<<Denbury Resources (NYSE:DNR) +5.6% pre-market despite electing not to make a ~$3M interest payment due today on its 4.625% senior notes due 2023 "in order to evaluate strategic alternatives," according to an 8-K filing.
The company has a 30-day grace period before non-payment constitutes an event of default.
Denbury recently skipped an ~$8M interest payment on its 6.375% convertible senior notes due 2024.>>
Denbury BK?
Re: Denbury BK?
Denbury's hedges should keep them cash flow positive in 2020, but they cannot survive with oil in the low $40s for full year 2021. Denbury's cash flow from operations in Q1 2020 was $104.8 million, which compares to their full-year capex budget of $100 million.
IMO it is foolish for debt holders to push them into Chapter 11 because that stops all interest payments going forward.
IMO it is foolish for debt holders to push them into Chapter 11 because that stops all interest payments going forward.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Denbury BK?
From The Motley Fool
Matthew DiLallo at 8:30 ET this morning
Bankruptcy also seems unavoidable for Denbury Resources. The oil company elected not to make an $8 million interest payment due at the end of June, triggering a 30-day grace period before it's in default. It also recently drew down most of its remaining available credit -- about $200 million -- usually a precursor to declaring bankruptcy.
Given Denbury's liquidity, it can afford to make last month's interest payment. However, what it's struggling to do is manage its mountain of debt, which stood at more than $2.2 billion at the end of March. While it had been chipping away at that debt by repurchasing small portions on the open market with free cash flow, it's no longer generating much excess cash because of this year's oil market downturn. It seems likely that Denbury will end up declaring bankruptcy at some point this year so that it can restructure this debt.
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I'm sure that Denbury is in serious discussions with their debt holders. The threat of filing for Chapter 11 protection does give the company negotiating leverage. As I posted earlier, Denbury does have positive cash flow through year-end thanks to their hedges. After year-end, I think they need at least $50 WTI to survive.
Matthew DiLallo at 8:30 ET this morning
Bankruptcy also seems unavoidable for Denbury Resources. The oil company elected not to make an $8 million interest payment due at the end of June, triggering a 30-day grace period before it's in default. It also recently drew down most of its remaining available credit -- about $200 million -- usually a precursor to declaring bankruptcy.
Given Denbury's liquidity, it can afford to make last month's interest payment. However, what it's struggling to do is manage its mountain of debt, which stood at more than $2.2 billion at the end of March. While it had been chipping away at that debt by repurchasing small portions on the open market with free cash flow, it's no longer generating much excess cash because of this year's oil market downturn. It seems likely that Denbury will end up declaring bankruptcy at some point this year so that it can restructure this debt.
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I'm sure that Denbury is in serious discussions with their debt holders. The threat of filing for Chapter 11 protection does give the company negotiating leverage. As I posted earlier, Denbury does have positive cash flow through year-end thanks to their hedges. After year-end, I think they need at least $50 WTI to survive.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group