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Denbury Resources Inc. Message Board

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  • rrb1981 rrb1981 Jul 20, 2003 10:20 PM Flag


    pddane, it was meant just to invoke thought. I haven't looked at the GP/LP splits for GEL, but I will when I get some free time. I realize that it looks like they are just shifting money from one pocket to another and even coming out on the short end. I was however, just throwing out some numbers.

    As we all know, GEL may very soon restore, or at least partially restore the .20 a quarter distribution. Right now its at .05 and they have been holding back on some of that cash for multiple reasons. One they want to see how consistant and reliable the cash flow stream is, and secondly, to build cash reserves and delever a bit. Acquiring the CO2 assets gives them alot more stability and consistant cash flow. Assuming the distribution is restored to .8 a year, I figure GEL ought to have a yield of around 8% as its a little less reliable than say a EEP or KMP or BPL. So that would value it at what $10. Again, what I'm saying is that its an investment that given time can be a significant source of earnings not to mention they. Again, given the many many gathering systems(and other midstream assets) out there and the continued jettisoning of them by the big oils in search of higher margin projects, there are lots of acquisitions opportunities to grow. The fact that GEL is such a small cap means that a relatively small acquisition can have a huge impact on the distribution.

    So in conclusion, what I am saying is that pain now can mean gain later. Look at PAA, it has a market cap of about 1.5 billion dollars and they are in similar assets as GEL. The point is that GEL has alot of room to grow and alot of potential to raise the distribution. The fact that DNR can get a "passle" of units now could be a significant positive given the above mentioned reasons.

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