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Denbury Resources’ Growth Engine: Cash Flow from Investing

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Mar. 30 2015, Updated 2:06 p.m. ET

Investing cash flows

In the previous part, we looked at Denbury Resources’ (DNR) cash flow from operations, which reflects a company’s cash-generating abilities.

In this part, we’ll see Denbury’s cash flow from investing (or CFI) activities. Items in this type of cash flow are usually negative, which implies expenditure, an important destination for a company’s cash.

CFI mainly includes capital expenditures (or capex) that a company makes toward growing its business. It also includes asset acquisitions a company makes. Occasionally, a company may sell some of its assets. In that case, it shows up as a positive number, a source of cash.

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Denbury Resources’ investing activities

Over the years, Denbury Resources’ (DNR) CFI has been quite volatile. CFI rose from just less than $1 billion in 2008 to a peak of ~$1.6 billion in 2011. Then it eased to just less than $1.1 billion in 2014. But CFIs have been large enough overall to give us some confidence in Denbury’s efforts to grow.

For context, peers Newfield Exploration Company (NFX), Ultra Petroleum Corporation (UPL), and Whiting Petroleum (WLL) spent ~$660 million, ~$1.6 billion, and ~$2.9 billion, respectively, in 2014 on investing activities.

Of these four companies, only Denbury Resources and Newfield Exploration spent less on investing activities than their operating cash earnings in 2014. Ultra Petroleum’s and Whiting Petroleum’s investing cash flows far outstripped their cash earnings from operating activities in the same year.

These four companies combined account for ~1% of the iShares U.S. Energy ETF (IYE). The ETF is a great way to achieve low-cost, diversified exposure to many premier American energy companies and the American energy sector.

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