Morningstar | Denbury Reiterates 2019 Volume and Capital Expenditure Guidance After Slight Miss in First Quarter
Our fair value estimate and no-moat rating are unchanged after a first pass at Denbury’s first-quarter financial and operating results. The firm delivered production of 59.2 mboe/d in the first quarter, which was 1% lower sequentially and 2% lower year over year. This was slightly below our forecast of 59.9 mboe/d, but there was no change to annual guidance (management still expects average production to be 56-60 mboe/d). Likewise, capital expenditures in the period were $61 million, putting the firm on track to hit its annual budget of $240 million-$270 million.The firm’s financial results were slightly below Street estimates, with adjusted EBITDA and adjusted earnings per share coming in at $125 million and $0.10 respectively (consensus estimates were $141 million and $0.10). We attribute this to slightly wider oil differentials and higher unit costs. In any case, due to the recent improvement in crude prices, management is now expecting $150 million in free cash flows during 2019, which exceeds its prior estimate of $100 million. The windfall will be used to continue strengthening the balance sheet. Denbury’s financial leverage has improved dramatically in the last couple of years but is still much higher than that of most upstream peers, with net debt to ETBIDA still above 4 turns.
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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