Denbury Resources (DNR)

[dan_s]

I have posted an updated profile and my updated forecast / valuation model for DNR to the EPG website.

This is an "OIL COMPANY". 97% of their production is crude oil and most of it is sold at Louisiana Light Sweet ("LLS") pricing; about $5/bbl above WTI.

My valuation increases to $8.30 because the company is increasing production and generating ~$50 million of FREE CASH FLOW FROM OPERATIONS per quarter.

Denbury is also a classic example of how Small-Caps are off the Wall Street Radar Screen, especially if they aren't shale companies.

DNR closed on Sept 25 at $6.21, which compares to First Call's Price Target of $5.01.

I checked Reuters / First Call and found that seven analysts reports are included in their consensus forecasts and price target. Of the 7 reports, 3 of them are dated prior to when DNR released Q1 results and only one is dated after the company released solid Q2 results. NONE of them are based on oil prices even close to where LLS is selling today ($79.48/bbl).

Why is the LLS oil price so high?
> It is very close in quality to WTI.
> It competes with seaborne oil coming into the Gulf Coast market, which is priced based on Brent.

Here is why I think DNR has a lot more upside: They have about 2/3rds of their oil hedged during 2H 2018 at an average price of around $55/bbl. Those hedges expire at the end of 2018, so they should get a significant increase in revenues. Since they have big NOL carryforwards they will pay almost no income taxes for several years, so a high percentage of that revenue "windfall" will go right to the bottom line of cash flow from operations.

This is why you pay me the Big Bucks!
> Read the DNR profile
> Go to their website and take 30 minutes to go through their updated presentation
> Then come back here with any questions

[Wade4213]

Dan -

I purchased DNR on 5/15/18 @ $3.80. Needless to say, I'm happy.

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