYSE:DNR) has a market cap of $1.01B with a float of 385.71M. The last time we wrote about DNR we talked about them getting on top of their debt and they are starting to do that. The company is well hedged against volatility and should be on your radar, but be wary if it breaks below $2.50. We will write more updates as the news colors out. Sign-up for continuing coverage on shares of $DNR stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $DNR, either long or short, and we have not been compensated for this article.

 

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