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Denbury's Improving Long-Term Outlook

May 01, 2018 2:02 AM ETDenbury Inc. (DEN)10 Comments


  • I had mentioned that Denbury's long-term prospects would be positive with $60+ oil.
  • WTI futures are now averaging around $62 in 2019, allowing Denbury to potentially hedge at favorable prices.
  • It doesn't benefit that much from rising 2018 prices due to its current hedges, but has only 10,000 barrels per day in 2019 hedges as of last report.
  • Denbury could reduce its debt to around $2.3 billion by the end of 2019 at current strip prices.
  • This would result in estimated leverage of approximately 3.2x, putting Denbury into position to deal with its 2021 to 2023 debt maturities.

Denbury Resources (DNR) is a company that will benefit substantially in terms of survival prospects if oil prices continue to remain in the $60s. It is mostly hedged for 2018, so the high oil prices this year only provide partial benefit for the company. However, if oil prices remain strong into 2019 (where the current strip is at $62), Denbury's leverage situation should improve significantly.

Denbury is not out of the woods yet, but the current situation appears favorable for it.

New 2018 Projections

At an average of $66 WTI oil, Denbury's oil and gas revenues are now expected to be around $1.46 billion, which is an improvement of $131 million from $60 WTI oil. However, Denbury's 2018 hedge value is now expected to be negative $188 million, a decline of $96 million from its value at $60 WTI oil. I am assuming that Denbury's oil differential remains at around $0.40 above WTI oil, which appears consistent with LLS oil trading at a several dollar premium to WTI over the rest of the year.

This results in estimated revenues of $1.307 billion net of hedges for Denbury.


Price Per Unit

Revenue ($ Million)

Oil (Barrels) 21,837,950



Natural Gas [Mcf] 4,752,300



Net Other


Hedge Value




Denbury's cash expenditures are estimated at $1.204 billion, resulting in estimated positive cash flow of $103 million during the year.

$ Million

Lease Operating Expense


Marketing Expenses


Production Tax


Cash G&A


Cash Interest


Capital Expenditures




This is an improvement of $25 million when I last looked at Denbury at around $60 WTI oil for the year.

Denbury only partially benefits from the improvement in 2018 oil prices though since it has

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