DNR

[dan_s]

Denbury Resources (DNR) is hosting our luncheon in Dallas on Friday, December 20. It has been in our Sweet 16 for several years and I have tracked in closely since EPG was founded in 2001. I like it a lot and I think it is trading at a significant discount to its current break-up value. My Fair Value Estimate is $29/share, which compares to First Call's Price Target of $22.11.

An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab.

It has a strong management team, experts on EOR using CO2, a rock solid balance sheet and generates lots of free cash flow. The shares are trading today at less than 5X CFPS, a very low multiple for a company of this quality.

This article explains the recent dip in the share price very accurately.
http://seekingalpha.com/article/1886201 ... urce=yahoo

Here is my take:
> DNR has VERY long-term proven oil reserves.
> It is not in the shale plays, so currently out of favor with Wall Street (they are ga-ga over the shale plays)
> The recent decision not to convert to an MLP caused many income funds to sell.
> Increasing production quarter-after-quarter and increasing free cash flow will bring back fund managers.
> DNR will increase dividends year-after-year. They have very predictable free cash flow.
> DNR will continue to buy back shares, at least up to $20/share.
> I think it is a prime takeover target for any major that wants to gain expertise in EOR using CO2. BTW their CO2 reserves are very valuable, which IMO Wall Street is totally missing.

[dan_s]

Phil did a good job at our luncheon in Dallas. DNR is trading at a deep discount to breakup value.

IMO it is simply because they are not in the shale plays. They have steady growth locked in for many years and the economics on EOR [Co2 floods] at today's oil prices is fantastic. DNR will continue to increase their free cash flow, which means higher dividends and more stock buybacks.