Denbury Resources Inc.’s (DNR) second-quarter 2014 adjusted earnings of 26 cents per share (excluding one-time items) missed the Zacks Consensus Estimate by a penny. The quarterly results were also 36.6% lower than the year-earlier adjusted earnings of 41 cents. The decline was mainly due to lower price realization and higher depletion, depreciation and amortization.
Total revenue for the second quarter was $669.0 million, which increased from $645.0 million a year ago and surpassed the Zacks Consensus Estimate of $622.0 million as well.
Operational Performance
During the reported quarter, production averaged 75,320 barrels of oil equivalent per day (Boe/d) versus 74,052 Boe/d in the prior-year quarter.
Oil production averaged 71,051 barrels per day, up 1.7% from the year-ago level. Natural gas production averaged 25,614 thousand cubic feet (up 2.7%) on a daily basis.
The company’s production from tertiary operations averaged 40,897 barrels per day, representing a 5.5% year-over-year increase. Contributions from continued field development and expansion of facilities in Heidelberg, Oyster Bayou and Tinsley fields as well as production in the Rocky Mountain region in Bell Creek Field aided the increase.
Oil price realization (including the impact of hedges) averaged $92.32 per barrel in the quarter, down 6.7% year over year, while gas prices rose 7.8% to $4.27 per Mcf from the prior-year quarter. On an oil equivalent basis, the overall price realization was $88.54 per barrel, down 6.5% from the year-earlier level of $94.70 per barrel.
Financials
Cash flow from operations was $329.8 million in the reported quarter versus $437.6 million in the year-ago quarter. Oil and natural gas capital investments were approximately $252.1 million (before acquisitions and capitalized interest), up from the year-earlier level of $224.9 million.
Cash balance as of Jun 30, 2014 was $12.0 million and total debt was $3,637.7 million, representing a debt-to-capitalization ratio of 41.7%.
Guidance
Denbury Resources expects 2014 production in the lower end of 76,500–78,500 Boe/d. The capital expenditure budget has been estimated at $1.1 billion, down $25 million from its earlier projection of $1.125.
Zacks Rank
Denbury carries a Zacks #2 Rank (Buy). Other stocks that warrant a look in the oil and gas sector include Weatherford International plc (WFT), CNOOC Ltd (CEO) and Natural Gas Services Group Inc. (NGS). All of these have a Zacks Rank #1 (Strong Buy) and are expected to outperform the market.
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