In earlier parts of this series, we discussed Denbury Resources’ (DNR) cash flows from operating and investing activities. Now let’s have a look at DNR’s cash flow from financing (or CFF) activities to complete our analysis of the company’s cash flow statement.
CFF is a key intermediary between a company and its sources of capital. It also shows cash returned to suppliers of capital or shareholders and debtholders.
Denbury’s investing cash flows
Given the large numbers we’ve seen so far, Denbury’s cash flows from financing activities stand out for their relatively small size. It also looks like the company has not only been raising money from debtholders and stockholders but also returning money to them in some years on a net basis.
For example, Denbury raised ~$440 million, mainly from debtholders, in 2010. However, it returned ~$135 million to shareholders and debtholders in 2014 on a net basis. The year 2014 was also the year Denbury initiated cash dividends for stockholders. Before that, it had only been repurchasing shares as a way to increase shareholder wealth.
Putting it all together
When we combine Denbury’s distribution and capital management activities, we see that Denbury’s cash flows from financing have on average been a net positive contributor to its cash balances over the years.
Putting all the components of Denbury Resources’ cash flows together, we can see how its operating cash flows and well managed financing cash flows have just about kept pace with its investing cash flows. This has amounted to a more or less unchanged cash pile, now at ~$23 million, over the years.
In comparison, larger energy companies Continental Resources (CLR), Murphy Oil (MUR), and Marathon Oil (MRO) had cash and equivalent balances of ~$24 million, ~$1.2 billion, and ~$2.4 billion, respectively, at the end of 2014. These four companies account for ~2% of the iShares U.S. Energy ETF (IYE).