uploads///DNR Q Hedges

Understanding Denbury Resources’ Hedging Activities

By

Jun. 22 2016, Updated 10:05 a.m. ET

Denbury Resources’ hedging advantage

For 1Q16, crude oil hedging activities increased Denbury Resources’ (DNR) average realized crude oil price by $12 per barrel. As we saw in the previous part of this series, excluding hedges, the 1Q16 average realized price for Denbury Resources’ crude oil production was $30.71 per barrel. This means that the commodity hedging activities increased Denbury Resources’ average realized crude oil price by ~39%.

Article continues below advertisement

Denbury Resources’ 2016 hedges

For 2Q16, 3Q16, and 4Q16, Denbury Resources has fixed price swaps on NYMEX WTI (West Texas Intermediate) crude oil for 11.5 MBoe (million barrels of oil equivalent) per day, 18.5 MBoe per day, and 26 MBoe per day at weighted-average prices of $61.84 per barrel, $38.96 per barrel, and $38.70 per barrel, respectively.

For 2Q16, 3Q16, and 4Q16, Denbury Resources also has fixed-price swaps on Argus Light Louisiana Sweet crude oil for 3.5 MBoe per day, 7 MBoe per day, and 7 MBoe per day at weighted-average prices of $64.99 per barrel, $39.61 per barrel, and $39.16 per barrel, respectively.

As of March 31, 2016, Denbury Resources has derivative coverage for ~51% of crude oil production forecast for 2016.

Denbury Resources’ production costs

For 1Q16, Denbury Resources reported a production cash cost of $33.31 per boe (barrel of oil equivalent). This is ~3% lower compared to 1Q15. In 1Q16, Denbury Resources’ LOE (lease operating expenses) were $16.23 per boe. This ~16% lower compared to 1Q15.

For 1Q16, other S&P 500 (SPY) upstream companies like ConocoPhillips (COP), Marathon Oil (MRO), and Murphy Oil (MUR) have LOEs of $9.42 per boe, $10.77 per boe, and $8.89 per boe, respectively.

Advertisement

More From Market Realist