Today’s Hot Stock Under Review: Denbury Resources Inc. (NYSE: DNR)

On Friday, Shares of Denbury Resources Inc. (NYSE: DNR) plunged -7.60% to $3.89. The stock opened its trade at $3.96 and after floating in a price range of $3.71 to $3.98; the stock grabbed the investor’s attention and traded 14,757,915 shares as compared to its average daily volume of 9.91M shares. The stock’s institutional ownership stands at 82.40%.

Denbury Resources Inc. (DNR) recently declared net income of $39.60M, or $0.09 per diluted share, for the first quarter of 2018.  Adjusted net income (a non-GAAP measure) was $54.0M, or $0.12 per diluted share, with the difference from GAAP net income mainly because of the exclusion of $15.0M ($12.0M after tax) of expense from noncash fair value adjustments on commodity derivatives.

2018 FIRST QUARTER AND RECENT HIGHLIGHTS:

• Production of 60.338K barrels of oil equivalent (“BOE”) per day in Q1 2018
• Adjusted cash flow from operations (a non-GAAP measure) of $125.0M for Q1 2018 ($500.0M annualized)
• Adjusted EBITDAX (a non-GAAP measure) of $142.0M for Q1 2018 ($569.0M annualized)
• Bank credit facility borrowing base reaffirmed at $1.050B
• Reduced debt principal by $72.0M in Q1 2018 and an additional $85.0M in April 2018 from the full conversion of 3½% Convertible Senior Notes due 2024 into common stock

REVIEW OF OPERATING AND FINANCIAL RESULTS:

The Company’s total lease operating expenses in first quarter 2018 were $118.0M, a boost of $13.0M, or 13%, on an absolute-dollar basis contrast to the prior quarter, and a boost of $5.0M, or 4%, contrasts to first quarter 2017.  The sequential quarter increase was mainly because of a $7.0M reduction recorded in fourth quarter 2017 for pricing adjustments related to prior period costs of certain industrial-sourced CO₂, as well as higher power costs and workover activity in the current quarter.

Taxes other than income, which include ad valorem, production and franchise taxes, increased $3.0M and $5.0M from fourth quarter 2017 and the prior-year first quarter, respectively, generally because of the impact of higher oil prices on production taxes.

General and administrative expenses were $20.0M in first quarter 2018, a slight decrease contrast to the prior quarter and a decrease of $8.0M contrast to first quarter 2017, with the year-over-year decrease attributable to lower employee-related costs associated with the August 2017 workforce reduction and other cost savings programs.

Interest expense, net of capitalized interest, totaled $17.0M in first quarter 2018, a decrease of $6.0M from fourth quarter 2017 and a decrease of $10.0M from the prior-year first quarter.  Interest expense excludes about $22.0M and $13.0M in the first quarters of 2018 and 2017, respectively, of interest recorded as a reduction of debt for financial reporting purposes instead of as interest expense, because of the accounting associated with debt exchange transactions accomplished in 2016, 2017, and 2018.  A plan detailing the components of interest expense is included on page 14 of this press release.

Depletion, depreciation, and amortization (“DD&A”) increased slightly to $52.0M in first quarter 2018, contrast to $51.0M in first quarter 2017.  The slight increase was mainly driven by a boost in depletable costs associated with our reserves base, partially offset by a boost in proved oil and natural gas reserve quantities.

2018 CAPITAL BUDGET AND ESTIMATED PRODUCTION:

The Company’s 2018 capital budget, excluding acquisitions and capitalized interest, remains unchanged from the formerly estimated range of about $300.0M to $325.0M.  The capital budget consists of about $270.0M for tertiary and non-tertiary field costs and CO₂ supply, plus about $45.0M of estimated capitalized costs (counting capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs).  Of this combined capital expenditure amount, about $48.0M (15%) has been incurred through the first quarter of 2018.  Denbury’s estimated 2018 production is also unchanged from the formerly revealed range of 60,000 to 64,000 BOE/d.

DNR has a market value of $1.86B while its EPS was booked as $0.11 in the last 12 months. The stock has 476.89M shares outstanding. In the profitability analysis, the company has net profit margin of 15.00%. Beta value of the company was 3.24; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.90.