Denbury Misses on Earnings

Denbury Resources Inc.’s (DNR) fourth-quarter 2013 adjusted earnings of 27 cents per share (excluding one-time items) failed to meet the Zacks Consensus Estimate of 31 cents. Also, quarterly results were 25% lower than the year-earlier adjusted earnings of 36 cents. The underperformance was mainly due to lower price realization as well as higher lease operating expenses and depletion, depreciation and amortization

For full-year 2013, adjusted profit was $1.46 per share versus $1.45 in the prior year. The reported figure comfortably surpassed our expectation of $1.50.

Fourth-quarter total revenue of $599.1 million lagged both the year-over-year figure of $609.2 million and the Zacks Consensus Estimate of $622.0 million. Full-year 2013 total revenue increased 2.5% year over year to $2,517.1 million.

Operational Performance

During the reported quarter, continuing production averaged 71,466 barrels of oil equivalent per day (Boe/d) versus 60,052 Boe/d in the prior-year quarter.

Oil production averaged 67,860 barrels per day, up 3.8% from the year-ago level. Natural gas production averaged 21,638 thousand cubic feet (down 24%), on a daily basis.

The company’s production from tertiary operations averaged 38,603 barrels per day, representing a 2.8% increase year over year. Contributions from continued field development and expansion of facilities in Oyster Bayou, Hastings and Heidelberg fields, were an upside.

Oil price realization (including the impact of hedges) averaged $93.00 per barrel in the quarter, projecting a fall of 4.7% year over year, while gas prices contracted 38.8% year over year to $3.50 per Mcf. On an oil equivalent basis, the overall price realization was $89.37 per barrel, down 4.2% from the year-earlier level of $93.26 per barrel.

Financials

Cash flow from operations was $349.0 million in the reported quarter versus $384.8 million in the year-ago quarter. Oil & natural gas capital investments were $300.3 million (before acquisitions and capitalized interest), down from the year-earlier level of $401.8 million.

Cash balance as of Dec 31, 2013, was $12.2 million and long-term debt was $3,296.8 million, representing a debt-to-capitalization ratio of 38.4%.

Guidance

Denbury expects 2014 production in the range of 76,500–78,500 Boe/d. The company expects its tertiary production to be at the lower end of the estimated range of 42,000–44,000 Boe/d. The capital expenditure budget has been reiterated at $1 billion, of which about 78% is apportioned for tertiary projects. The remainder is for conventional projects, with special emphasis on Cedar Creek Anticline and Hartzog Draw fields.

Zacks Rank

Denbury carries a Zacks #3 Rank (Hold). There are other stocks in the oil and gas sector like, Helmerich & Payne, Inc. (HP), Matrix Service Company (MTRX) and Matador Resources Company (MTDR), which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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