DNR

[ted3584]

Dan,

I like your DNR idea, but think the market needs to get a better handle on their oil production base. We know tertiary production will grow at 10-20% through 2015. With Conroe and the Encore properties, that five-year growth can be extended for 10 years to 2020. Other oil fields on the Gulf Coast will be added to increase this growth. Adjusting for the Southern Property Sale, DNR produced 74,500 bbl/d in the first quarter. If ENP is sold, that number would be reduced to 65,000 bbl/d. Is this the correct base to grow from? Tertiary production in the first quarter was 27,000. That would mean that existing production is 38,500 b/d. I presume this production is mostly waterflood production from existing fields. Is this production in decline, flat or incline? If DNR can get 15% growth from tertiary production but no growth from 38,500 bbls/day, then it is a single digit grower and what multiple should we give it?

Another somewhat related question involves DNR's Phase 5, the Delhi Field. EPM owns a 7.44% royalty in this production which started in March. If this field can eventually produce 50 million barrels, how should an investor value this production which should incline for the next 6 years and then plateau for another 5 years? At what point does EPM become a buy based primarily on the DNR override? Any forum input will be appreciated.

Thanks for the help,

[dan_s]

I plan to take a very hard look at DNR when 2nd quarter results come out. This will be our first look at the post-merger company.

DNR has a great long-term plan and they have financial flexibility.

I'm sure they will clarify a lot of this stuff for us in their Q2 press release and the CC that follows.

EPM is on my "Watch List" (which is now available on the website to Premium Members) so I will be preparing a Company Profile on that one soon.

Dan