Denbury Resources Inc. (DNR) is an independent oil and natural gas company with 288.6 MMBOE of estimated proved oil and natural gas reserves as of December 31, 2015, of which 98% is oil. Their operations are focused in two key operating areas: the Gulf Coast and Rocky Mountain regions. Their goal is said to increase the value of our properties through a combination of exploitation, drilling and proven engineering extraction practices, with the most significant emphasis relating to CO2 enhanced oil recovery (“CO2 EOR”) operations.
Denbury Resources corporate headquarters are in Plano, Texas (a suburb of Dallas).
Shares of Denbury Resources have decreased by 2% on Friday morning, just as all energy depending and related stocks, that were pressured by the lowering in oil prices.
The commodity is trading in the red as the Organization of Petroleum Exporting Countries agreed at a meeting earlier this week not to freeze their production levels.
Here are some insights about the meeting held in Qatar:
Larger OPEC producers such as Saudi Arabia, though, have insisted on keeping production levels high, because they do not want to lose customers to non-OPEC producers such as the United States.
“Countries came to the summit with different interests and therefore the prospects of a deal were low,” Abdurahim al-Hor, a Doha-based economist said at the summit.
He said that oil prices were expected to go down because of the failure to agree to any cap on output – possibly down to $35 a barrel, compared with the current $40.
“The price has been fluctuating with a big margin before, between $20 and $40 in January, so the decrease now could also be big,” he said.
OPEC discussed capping production in recent months, which helped give oil prices a much needed boost, however negotiations fell through as Iran is unwilling to lower production. The key OPEC member is looking to increase its output now that international sanctions have been lifted and absolutely wants to return to the production level it held before sanctions.
Crude oil (WTI) has decreased by 1.73% to $48.16 per barrel and Brent crude is falling by 1.57% to $48.94 per barrel this morning.
“Despite the lack of an OPEC-led production freeze, the balance of the global oil market has changed in the last few months,” Bob Minter, investment strategist at Aberdeen Asset Management said. “All member countries are still highly motivated to maximize production for political and economic reasons.”
All of these several weighted concerns should have a greater impact than any strength, and could make it more difficult for investors to achieve positive results compared to most of the stocks it covers. Phil Rykhoek, Denbury Resources President and CEO, commented, “I am very pleased with our first quarter results as we maintained our focus on our core objectives for 2016, which include lowering costs, preserving cash and liquidity, and reducing leverage. Although the oil commodities market has improved slightly, we are continuing to operate under the assumption the prices could stay low for an extended period of time”.
The company’s weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and deteriorating net income.