DNR beats

[setliff]

37c vs 29c est

Denbury Resources Announces Third Quarter Results

Denbury Resources Inc.Topics:Earnings.Related Quotes
Symbol Price Change
DNR 16.01 0.00

Press Release Source: Denbury Resources Inc. On Thursday November 3, 2011, 8:30 am

DALLAS--(BUSINESS WIRE)-- Denbury Resources Inc. (NYSE:DNR - News) ("Denbury" or the "Company") today announced its third quarter 2011 financial and operating results. The Company recognized net income during the third quarter of 2011 of $275.7 million, or $0.69 per basic common share ($0.68 per diluted common share), as compared to net income of $29.1 million, or $0.07 per basic and diluted common share, in the third quarter of 2010. Net income adjusted to exclude certain non-cash or unusual items would have been approximately $148.2 million, or $0.37 per basic and diluted common share, in the third quarter of 2011 and would have been $52.7 million, or $0.13 per basic and diluted common share, in the prior year third quarter. The significant non-cash item included in third quarter 2011 results was a $205.6 million ($127.5 million net of taxes) non-cash gain on the change in the fair value of commodity derivatives. See the accompanying schedules for a reconciliation of “net income” as defined by generally accepted accounting principles (“GAAP”) to the non-GAAP measure “adjusted net income.” The Company completed the acquisition of Encore on March 9, 2010; therefore, the operating results for the comparative first nine months of 2010 only include amounts associated with Encore for the period from March 9, 2010 to September 30, 2010.

Adjusted cash flow from operations (cash flow from operations before changes in assets and liabilities, a non-GAAP measure) for the third quarter of 2011 was a Company quarterly record of $357.7 million, as compared to adjusted cash flow from operations of $219.9 million in the third quarter of 2010, with the increase due primarily to higher oil prices during the 2011 quarter. Cash flow from operations, the GAAP measure, totaled $315.7 million during the third quarter of 2011, compared to $208.5 million during the third quarter of 2010. Adjusted cash flow from operations and cash flow from operations differ in that the latter measure includes the changes in receivables, accounts payable and accrued liabilities during the quarter (see the accompanying schedules for a reconciliation of the GAAP measure “cash flow from operations,” to “adjusted cash flow from operations,” which is the non-GAAP measure discussed above). Net increases in operating assets and liabilities of $42.0 million during the third quarter of 2011 were primarily due to increases in trade and other receivables, and decreases in accounts payable and accrued liabilities.

Production

During the third quarter of 2011, the Company’s oil and natural gas production averaged 66,830 barrels of oil equivalent per day (“BOE/d”), a 6% increase compared to continuing production of 63,194 BOE/d during the third quarter of 2010, which excludes 14,536 BOE/d of production from non-strategic Encore properties and Encore Energy Partners LP (“ENP”) properties, all of which were sold during the fourth quarter of 2010. This 6% increase is attributable to higher production from the Company’s Bakken and tertiary properties, partially offset by natural declines in production from other non-tertiary properties.

Production from the Company’s tertiary operations increased 5% in the third quarter of 2011, averaging 31,091 barrels of oil per day (“Bbls/d”), as compared to 29,531 Bbls/d of average production in the third quarter of 2010. This increase in tertiary production is primarily due to production growth in response to continued expansion of the tertiary floods in Delhi, Tinsley, and Heidelberg Fields. Offsetting these production gains were normal production declines in the Company’s mature tertiary fields. Third quarter 2011 average tertiary production was slightly higher than the 30,771 Bbls/d of tertiary production in the second quarter of 2011.

The Company’s Bakken area production for the third quarter of 2011 averaged 9,976 BOE/d, a 31% increase over second quarter 2011 Bakken production levels and a 114% increase over third quarter 2010 production levels. The production increases in the Bakken are due to an acceleration of drilling activities in the area, as the Company increased operated drilling rigs from two at the time of the Encore acquisition in March 2010, to seven operated rigs at the end of the third quarter of 2011. During the first nine months of 2011, the Company completed 24 operated wells in the Bakken.

complete report here---

http://finance.yahoo.com/news/Denbury-R ... l?x=0&.v=1

[dan_s]

37 cents adjusted EPS beat my forecast of 30 cents.

I will update my forecast after I listen to their conference call.

Denbury's CEO, Phil Pykhoek, will be the speaker at our luncheon on November 15 at The Hess Club in Houston. Please register if you plan to attend as we are expecting a very large crowd.

[dan_s]

CFPS was WAY OVER what I had in my forecast model.

Adjusted cash flow from operations (cash flow from operations before changes in assets and liabilities, a non-GAAP measure) for the third quarter of 2011 was a Company quarterly record of $357.7 million, as compared to adjusted cash flow from operations of $219.9 million in the third quarter of 2010, with the increase due primarily to higher oil prices during the 2011 quarter.

[dan_s]

During the third quarter of 2011, the Company’s oil price differentials (Denbury’s received net oil price compared to NYMEX prices) continued to improve significantly, primarily due to the favorable price differential for crude oil sold under Light Louisiana Sweet (“LLS”) index pricing. Company-wide oil price differentials in the third quarter of 2011 were $7.25 per Bbl above NYMEX, compared to a differential of $3.85 per Bbl below NYMEX in the third quarter of 2010 and a differential of $3.72 per Bbl above NYMEX during the second quarter of 2011. During the latter part of the first quarter of 2011, the LLS index price increased significantly more than NYMEX prices, causing the LLS to NYMEX differential to increase significantly, and it has remained high throughout the second and third quarters. For the third quarter of 2011, this LLS differential averaged a positive $18.90 per Bbl on a trade-month basis, compared to a positive $15.32 per Bbl differential in the second quarter of 2011 and a more typical positive $3.11 per Bbl differential in the third quarter of 2010. The Company currently sells approximately 42% of its crude oil based on the LLS index price (although due to contract provisions it may not realize the full differential), sells approximately 38% based on NYMEX prices, and sells the balance based on various other indexes.

[dan_s]

Phil Rykhoek, Chief Executive Officer, said, “We are pleased to report another record quarterly cash flow from operations, even though average NYMEX oil prices declined approximately $13 per barrel between the second and third quarters. We were able to do so in part because we sell more than 60% of our oil based on indexes other than NYMEX WTI, increasing our overall NYMEX differential to $7.25 per barrel above NYMEX this quarter, primarily as a result of the high LLS differential. Our net oil price as compared to NYMEX price has improved more than $11 a barrel from a year ago, making a significant impact on our bottom line. Further, we had a modest increase in production and modest savings in most of our expenses, all contributing to the record quarter. In the third quarter, we continued to increase our net asset value with the addition of over 50 MMBOE of proved reserves, a 12% increase over the estimates at June 30, 2011. With our share repurchase program, we have improved all of our per share metrics by nearly 3% with the purchase of approximately 11 million shares in the last few weeks, all purchased at prices below the per share net asset value of our proved reserves at current prices."

For a company of this quality to be trading below net value of its proved reserves is ridiculous. That totally ignores the value of its undeveloped Bakken Acreage, which IMO is worth over $2 Billion. - Dan

[setliff]

question is would they benefit more than 3% on their metrics if the cash used to purchase shares would have been used for more drilling and proving out more reserves

[dan_s]

On the conference call Phil Rykhoek said the repurchase of shares was the best investment they have made in years on a boe basis. Come to our luncheon on November 15 and ask him yourself.

EPG luncheons are a great place to meet the C-level management of our favorite companies. I work very hard to get companies of this quality to host our luncheons.

[setliff]

could you ask him? i'm a dallasite. do appreciate those lunches here--haven't missed one yet.

i am one that really appreciates the work you do for EPG.

[ko10068]

Citi on DNR:

Denbury Resources, Inc. (DNR)
Analyst Day: 2012 Production/Capex Outlook, But Few Surprises
Target price US$18.00

Initial 2012 Guidance… – Denbury provided initial 2012 guidance with production
projected to be 70.25-75.25 MBOE/d, or midpoint growth of ~12%, versus unchanged
2011 guidance of 65.6 MBOE/d. We continue to model 2012 output of ~71.4 MBOE/d,
up ~8.5% versus 2011, and then growing nearly 10% to ~78.4 MBOE/d in 2013. The
company projects tertiary output growth of 6-16% to 33-36 MBOE/d, while Bakken
volumes are slated to grow by 50-75% to 12.8-14.8 MBOE/d (~20% of total in 2012).

Capex Flat, Greater Focus on Pipelines – Management has pegged 2012 capex at
$1.35bn, flat with this year but reshuffled to allocate a greater portion to CO2 pipelines
– $335mm versus just $200mm in 2011. Otherwise, capital spending is projected to
decline in every operating area, with $365mm (27%) and $350mm (26%) allocated to
tertiary and the Bakken, down from $475mm and $400mm, respectively, this year.

Oyster Bayou Pressuring Up, Hastings To Drive Growth – The Oyster Bayou field is
being pressured up with CO2 and initial response is now expected at the beginning of
January, nearly three months ahead of schedule. Denbury now projects first oil from
Hastings in January/February 2012, or starting up after Oyster Bayou. Nonetheless,
with a ~15-20 MBOE/d estimated peak production rate versus <5 MBOE/d peak rate at
Oyster Bayou, Hastings should be a major contributor to tertiary output growth in 2012.

Growing Bakken While Dropping Rigs – The company projects Bakken production
will grow by ~65% to average 13.75 MBOE/d (midpoint) in 2012 even as it drops
operated rigs from 7 currently to 6 by year-end and to just 3 by the end of 2012. Post
Q1’12, all Bakken acreage will be HBP and Denbury will move on to drilling less costly
multi-well pads (34 planned wells) and re-fracking former Encore wells.

Share Buyback Program – Importantly, Denbury’s 2012 guidance assumes $250mm
is used for share buybacks with $150mm spent to date. The company’s total share
repurchase program authorizes up to $500mm. Thus, Denbury’s 2012 capital program
would have otherwise been $1.6bn while any share repurchases beyond $250mm
would be partly financed with lower capital spending on tertiary recovery programs but
with no impact on 2012 production guidance.

[dan_s]

If oil prices hold up, DNR will increase 2012 capex budget. My guess is that the Bakken will be the flexible program.