It was a tough quarter for oil and gas companies of all sizes and stripes, from ExxonMobil (NYSE:XOM) to the smallest independent. Indeed, amid the credit crunch and an overabundance of natural gas, the smaller companies often had the more difficult go of it.
But then who'd have imagined that oil and gas prices would drop by roughly two-thirds in less than a year? They did, and Dallas-area independent oil and gas operator Denbury Resources (NYSE:DNR) took it on the chin, along with virtually all its peers. The company recorded a loss of $18.3 million, or $0.07, compared to earnings of $73 million, or $0.30 a share for the same quarter a year ago. Revenue plunged by 45% to $173.8 million, from $317.3 million in the March 2008 quarter.
Denbury's loss resulted from lower oil and gas prices, along with a $65.9 million (after tax) derivative contracts charge. Without the charge, the company would have earned $0.19, or the amount that analysts were expecting.
Beyond the purely financial metrics, the quarter was, by most standards, an active one for Denbury. It completed the purchase of the Hastings Field in Southeast Texas from Venoco (NYSE:VQ). And because it has become a major factor in CO2 flooding, the company has announced plans to build a CO2 pipeline from Louisiana to Texas. The CO2 will be used in Hastings Field, which Denbury believes still has large in-place reserves that can be recovered by CO2 tertiary flooding, a method to increase oil production from declining fields.
Denbury, which originally was formed in Canada in 1951, is the biggest oil producer in Mississippi. It currently maintains CO2 pipelines in Mississippi and Louisiana. Beyond that, it operates in the Barnett Shale of North Texas, alongside the likes of Chesapeake (NYSE:CHK), Devon (NYSE:DVN), and EOG Resources (NYSE:EOG).
And in the non-operating arena, Denbury moved into a position of increased prominence during the past quarter. It was chosen to replace Rohm & Haas -- which was being acquired by Dow Chemical (NYSE:DOW) -- as a member of the S&P 500.
Despite its reported loss, I'm closely watching this smallish -- but spunky -- company from Plano, Texas. Its CO2 activities alone make it especially compelling, and management clearly isn't afraid to keep the activity flowing.
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