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Denbury (DNR) Breaks Even in Q2 Earnings, Revenues Beat

Denbury Resources Inc. DNR – predominantly an oil exploration and production company – reported stronger-than-expected results in second-quarter 2017. The company executed several capital projects which drove the results. Lower lease operating expenses also supported the numbers. These positives were offset partially by lower production and decreased oil equivalent price realizations.   

Denbury’s earnings – after adjusting for one-time items – broke even in the quarter. The Zacks Consensus Estimate had hinted at a loss of 2 cents. However, the bottom line declined from the year-ago adjusted earnings of 8 cents.

Second-quarter total revenue of $261 million increased from $255 million a year ago. The top line also beat the Zacks Consensus Estimate of $247 million.   

Operational Performance

During the reported quarter, production averaged 59,774 barrels of oil equivalent per day (Boe/d), compared with 62,976 Boe/d in the prior-year quarter.  

Oil production averaged 57,867 barrels per day (almost 97% of the total volume), down 7% from the year-ago level. Natural gas production averaged 11,444 thousand cubic feet/Mcf (down 25.5%) on a daily basis.

The company’s production from tertiary operations averaged 36,709 barrels per day, down 6.4% year over year.

Oil price realization (including the impact of hedges) averaged $44.92 per barrel in the quarter, down 14.6% year over year. Gas prices, however, rose 64% year over year to $2.46 per Mcf. On an oil equivalent basis, the overall price realization was $43.96 a barrel, down 14% from the year-earlier level of $50.88.   

Lease Expenses

The company recorded lease operating expenses of 1.3 million, higher than $100 million in the year-ago comparable quarter.

Financials

Cash flow from operations was $65 million in the reported quarter, compared with $93 million in the prior-year quarter. Oil and natural gas capital investments in the reported period were approximately $70.9 million, compared with the year-earlier level of $48.2 million. As of Jun 30, 2017, cash balance was $3.5 million and total debt was $2,954.1 million.

Guidance

In response to weak oil and gas prices during the first half of this year, Denbury lowered its capital budget for 2017 to $250 million from the prior guidance of $300 million.

Despite lower capital spending, the company expects to raise the full-year production guidance to 60,000–62,000 Boe/d from the previous range of 58,000–62,000 Boe/d. The development in this front is reflective of the fact that the upstream player has successfully executed some projects in the first half of this year.

Share Price Performance

Denbury lost 40.7% in the April-to-June quarter of this year versus the 16.9% decline of its industry.

Zacks Rank & Key Picks

Denbury currently carries a Zacks Rank #4 (Sell). A few better-ranked players in the energy sector are TransCanada Corporation TRP, Range Resources Corporation RRC and Global Partners LP GLP. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

TransCanada posted an average positive earnings surprise of 4.06% over the last four quarters.

Range Resources’ 2017 earnings are estimated to grow almost 116%.

Global Partners posted average positive earnings surprise of 415.30% over the last four quarters.

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Global Partners LP (GLP): Free Stock Analysis Report
 
TransCanada Corporation (TRP): Free Stock Analysis Report
 
Range Resources Corporation (RRC): Free Stock Analysis Report
 
Denbury Resources Inc. (DNR): Free Stock Analysis Report
 
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