Denbury Resources: Production Increases Should Power This $15 Energy Concern

Jun. 6.12 | About: Denbury Resources (DNR)

Denbury Resources (NYSE:DNR) like most stocks in the energy sector, have had a rough go of it over the past couple of months. However, the stock is deeply undervalued and is starting to get some positive news and catalysts.

Recent positives on DNR:

  • The company just upped its production estimates for the rest of 2012.
  • Consensus earnings estimates for FY2012 and FY2013 have quit falling and FY2013 estimates actually ticked up last week.
  • The stock recently entered "oversold" territory.
  • Denbury's Bakken reserve is increasing output. Production from this region is expected to grow by 45% to 70%, to 15,000 BOE per day this year.
  • I would not be surprised to see Denbury benefit from Chesapeake's (NYSE:CHK) fire sale of some lucrative producing assets.

4 reasons DNR will reward investors at $15 a share:

  • The stock has over 60% upside to reach the median analysts' price target of $25.50 by the 17 analysts that cover the stock.
  • The stock is cheap at just over 9 times forward earnings and has a minuscule five year projected PEG (.44).
  • The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
  • The stock has some medium term technical support at just under these levels and has bounced twice now off the $14 price level (See Chart)

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Disclosure: I am long DNR.