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Denbury (DNR) Earnings Beat Estimates in Q1, Revenues Miss

Zacks Equity Research

Denbury Resources Inc. DNR reported first-quarter 2020 earnings (excluding one-time items) of 6 cents per share, beating the Zacks Consensus Estimate by a penny. However, reported earnings were lower than 10 cents per share in the year-ago quarter.

Total revenues were $242 million, down from $305 million in the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $281 million.

The better-than-expected earnings were supported by lower lease operating expenses, partially offset by lower production and price realizations of commodities.

Denbury Resources Inc. Price, Consensus and EPS Surprise

 

Denbury Resources Inc. Price, Consensus and EPS Surprise

Denbury Resources Inc. price-consensus-eps-surprise-chart | Denbury Resources Inc. Quote

Despite the earnings beat, the stock declined more than 10% as the upstream energy player raised doubts about its capability to continue as a going concern. Notably, the company’s ability to repay $584.7 million of senior secured notes, due to mature in 2021, has diminished considerably owing to the coronavirus pandemic. This has also fueled investor concern.

Operational Performance:

Production Falls

During the quarter, production averaged 55,965 barrels of oil equivalent per day (Boe/d) compared with 59,218 Boe/d in the prior-year quarter.

Oil production averaged 54,649 barrels per day (BPD), down from the year-ago level of 57,414 BPD. Natural gas daily production averaged 7,899 thousand cubic feet (Mcf/d), lower than the year-ago 10,827 Mcf/d.

The company’s production from tertiary operations averaged 36,861 Boe/d, down from 37,073 Boe/d in the year-ago quarter.

Price Realizations Decline

Oil price realization (excluding the impact of hedges) averaged $45.96 per barrel in the quarter, down from the year-ago level of $56.50. Gas prices declined to $1.46 per Mcf from $2.68 in the year-ago quarter. On an oil-equivalent basis, overall price realization was $45.09 per barrel, lower than the year-earlier level of $55.27.  

Cost & Expenses

During the quarter, the company incurred lease operating expenses of $109.3 million, lower than the year-ago $125.4 million. Expenses related to transportation and marketing fell to $9.6 million from the year-ago level of $10.8 million. Moreover, total expenses in the reported quarter contracted to $178.8 million from the year-ago $341.9 million.

Capital Expenditure

Oil and natural gas capital investments were $46 million compared with $86.9 million in the year-ago quarter. Total capital spending (excluding capitalized interest and acquisitions) was $38.8 million, lower than $61.2 million in first-quarter 2019.

Financials

Adjusted cash flow from operations was $104.8 million, down from $119.2 million in the year-ago quarter.

As of Mar 31, 2020, the company’s cash balance was $6.9 million and total debt was $2.3 billion, with a debt-to-capitalization of 60.1%.

Guidance

Denbury projects 2020 development capital budget in the range of $95 million to $105 million. This is 44% lower than the initial forecast.

Owing to the coronavirus-hit oil prices, the company is focusing on optimizing cashflows by shutting down uneconomic production activities. Denbury added that through April since late March, it stopped 2,000 barrel of oil equivalent per day (BOE/D) of uneconomic production.

Zacks Rank & Other Stocks to Consider

Denbury currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the energy sector are Murphy USA Inc MUSA, Key Energy Services, Inc. KEGX and CNX Resources Corporation CNX. While Murphy and Key Energy sport a Zacks Rank #1 (Strong Buy), CNX Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA is likely to see earnings growth of 7% in the next five years.

Key Energy is expected to witness bottom-line growth of 97.2% in 2020.

CNX Resources has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

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