Denbury's High Leverage and Oil Exposure Make It Vulnerable to Falling Oil Prices
We are reducing our fair value estimate to $1.25 after digesting Denbury's first-quarter financial and operating results. The firm remains on track to meet full-year production guidance of 58-62 mboe/d, without exceeding its $300 million capital budget. However, its production is 97% oil, making it one of the oiliest producers in our coverage, and its financial leverage is extremely high (debt to capital was 86% at the end of the quarter). This makes it vulnerable to falling crude prices. Unfort...Denbury Resources is an independent oil and natural gas company. The company's operations are focused in two main operating areas: the Gulf Coast and Rocky Mountain regions. The company's properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming.
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