Denbury, Denbury News, Investing in Denbury

By: CaraTan   Date: 19 July 2008

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CaraTan

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Cara Tan, editor

 

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Despite Denbury Resources’ recent healthy performance, the share price has plummeted almost 40% since late June.

Denbury Resources (DNR), Mississippi’s largest oil and natural gas operator, has interests in oil and natural gas properties in the US Gulf Coast region. It also owns rights to a natural source of carbon dioxide reserves. The company deploys a portion of CO2 in its tertiary oil recovery operations, while selling some of it to industrial users.

Denbury Resources’ earnings jumped 82% in the second quarter ended June 30 to a record high of $114.1 million, or $0.45 per share, from $62.6 million, or $0.25 per share, in the same period a year earlier. The company attributed the surge in its net income to “higher oil prices and production levels.” Production grew 25% year-on-year to 46,305 barrels of oil per day in the second quarter of 2008. Revenues sped past Wall Street estimates to $418.0 million, up 88% from the year-ago level.

Denbury Resources has 5 strong buy ratings, 8 buy ratings, 3 hold ratings and 0 sell ratings, according to analysts polled by Thompson/First Call. In a research note published on June 16, Lehman Brothers upgraded the company to overweight from equal weight. Analyst Jeffrey W Robertson of Lehman Brothers said that he expected the company’s tertiary recovery program to continue to support volume growth through the rest of this year. Lehman Brothers upped its NYMEX oil price estimates from $97.50/bbl to $113.00/bbl for 2008 and from $85.00/bbl to $90.00/bbl for 2009, while raising its estimates for earnings per share (EPS) for the company from $1.75 to $2.20 for 2008 and from $1.80 to $2.00 for 2009.

 

Shares have been under pressure due to the recent downturn in oil prices. However, Denbury Resources is not dependent on elevated oil prices for generating healthy profits. Production growth at the company has been good and ROE is at an attractive 23.58%. Nonetheless, shares have plummeted from their 52-week high of $40.32, which they hit on June 19, 2008. With a PEG of 0.38 and shares trading at around $24, this may be a good time to invest in Denbury Resources.

 

Alternatio Cirqui, EconomyWatch.com Energy Correspondent

 


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