Denbury Resources (DNR) has had its share of ups and downs over the past year. The oil producer's stock soared along with crude prices through the first three quarters of 2018, then plunged during the final one due to crashing crude prices, as well as a puzzling acquisition attempt. The stock, however, has started to recover in 2019 thanks to higher oil prices and management's decision to abandon that controversial merger.

Investors will get their next data point from Denbury this week when it reports its first-quarter results. Here are three things to keep an eye on when looking over that release.

A oil pump with snow-covered mountains in the background.

Image source: Getty Images.

1. Is Denbury on track to meet its production guidance?

Denbury Resources put out its preliminary budget and production outlook when it reported fourth-quarter results in February. At the time, the company said it expected to produce between 56,000 to 60,000 barrels of oil equivalent per day (BOE/D) as a stand-alone entity. At the midpoint of that range, production would be about 4% lower than last year, largely as a result of the company's decision to cut spending after oil prices fell in Q4.

Denbury, though, has at times had trouble living up to its guidance. Last year, for example, it produced at the low end of its forecast due to production issues it encountered during Q3. Ideally, the company will do much better this year and produce toward the top end of its forecast. Doing so would improve its investment returns and enable the company to generate more cash flow.

2. How much did the balance sheet improve?

One of Denbury's priorities in recent years has been to shore up its financial profile. The company was caught carrying too much debt when oil prices crashed in 2014, which forced it to cut spending so that it could reduce leverage. The company has already paid off more than $1 billion in debt since the end of 2014, including $281 million last year.

That pattern should have continued during Q1. Denbury cut its capital spending budget range by 20% to 25% compared to 2018, which should put it in position to generate free cash flow it can route toward debt reduction. Initially, the company estimated that it would produce between $50 million and $100 million in free cash in 2019, assuming oil averaged $50 a barrel. With crude currently in the $60s, the company's is on track to produce more cash, so it should have been able to more aggressively chip away at its debt.

A drilling rig with the mountains in the background.

Image source: Getty Images.

3. Has it made any changes to its strategic plan?

During Q1, Denbury abandoned its attempt to acquire Penn Virginia (ROCC). That deal would have accelerated the company's growth rate as well as improved its leverage profile. However, the merger would also have led to higher risks since the two companies have different areas of expertise.

The decision to walk away from that deal likely means Denbury will stick with its standalone strategy. That plan would involve the company keeping a tight lid on spending so it can generate free cash flow to reduce debt while it invests in a large-scale oil development in Montana and North Dakota. That project won't start producing oil until the second half of 2022, but after that, it should provide steady growth and a gusher of free cash flow for years.

The question is whether or not the company is going to stick to that long-term plan, or shift gear once again to restart its near-term growth engine. The company could, for example, boost capital spending now to drill more wells that would come online sooner.

All eyes on what's ahead

Denbury's decision to drop its Penn Virginia acquisition plan means increased uncertainty for investors. The company had hoped that the transaction would both re-accelerate its growth and improve its balance sheet. Now, it's unclear what the company will do, since following its current strategy would likely result in several more years of production declines. Denbury's next strategic decisions should tell investors a great deal about how it plans to adapt from here.