Does Denbury Resources Stock Declining Trend End?

Denbury Resources

Denbury Resources (NYSE: DNR) had struggled to impress investors in the last couple of years, amid the outcome of volatile oil prices on its cash generation and production potential. DNR shares plummeted more than 70% in the previous three years before some stabilization since the start of this year. Denbury Resources stock rose 17% year to date, supported by stabilization in oil prices and the improvement in its latest financial numbers.

Denbury Resources

Its cost cuttings along with year over year growth in an average realized oil price to $57.17/bbl in Q4 added to its revenues and cash generation. Its revenue of $321 million in Q4 jumped 20% from the same period last year, and its earnings exceeded analysts’ consensus estimate by $0.05 per share.

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Its operating cash flows of $329 million in fiscal 2017 provided a complete cover to its capital requirements of $269 million.

Chris Kendall, Denbury’s CEO, commented, “I am extremely pleased with our fourth quarter results.  We nearly doubled cash flow from the third quarter, reflecting the combined impact of cost reductions and Denbury’s extraordinary crude oil exposure, clearly demonstrating our upside earnings power.”

Future Prospects Are Strengthening For Denbury Resources

Oil prices improved sharply in the last couple of months after Russia and OPEC, which accounts for 40% of total production, have announced to extend their production cuts by the end of this year.

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Brent crude trades around $70 a barrel at present while U.S. crude stands around $65 a barrel. Meanwhile, the majority of U.S. companies’ wants the oil to trade above $50 a barrel to remain cash flow neutral. Denbury appears in strong position to enjoy higher oil price, as oil accounts for almost 97% of total production.

The company has also been lowering its operational costs to reduce the breakeven point and support its cash generation potential. Its G&A expense declined 7% year over year to $102 million in fiscal 2017. The market pundits expect DNR shares to extend the uptrend in the days to come after its strong fourth quarter results and improving future fundamentals.

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