For the second time in the last week DNR announced that they had issued shares plus a small amount of cash for debt. Looks to me like a smart move to strengthen their balance sheet, but the market doesn't like it. Again.
Its hard for me to understand the market's utter distaste for DNR. Cash flow positive after capital expenditures, 97% oil, bulk of oil sold into LLS market (WTI + $$), net user of CO2 instead of emitter - I just don't see bankruptcy in their future, but it looks like the market might. Thoughts??
DNR issuing shares + cash for debt
Re: DNR issuing shares + cash for debt
DNR is on a LONG LIST of small-caps that are out-of-favor with the Wall Street Gang.
November 22, 2019 Form 8-K: "Denbury Resources Inc. (the “Company”) has entered into a privately negotiated exchange agreement, dated November 22, 2019, under which it has agreed to issue an aggregate of 15,150,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and pay $2,950,000 of cash (excluding accrued and unpaid interest), in exchange for $8,750,000 aggregate principal amount of its 5½% Senior Subordinated Notes due 2022 and $25,361,000 aggregate principal amount of its 4⅝% Senior Subordinated Notes due 2023 (the “Exchange Transaction”). The Company may engage in similar transactions in the future but is under no obligation to do so."
IMO this is a good use of free cash flow.
Production was down Q2 to Q3 because of weather related issues, but production should rebound in Q4. Denbury is generating over $50 million free cash flow from operations per quarter and they should keep buying back debt at a discount while they can.
They have HUGE CO2 reserves, which are not priced into the stock.
We will be publishing an updated profile on DNR late this week.
November 22, 2019 Form 8-K: "Denbury Resources Inc. (the “Company”) has entered into a privately negotiated exchange agreement, dated November 22, 2019, under which it has agreed to issue an aggregate of 15,150,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and pay $2,950,000 of cash (excluding accrued and unpaid interest), in exchange for $8,750,000 aggregate principal amount of its 5½% Senior Subordinated Notes due 2022 and $25,361,000 aggregate principal amount of its 4⅝% Senior Subordinated Notes due 2023 (the “Exchange Transaction”). The Company may engage in similar transactions in the future but is under no obligation to do so."
IMO this is a good use of free cash flow.
Production was down Q2 to Q3 because of weather related issues, but production should rebound in Q4. Denbury is generating over $50 million free cash flow from operations per quarter and they should keep buying back debt at a discount while they can.
They have HUGE CO2 reserves, which are not priced into the stock.
We will be publishing an updated profile on DNR late this week.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group