Denbury Resources (DNR)
Posted: Tue Aug 22, 2017 12:56 pm
If the bankers continue to work with Denbury AND oil prices move back over $50, they should survive. BUT they must get expenditures back in line with cash flows and do it soon.
"The Company had a total of $490 million of borrowings outstanding under its $1.05 billion senior secured bank credit facility (the “Facility”) as of June 30, 2017, compared to $301 million outstanding as of December 31, 2016. The $189 million increase in borrowings is partly due to the Company’s capital expenditure levels, including $89 million of oil and natural gas property acquisitions in the first six months of 2017, with the remaining portion due to $50 million of cash outflows for working capital changes, and repayments of other non-bank debt of $39 million. After consideration of $62 million of outstanding letters of credit, this leaves the Company with significant borrowing capacity as of June 30, 2017. Assuming oil prices remain in the upper $40’s per Bbl for the remainder of 2017, and based on currently-projected cash flows and capital spending levels, the Company anticipates that its bank debt at the end of 2017 should be in the range of $425 to $475 million, which would provide more than $500 million of available liquidity under the Company’s bank line."
The big issue is that accounts payable (due today) are double their cash and accounts receivable. Trade payables are usually what forces a company into bankruptcy. The company is not generating enough cash flow from operations to cover their capex, not even half of it.
At the next back redetermination date they could be in big trouble. They cannot keep drawing down their bank credit facility and survive.
To a large-cap with a much lower cost of capital, DNR looks like an attractive takeover target. Their CO2 reserves and pipeline system is worth a lot.
"The Company had a total of $490 million of borrowings outstanding under its $1.05 billion senior secured bank credit facility (the “Facility”) as of June 30, 2017, compared to $301 million outstanding as of December 31, 2016. The $189 million increase in borrowings is partly due to the Company’s capital expenditure levels, including $89 million of oil and natural gas property acquisitions in the first six months of 2017, with the remaining portion due to $50 million of cash outflows for working capital changes, and repayments of other non-bank debt of $39 million. After consideration of $62 million of outstanding letters of credit, this leaves the Company with significant borrowing capacity as of June 30, 2017. Assuming oil prices remain in the upper $40’s per Bbl for the remainder of 2017, and based on currently-projected cash flows and capital spending levels, the Company anticipates that its bank debt at the end of 2017 should be in the range of $425 to $475 million, which would provide more than $500 million of available liquidity under the Company’s bank line."
The big issue is that accounts payable (due today) are double their cash and accounts receivable. Trade payables are usually what forces a company into bankruptcy. The company is not generating enough cash flow from operations to cover their capex, not even half of it.
At the next back redetermination date they could be in big trouble. They cannot keep drawing down their bank credit facility and survive.
To a large-cap with a much lower cost of capital, DNR looks like an attractive takeover target. Their CO2 reserves and pipeline system is worth a lot.