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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Executives at Denbury Resources Incorporated (NYSE:DNR) (Plano, Texas) like to refer to their company as a unique energy business. An independent Oil & Gas producer using enhanced oil recovery (EOR) techniques in the Gulf Coast and Rocky Mountains regions, there are some aspects of Denbury's business that make it unusual, if not unique, among energy companies. For one, it injects about 3.3 million tons of carbon dioxide (CO2) from industrial facilities into its EOR projects each year, keeping that greenhouse gas out of the atmosphere. Another point of differentiation: Crude oil accounts for about 97% of Denbury's production, an oil weighting far above 17 of its peers.
Click on the image at right to see a comparison of Denbury's crude oil production percentage compared to its peers.
Also, unlike many of its peers, Denbury generated free cash flow and healthy financial returns for the second quarter of this year: net income of $147 million on $343 million of revenue. For the year-earlier period, Denbury earned $30 million on revenue of $387 million. The company expects to generate $120 million to $150 million in free cash flow this year. Free cash flow, defined as cash flow from operations minus capital expenditures (capex), is a metric that investors are focusing on these days. More than a few independent producers are struggling to become free cash flow positive. For more on that, see September 6, 2019, article - Free Cash Flow in the Marcellus: Cabot Oil & Gas vs. Range Resources.
Another difference with its peers: Denbury is not having trouble servicing its debt. It even reduced its debt load by about $1 billion this year, giving it greater financial flexibility. By contrast, many of its peer independent producers have had trouble servicing their debt. Nearly 200 independent oil and gas companies have filed for Chapter 11 bankruptcy protection between January 2015 and August 2019, according to Haynes & Boone LLP (Dallas, Texas). At least 26 of those Chapter 11 filings have taken place in 2019. For more on that, see August 19, 2019, article - Oil Executives Pledge Financial Probity, Environmental Protection at Denver Conference.
Because it stays away from infrastructure-constrained areas like the Permian Basin, Denbury is able to sell its product at a premium to the prices on the New York Mercantile Exchange. Partly because of that, Denbury has a higher operating margin per barrel of oil equivalent than its peer independent producers.
Click on the image at right to see a comparison of Denbury's operating margin and its peer independent producers.
But in one important way, Denbury has something in common many other independent producers: investors have turned against the industry. No longer interested in the Denbury story, investors have driven the company's share price down over 90% since 2014, to a recent price of about $1.25 per share.
Industrial Info is tracking six Denbury projects valued at about $1 billion, all located in either the Gulf Coast or Rocky Mountains regions.
In its EOR operations, the Plano producer has about 151 million barrels of proved oil equivalent and 812 million barrels of potential oil equivalent at its Gulf Coast and Rocky Mountains locations. Denbury also has proved non-EOR reserves totaling 110 million barrels in those regions. Those reserves have a value of about $4 billion, yet the company's market capitalization (stock price multiplied by number of shares) is only about $600 million. The company produces about 60,000 barrels of oil equivalent per day.
In a session at last month's The Oil & Gas Conference, sponsored by EnerCom Incorporated (Denver, Colorado), Denbury President and Chief Executive Chris Kendall said his company was "uniquely situated with strategically advantaged operations and extraordinary potential." The industrially sourced CO2 Denbury injects into its EOR wells has the environmental impact of taking more than 690,000 cars off the road, giving the producer an unusually green hue to its operations. The company showcased its environmental credentials in its 2018 corporate social responsibility report, but Kendall did not dwell on that aspect of the company's business in his EnerCom talk.
"Denbury is ideally suited to capture CO2 from industrial sources and transport it to its EOR projects," Kendal told about 2,000 attendees at the EnerCom event, which was held in Denver. The company may be hard-pressed to attain its full potential until the current wave of investor skepticism passes.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Click on the image at right to see a comparison of Denbury's crude oil production percentage compared to its peers. Also, unlike many of its peers, Denbury generated free cash flow and healthy financial returns for the second quarter of this year: net income of $147 million on $343 million of revenue. For the year-earlier period, Denbury earned $30 million on revenue of $387 million. The company expects to generate $120 million to $150 million in free cash flow this year. Free cash flow, defined as cash flow from operations minus capital expenditures (capex), is a metric that investors are focusing on these days. More than a few independent producers are struggling to become free cash flow positive. For more on that, see September 6, 2019, article - Free Cash Flow in the Marcellus: Cabot Oil & Gas vs. Range Resources.
Another difference with its peers: Denbury is not having trouble servicing its debt. It even reduced its debt load by about $1 billion this year, giving it greater financial flexibility. By contrast, many of its peer independent producers have had trouble servicing their debt. Nearly 200 independent oil and gas companies have filed for Chapter 11 bankruptcy protection between January 2015 and August 2019, according to Haynes & Boone LLP (Dallas, Texas). At least 26 of those Chapter 11 filings have taken place in 2019. For more on that, see August 19, 2019, article - Oil Executives Pledge Financial Probity, Environmental Protection at Denver Conference.
Because it stays away from infrastructure-constrained areas like the Permian Basin, Denbury is able to sell its product at a premium to the prices on the New York Mercantile Exchange. Partly because of that, Denbury has a higher operating margin per barrel of oil equivalent than its peer independent producers.
Click on the image at right to see a comparison of Denbury's operating margin and its peer independent producers.But in one important way, Denbury has something in common many other independent producers: investors have turned against the industry. No longer interested in the Denbury story, investors have driven the company's share price down over 90% since 2014, to a recent price of about $1.25 per share.
Industrial Info is tracking six Denbury projects valued at about $1 billion, all located in either the Gulf Coast or Rocky Mountains regions.
In its EOR operations, the Plano producer has about 151 million barrels of proved oil equivalent and 812 million barrels of potential oil equivalent at its Gulf Coast and Rocky Mountains locations. Denbury also has proved non-EOR reserves totaling 110 million barrels in those regions. Those reserves have a value of about $4 billion, yet the company's market capitalization (stock price multiplied by number of shares) is only about $600 million. The company produces about 60,000 barrels of oil equivalent per day.
In a session at last month's The Oil & Gas Conference, sponsored by EnerCom Incorporated (Denver, Colorado), Denbury President and Chief Executive Chris Kendall said his company was "uniquely situated with strategically advantaged operations and extraordinary potential." The industrially sourced CO2 Denbury injects into its EOR wells has the environmental impact of taking more than 690,000 cars off the road, giving the producer an unusually green hue to its operations. The company showcased its environmental credentials in its 2018 corporate social responsibility report, but Kendall did not dwell on that aspect of the company's business in his EnerCom talk.
"Denbury is ideally suited to capture CO2 from industrial sources and transport it to its EOR projects," Kendal told about 2,000 attendees at the EnerCom event, which was held in Denver. The company may be hard-pressed to attain its full potential until the current wave of investor skepticism passes.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
