On May 7, Denbury Resources (DNR) reported an adjusted net income of $0.1 per diluted share for the first quarter of 2019, on par with both the previous quarter and analysts’ consensus estimate. Its earnings remained constant despite a 7.5% fall in WTI active futures on a sequential basis in the last quarter. Natural gas prices fell 23.1% in the same period. In fact, other top oil producers ConocoPhillips’ (COP) and Occidental Petroleum’s (OXY) EPS fell 11.5% and 31.1%, respectively, on a sequential basis in the first quarter.
As of 9:11 AM EDT on May 7, DNR had fallen 4.9%.
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Derivative settlements increased realized commodity prices
In the first quarter of 2019, DNR operated with a production mix of 97% in oil and the rest in natural gas. However, due to gains on derivatives, it realized $0.20 more on its per-barrel sale of oil on a sequential basis. Moreover, its sales price on natural gas, including derivative settlements, rose 9.8%. The company’s total production fell ~1.9% on a sequential basis, an important factor behind the 13.5% fall in its top line in the first quarter of 2019 compared to the previous quarter.
The road ahead
In the second quarter, DNR’s total revenue is expected to rise 10.7% from the last quarter, according to Reuters’ estimates. In fact, WTI prices are already up 15.9% this quarter compared to the first quarter of 2019. On May 6, Denbury Resources closed at $2.06. The mean target price for the stock in the next year is $2.63, which implies a possible upside of ~27.7%. ConocoPhillips and Occidental Petroleum have potential upsides of 29.4% and 30.5%, respectively.