Denbury increasing production guidance

[dan_s]

Oil and natural gas company Denbury Resources Inc. (DNR) has raised its 2012 annual production guidance. The company expects total production for 2012 in the range of 69,775–74,775 barrels of oil equivalent per day (Boe/d).

The 1,150 Boe/d increment in production estimate was made following the closure of its purchase of Thompson Field in Fort Bend County, Texas. The raised guidance reflects average daily production of about 2,000 barrels of oil from the properties acquired, for the remainder of 2012. Denbury targets its total production in the upper half of the company's estimated range.

The acquisition of Thompson Field cost the company approximately $360 million prior to purchase price adjustments. Denbury proposes to fund the purchase with $213 million in cash (generated from its sale of non-core properties earlier in 2012) and borrowing under its revolving credit facility. The portion of the acquisition that was financed by the property sale did not generate any tax liability on it, thereby facilitating the company with a tax gain of $30 million in 2012.

The Thompson field in Fort Bend County produces 2,200 barrels of oil per day and holds potential conventional reserve capacity of around 17 million barrels of oil. The 8,454 acre oilfield, which produces oil from the Frio zone, is located 18 miles west of the Hastings field, and will be used to enhance oil recovery by pumping carbon dioxide.

The Thompson field, discovered in the early 1930s, was jointly owned and operated by Chevron Corporation (CVX) and ExxonMobil Corporation (XOM) from 1932 onwards. Later, both companies sold their stakes in separate transactions to a private buyer, who then sold it to Denbury in 1999 and 2003.

[dan_s]

Denbury is on-track to exit 2012 with 77,000 to 78,000 boepd of production (approximately 92% of production is oil).

> About 45% of DNR production is sold at close to Brent pricing
> 45% to 50% of 2012 natural gas production is hedged at $6.50/mcf
> DNR is projecting 13% to 15% annual production growth from existing projects

[dan_s]

From:
http://seekingalpha.com/article/641171- ... urce=yahoo

Recent positives on DNR:

The company just upped its production estimates for the rest of 2012.
Consensus earnings estimates for FY2012 and FY2013 have quit falling and FY2013 estimates actually ticked up last week.
The stock recently entered "oversold" territory.
Denbury's Bakken reserve is increasing output. Production from this region is expected to grow by 45% to 70%, to 15,000 BOE per day this year.
I would not be surprised to see Denbury benefit from Chesapeake's (CHK) fire sale of some lucrative producing assets.
4 reasons DNR will reward investors at $15 a share:

The stock has over 60% upside to reach the median analysts' price target of $25.50 by the 17 analysts that cover the stock.
The stock is cheap at just over 9 times forward earnings and has a minuscule five year projected PEG (.44).
The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
The stock has some medium term technical support at just under these levels and has bounced twice now off the $14 price level (See Chart)

[dan_s]

Sweet 16 Growth Portfolio: An updated Net Income & Cash Flow Forecast model, which includes today's increased production guidance, for Denbury Resources (DNR) has been posted under the Sweet 16 Tab.

My adjust Fair Value estimate for DNR can be found at the bottom of the model.