EUR 850.00 For Business Accounts Only

Morningstar | Denbury Expects 4% Growth in 2019 with 20-25% Less Capital Expenditures

Denbury’s fourth-quarter production came within guidance at 60 thousand barrels of oil equivalent, or mboe/d, (1% higher sequentially and 2% lower year over year). But the firm’s financial results were slightly better than expected, with adjusted EBITDA and adjusted earnings per share coming in at $162 million and $0.10, respectively (consensus estimates of $132 million and $0.09). At first glance, the main driver appears to be lower-than-expected G&A expenses, which fell to $1.87/boe in the fourth quarter. But the benefit is a one-off windfall reflecting downward adjustments in performance-based compensation.

Due to the recent slump in crude prices, the 2019 budget was set at $240-$260 million, which is 20%-25% below the 2018 spending level. But as the firm was able to push the facilities spending related to its long-term Cedar Creek Anticline tertiary project into 2020, the budget cut will have little impact on its output this year. The firm anticipates production growth of about 4% at the midpoint of guidance (pro forma for the previously announced Penn Virginia acquisition, which is likely to close in the first half of 2019).

We plan to incorporate these operating and financial results in our model shortly, but after this first look, our fair value estimate and no-moat rating are unchanged.