Denbury Resources’s 2Q16 production
For 2Q16, Denbury Resources (DNR) reported total production of ~64.5 Mboepd (thousand barrels of oil equivalent per day), which is lower by ~12% when compared with 2Q15 production of ~73.7 Mboepd.
Denbury Resources’s 2Q16 production is also lower sequentially, by ~7%, when compared with 1Q16.
Weather impact on Denbury Resources’s 2Q16 production
The steep decline in Denbury Resources’s 2Q16 production can be attributed to the weather-related shut-in production. In April 2016, strong thunderstorms in the Houston area affected Conroe Field and flooded Thompson Field.
While DNR brought back most of the Conroe production in June, 2016, additional record rainfall in May 2016 flooded Thompson Field a second time, forcing most of that field to remain shut in through the end of 2Q16.
Denbury Resources is currently working to restore full production, most of which is expected to be back online during 3Q16. Together, these storms and flooding impacted Denbury Resources’ 2Q16 production by ~1.5 Mboepd.
Crude oil price impact on Denbury Resources’s 2Q16 production
Another factor which impacted Denbury Resources’s 2Q16 production was shut-in due to unfavorable economics. In 2Q16, DNR shut-in ~2.8 Mboepd of production due to uneconomic wells.
So far, in 1H16, a total of ~2.6 Mboepd of production was shut-in due to uneconomic wells. According to DNR’s estimates, ~39% of the production currently shut-in is profitable at $50 per barrel or below, ~27% at $50–$60 per barrel, with the remainder requiring an oil price in excess of $60 per barrel in order to be economic.
Denbury Resources’s updated production guidance
Due to weather related shut-in production (~0.68 Mboepd) and non-core asset sales (0.5 Mboepd), Denbury Resources reduced its fiscal 2016 production guidance.
For 2016, Denbury Resources now expects full-year production in a range of 64–66 Mboepd, a mid-point decrease of ~1 Mboepd (or ~2%) from its previous guidance of ~66 Mboepd.