DNR lunch-Dan have question

[setliff]

can you elaborate with the explanation of reducing capex by same amount as stock buy back? i'm like the guy that said that sure is strange---just exactly how does it help. (for those of us that are not balance sheet experts).

[dan_s]

"capex" = their capital expenditure budget for 2012, which is now set at $1.35 Billion (see slide 22 of their November presentation for details). In addition to the amount above, DNR expects to spend $250 million on stock buybacks. So, a total of $1.6 billion is what they expect to invest next year.

DNR has a flexible budget. They are committed to buyback their stock on the dips below what they believe is the value of their PDP reserves. If they spend more than the $250 million allocated to the stock buyback today, it will reduce other capital spending next year.

Money spend on the stock buyback will result in a debit (reduction) to the equity section on the Balance Sheet.

I hope this helps explain what DNR plans to do.

[setliff]

thanks, dan. it still seems to me that an increase in production would be looked upon better by the markets than decreasing the float. particularly after missing production numbers this year.

whenever a stock is below the nav it is usually due to market perception--lowering capex don't help that imo. all fwiw, of course.