What Denbury Resources’s realized prices tell us
In the previous article, we touched on how a company’s costs and revenues interact to drive its profitability. We also covered Denbury Resources’s (DNR) costs. Here, we’ll look at the other side of this profitability equation—its realized prices. An energy company’s realized prices multiplied by its produced volumes gives us its revenues.
However, realized prices can vary for a company from region to region. These can be affected by various factors ranging from supply–demand to market access considerations.
To make things easier, companies usually report realized prices relative to popular benchmarks. In the case of American energy companies, this will be WTI crude oil prices and Henry Hub natural gas prices traded on the NYMEX.
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Denbury Resources mostly produces oil. So, to analyze its realized prices, we’ll have to look at the its realized prices relative to WTI crude traded on the NYMEX on a barrel of oil equivalent (or boe) basis.
The first thing that stands out from the table above is that Denbury’s Gulf Coast operations are clearly advantaged. Price realizations in this region have been at a premium to NYMEX. Fellow oil-heavy producer Whiting Petroleum (WLL) also has operations in the Gulf Coast region.
Denbury’s Rocky Mountain operations clearly suffer from price discounts to the NYMEX benchmark. This is very likely as a consequence of market access considerations. Denbury’s fellow oil-heavy producer Continental Resources (CLR) is also sharply focused on this region.
Overall, the introduction of price-disadvantaged tertiary production in the Rockies region seems to have dragged Denbury’s price differentials into a discount in 2013.