It has been about a month since the last earnings report for Denbury Resources (DNR). Shares have added about 2.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Denbury Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Denbury Q2 Earnings Beat on Higher Oil Price Realization
Denbury Resources recently reported earnings of 13 cents per share (excluding one-time items) in second-quarter 2019, beating the Zacks Consensus Estimate of 9 cents. The reported earnings were flat year over year.
Total revenues were $343 million, down from $387 million in the year-ago quarter. However, the top line beat the Zacks Consensus Estimate of $332 million.
The better-than-expected results were supported by higher commodity price realizations and cost efficiency. However, the positives were partially offset by lower production volumes.
During the quarter, production averaged 59,719 barrels of oil equivalent per day (Boe/d) compared with 61,994 Boe/d in the prior-year period.
Oil production averaged 58,034 barrels per day (BPD), down from the year-ago level of 60,109 BPD. Natural gas daily production averaged 10,111 thousand cubic feet (Mcf/d), lower than the year-ago period’s 11,314 Mcf/d.
The company’s production from tertiary operations averaged 38,423 Boe/d, up from 38,079 Boe/d in the year-ago quarter.
Notably, it achieved a 50% year-over-year increase in production from Bell Creek to 5,951 Boe/d in the reported quarter.
Price Realization Up
Oil price realization (including the impact of hedges) averaged $61.92 per barrel in the quarter, increasing from the year-ago level of $58.23. Gas prices declined to $2.01 per Mcf from $2.21 in the year-ago quarter. On an oil-equivalent basis, overall price realization was $60.52 per barrel, higher than the year-earlier level of $56.86.
Cost & Expenses
During the quarter, the company incurred lease operating expenses of $117.9 million, lower than the year-ago period’s $120.4 million. Costs related to transportation and marketing rose to $11.2 million from the year-ago level of $10.1 million. CO2 discovery and operating expenses also increased to $581 thousand from $500 thousand in second-quarter 2018.
Oil and natural gas capital investments were approximately $56 million compared with $72.3 million in the year-ago quarter. Total capital spending (excluding capitalized interest and acquisitions) was $76.9 million, lower than $81.6 million in second-quarter 2018.
Cash flow from operations was $148.6 million, down from $154 million in the year-ago quarter.
As of Jun 30, 2019, cash balance was around $0.3 million and total debt was $2,480.9 million, with a debt-to-capitalization ratio of 66.1%.
Denbury expects to generate free cash flow in the range of $120-$150 million in 2019, assuming oil price to be $55 per barrel. The company tightened its 2019 production guidance from 56,000-60,000 Boe/d to 57,000-59,500 Boe/d, improving the midpoint from 58,000 Boe/d to 58,250 Boe/d, even after the divestment of the Citronella field on Jul 1. Capital expenditure view is reiterated in the range of $240-$260 million, indicating 20-25% decline from the 2018 capital spending level.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Denbury Resources has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Denbury Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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