Independent oil and natural gas company Denbury Resources (DNR, Financial) recently reported mixed financial results. However, its long-term prospects look bright, as its production is pretty strong in the Rocky Mountains. It has potential mines such as LaBarge, Riley Ridge and Shute Creek at the Rockies. These mines remain quite profitable in the long-run. The company expect its tertiary oil fields production to grow in the range of 42,100 to 43,700 barrels of oil equivalent per day in 2015. This is about 2% growth over its production of 41079 barrels of oil equivalent in 2014.
Making good progress
The lease operating expenses were reduced more than 14% to $22.64 per barrel of oil equivalent from $26.24 per barrel of oil equivalent in the same quarter last year. The company sees further improvements in operating costs that should strengthen its earnings performance in 2015. However, its revenue of $480 million failed to beat street estimates of $565.73 million for the quarter. The continual downturn in the commodity oil prices had a large impact on its earnings.
Meanwhile the company remains solid on production. Its production has increased about 5% to 74,875 barrel of oil equivalent per day. Moreover, its tertiary production is continually increasing. This has averaged 41,900 barrels of oil equivalent per day. The company is seeing enhanced oil production at its Bell Creek, Oyster Bayou, Tinsley, Heidelberg and Hastings fields.
The company is consistently making various efforts to improve its production by deploying various technologies, new patters, additional developments and installation of extra compressions. This should assist the company to maintain its production level in 2015 and beyond. Its Oyster Bayou play has tremendous amount of reservoir. The company has opened new patterns A-2 Zone in the field of late. This should lead to greater production in 2015.
Its non-tertiary oil fields are expected to have production of about 30,400 to 31,800 barrels of oil equivalent per day in 2015. The total estimated production for Denbury will remain almost flat to 72,500 to 75,500 barrels of oil equivalent in 2015.
Denbury is making various adjustments to combat the low oil price environment. The reduction in capital expenditure along with its affluent operational initiatives will help the company deliver solid return over the coming years. Moreover the company has extensive hedge in 2015 that should deliver incremental cash flow to Denbury this year.
Conclusion
However, the stock seems to be a little expensive. It has forward P/E multiple of 75.33 which is above its trailing P/E multiple of 4.99. But its profit and operating margins remain pretty healthy. It has profit and operating margins of 26.29% and 53.38% respectively for the past twelve months. Its balance sheet carries total cash of $23.15 million and has total debt of $3.57 billion. Denbury has operating cash flow of $1.22 billion.
