The oil industry has experienced a lot of turmoil this year so far, and the massive fluctuations in oil prices have had an adverse impact on many energy companies. One of the energy companies that has been particularly hard hit by the troubles is Denbury Resources Inc (NYSE:DNR), which has had a hard time since 2014. It was around that time that oil prices started dropping, and in the next five years, DNR stock shed as much as 90% of its value.
DNR stock is now down to $1 per share; however, it should be noted that Denbury management is doing everything it can in order to turn the company’s fortunes around.
One of the biggest problems for Denbury Resources over the years has been its huge debt burden, a direct result of falling oil prices. The company has, however, been hacking away at the debt burden and has made substantial repayments over the years.
In its latest quarter, Denbury repaid $90 million of its debt and has reduced the debt burden to $1.2 billion at this point. The company used its $44 million worth of free cash flow to buy its debt at a discount in the open market.
DNR stock is down 1% and now trading at $0.99.
While the company is making significant efforts on this front, investors need to keep in mind that no debt is going to be due until mid-2021, and hence, the next one and a half years could prove to be crucial for the company. However, in 2021, as much as $750 million worth of debt is going to mature, and Denbury Resources needs to progress significantly during this period to catch up.
To that end, Denbury has started a range of initiatives and is now looking for a joint venture collaborator for its pipeline project meant to support CCA development. If the company manages to either pay off its debt or refinance by 2021, then it could prove to be an inspired bet for any investor.
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