U.S. Markets close in 2 hrs 49 mins

Denbury (DNR) Q3 Earnings Meet Estimates on Cost Efficiency

Zacks Equity Research

Denbury Resources Inc. DNR reported third-quarter 2019 earnings (excluding one-time items) of 8 cents per share, in line with the Zacks Consensus Estimate. The bottom line was supported by lower costs and expenses. However, the reported earnings were lower than 13 cents in the year-ago period, owing to decline in commodity price realizations and production volumes.

Total revenues were $315.5 million, down from $395 million in the year-ago quarter. However, the top line beat the Zacks Consensus Estimate of $307 million.

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

Operational Performance:

Production Declines

During the quarter, production averaged 56,441 barrels of oil equivalent per day (Boe/d) compared with 59,181 Boe/d in the prior-year period. The decline stemmed from planned maintenance at the Rockies CO2 source facility and tropical storm Imelda that impacted its Gulf Coast output.

Oil production averaged 55,085 barrels per day (BPD), down from the year-ago level of 57,410 BPD. Natural gas daily production averaged 8,135 thousand cubic feet (Mcf/d), lower than the year-ago period’s 10,623 Mcf/d.

The company’s production from tertiary operations averaged 36,702 Boe/d, down from 37,219 Boe/d in the year-ago quarter.

Price Realizations Decline

Oil price realization (excluding the impact of hedges) averaged $57.64 per barrel in the quarter, decreasing from the year-ago level of $71.44. Gas prices declined to $1.46 per Mcf from $2.35 in the year-ago quarter. On an oil-equivalent basis, overall price realization was $56.46 per barrel, lower than the year-earlier level of $69.73.  

Cost & Expenses Improve

During the quarter, the company incurred lease operating expenses of $117.9 million, lower than the year-ago period’s $122.5 million, due to increased cost efficiency. Costs related to transportation and marketing fell to $10.1 million from the year-ago level of $11.1 million. Total expenses in the reported quarter fell to $205.5 million from the year-ago level of $300.9 million.

Capital Expenditure

Oil and natural gas capital investments were approximately $48.1 million compared with $73.3 million in the year-ago quarter. Total capital spending (excluding capitalized interest and acquisitions) was $51.4 million, lower than $86.1 million in third-quarter 2018.

Financials

Adjusted cash flow from operations was $125.8 million, down from $134.5 million in the year-ago quarter.

As of Sep 30, 2019, its cash balance was around $0.5 million and total debt was $2,436.4 million, with a debt-to-capitalization ratio of 64.4%.

Guidance

Denbury expects to generate free cash flow in the range of $140-$150 million in 2019, assuming oil price to be $55 per barrel in the fourth quarter. The company reiterated its 2019 production guidance in the band of 57,000-59,500 Boe/d. Capital expenditure view for 2019 is reiterated in the range of $240-$260 million, indicating 20-25% decline from the 2018 capital spending level.

Zacks Rank and Stocks to Consider

Currently, Denbury has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Noble Midstream Partners LP NBLX, CNX Resources Corporation CNX and Contango Oil & Gas Company MCF. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Noble Midstream’s 2019 sales are expected to rise 32.4% year over year.

CNX Resources’ 2019 earnings per share have witnessed three upward movements and no downward revision in the past 30 days.

Contango Oil & Gas’ bottom line for the current year is expected to rise around 87% year over year.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.