Business

NOTE TO EDITORS: The Following Is an Investment Opinion Being Issued by Benchmark Journal.

NOTE TO EDITORS: The Following Is an Investment Opinion Being Issued by RothmanResearch.com.

Denbury Resources will become the undisputed leader in enhanced oil recovery (EOR) once its merger with Encore Acquisition is complete.

Denbury Resources Inc. (DNR) reported in-line third quarter results, as increased production helped the company to meet estimates. Earnings per share, excluding non-cash fair value adjustments, came in at 16 cents, same as the Zacks Consensus Estimate. Including one-time items, Denbury posted a profit of 11 cents per share. On a year-over-year basis, the company’s adjusted [...]

(DNR) In-Line Quarter for Denbury Resources

Denbury Resources Inc. (DNR) reported in-line third quarter results, as increased production helped the company to meet estimates. Earnings per share, excluding non-cash fair value adjustments, came in at 16 cents, same as the Zacks Consensus Estimate. Including one-time items, Denbury posted a profit of 11 cents per share.

On a year-over-year basis, the company’s adjusted earnings per share declined 68.0% (from 50 cents to 16 cents), while revenue was down 44.6% to $227.2 million. The year-over-year negative comparisons were due to the steep decline in commodity prices.

Production

Production during the quarter averaged 42.7 thousand oil-equivalent barrels per day (MBOE/d), a decrease of approximately 7.1% year over year. However, after adjusting for the 2009 sale of 60% of the company’s Barnett Shale natural gas assets, Denbury’s volumes rose approximately 10% from the third quarter of 2008.

Of the total quarterly production, approximately 82% was oil. The year-over-year production increase can be attributed to the contribution from the recently acquired Hastings Field and a 23% tertiary oil production increase. Tertiary production for the quarter averaged 24.3 thousand barrels per day (MBbl/d). The Heidelberg, Tinsley, Soso, Lockhart Crossing and Cranfield fields were the main contributors for the tertiary production increase.

Realizations

Denbury’s realized oil prices (including the impact of hedges) averaged $70.54 per barrel, down 35.1% year over year. Realized natural gas prices for the quarter was $3.09 per Mcf, a decrease of 62.4% from the previous year quarter.

Expenses

Lease operating expenses on a per BOE basis increased 5.1% year over year to $21.22, primarily on account of the Barnett Shale property sale in mid-2009. G&A expenses per BOE were up significantly (by 72.4%) from the year-earlier period to $6.12, mainly due to higher employee costs. DD&A expenses on a per BOE basis declined slightly year-over-year to $11.66.

Capital Budget & Guidance

Denbury reiterated its 2009 capital budget at $750 million, of which approximately 90% will go to the company’s tertiary operations. As previously announced, due to the Barnett Shale assets divestment, the company decreased its 2009 production guidance to 47.5 MBOE/d. Denbury reaffirmed this guidance. Further, as declared earlier, the company reduced its 2009 tertiary production guidance by 1% to 24.2 MBbl/d (from 24.5 MBbl/d before).

Outlook

Our Neutral recommendation for Denbury shares reflects the company’s low-risk profile and oil-centric niche business model. With oil representing about three quarters of the total production, the company is experiencing an enviable position in the industry, given the higher realizations and margins that presently exist in oil than gas.

Earlier this week, Denbury entered into a definitive agreement with U.S. onshore oil and gas producer Encore Acquisition Company (EAC) to acquire the company for $4.5 billion. We think that Encore is a good fit for Denbury as both the companies have exposure in tertiary recovery techniques to increase the value of acquired properties. As Denbury had sold its 60% interest in Barnett Shale assets in June to focus on its core tertiary oil operations, the Encore acquisition is another prudent step in this direction.
Read the full analyst report on "DNR"
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Zacks Investment Research

Deal-making activity heated up with the mega-deal announcement from Berkshire Hathaway (BRK-A) of its plans to acquire Burlington Northern (BNI) for $100 per share in a deal valued at approximately $44 billion, the largest in Berkshire history Stanley Works (SWK) announced plans to purchase Black & Decker (BDK) in a deal valued ...

• Deal-making activity heated up with the mega-deal announcement from Berkshire Hathaway (NYSE:BRK.A) of its plans to acquire Burlington Northern (NYSE:BNI) for $100 per share in a deal valued at approximately $44 billion, the largest in Berkshire history

• Stanley Works (NYSE:SWK) announced plans to purchase Black & Decker (NYSE:BDK) in a deal valued at $4.5 billion

• Denbury Resources (NYSE:DNR) announced plans to acquire Encore Acquisition (NYSE:EAC) in a cash and stock deal valued at $3.2 billion

• Ford (NYSE:F) said it is planning to raise $2 billion through the sale of senior convertible notes due 2016, and $1 billion through common shares sold in private deals

• UBS (NYSE:UBS) noted "we do not expect an immediate recovery in client net new monthly flows," as it reported its fourth straight quarterly loss. The third quarter loss of $552.4 million was larger than anticipated

• Morgan Stanley (NYSE:MS) downgraded US semiconductor shares to "cautious" warning the industry is now in the final stages of the semiconductor cycle. Intel's (NASDAQ:INTC) rating was lowered to "equalweight" from "overweight," along with shares of Altera (NASDAQ:ALTR), Linear Tech (NASDAQ:LLTC), Xilinx (NASDAQ:XLNX) and Maxim (NASDAQ:MXIM)

• During yesterday's session Citigroup's (NYSE:C) analyst slashed its rating on Research in Motion (NASDAQ:RIMM) to "sell" from "buy," also downgrading Palm (NASDAQ:PALM) to "sell" from "hold." Meanwhile, the firm upgraded Motorola (NYSE:MOT) shares to "buy" from "hold," noting positive surprises likely from new phone offerings based on Google's (NASDAQ:GOOG) Android operating system

• Archer Daniels Midland (NYSE:ADM-A) reported fiscal first quarter earnings of 77 cents per share on sales of $14.9 billion.  The company said, "Looking ahead, we see demand improving in some key markets, and we have the assets and acumen to capture value as the global economy resets"

• American Tower (NYSE:AMT) reported inline third quarter earnings of 17 cents a share on revenues of $444.10 million. The firm backed its 2009 guidance

Zacks Investment Research

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Companies featured in this segment: Agrium Incorporated (NYSE:AGU), Terra Industries Incorporated (NYSE:TRA), CF Industries (NYSE:CF), ArcelorMittal (NYSE:MT), Duke Energy (NYSE:DUK), Denbury Resources Incorporated (NYSE:DNR), Scottish and Southern Energy plc (OTC:SSEZY), Electricite de France (EPA:EDF), Areva SA (EPA:CEI), Adhunik Group (BSE:532727), Tata Sponge Iron Limited (BSE:513010), Monnet Ispat & Energy Limited (BSE:513446), NMDC Limited (BSE:526371), Steel Authority of India Limited (BSE:500113), NTPC Limited (BSE:532555)

IPAA OGIS New York

Tom Dorsey, Sue Morrison, and Jay Gragnani - State of Affairs After the First Quarter

Companies featured in this segment: Denbury Resources (NYSE:DNR), CTCI Corporation (TPE:9933), Asahi Kasei Chemical Corporation (TYO:3407), Marubeni Corporation (TYO:8002), PTT Public Company Limited (BAK:PTT), HSBC (NYSE:HBC), ING Groep NV (NYSE:ING), Nova Chemicals Corporation (NYSE:NCX), E.ON AG’s (OTC:EONGY), Lanxess AG (FRA:LXSG), Singapore Petroleum Company Limited (SIN:S99), SembCorp Industries Limited (SIN:U96), Shell (NYSE:RDS.A), ExxonMobil (NYSE:XOM), Foster Wheeler Limited (NASDAQ:FWLT), and Briggs & Stratton Corporation (NYSE:BGG).

IPAA 2008 OGIS New York