Is It The Right Time To Get Rid Of Denbury Resources (DNR)?
Zacks Investment Research | Jul 18, 2017 09:05PM ET
On Jul 18, Denbury Resources Inc. (NYSE:DNR) was downgraded to a Zacks Rank #5 (Strong Sell), reflecting the company’s declining proved crude reserves and weak financials.
Key Factors
Total proved reserve at Denbury has been declining steadily over the last two years. Since 2014, estimated reserves fell over 40%, which is a serious matter of concern. Declining reserves raise questions over the company’s production capabilities which might hurt cashflow for shareholders.
Moreover, cash balances at Denbury have been on the decline since 2015, resulting in the current low of $2 million as of Mar 31, 2017. In comparison, long-term debt is at around $3 billion, leading to a debt-to-capitalization ratio is 86.03%, which is much higher than the broader industry average of 49.35%. Hence, a high debt load and weak cash balance hint at the company’s deteriorating financials.
Since the beginning of 2013, there has been a steady decline in cashflow from the company’s core operations. Notably, over the same time frame, operating cashflow fell below $300 million from roughly $1400 million. Weak operations following persistently soft oil and natural gas prices compelled the company’s board of directors to suspend dividend payment from the beginning of the fourth quarter of 2015.
Investors should also know that Denbury has underperformed the Zacks categorized Original post
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