Back in August, I assured readers that Denbury Resources
This stock has gone from worthy of consideration to worthy of captivation.
Granted, the company doesn't quite have the fortress-like balance sheet of an Occidental Petroleum
First, Denbury has more than doubled its bank line to $750 million. The line remains undrawn, which gives the firm a lot of firepower. The terms are also favorable, providing Denbury the flexibility to divest of its Barnett shale assets -- if someone like Devon Energy
That last clause won't be necessary in the near term, because Denbury has indefinitely postponed a recent acquisition. The firm has such a full development pipeline over the next several years that the $30 million hit to break off the arrangement seems well worth taking. Even before oil prices tanked, there were very few companies in the market for tired, old fields requiring enhanced recovery techniques. I suspect this asset will still be available down the road, at a price that more than makes up for the break fee.
But wait, there's even more news!
Denbury has locked in more than 75% of next year's oil production in a very reasonable band of $75 to $115 a barrel. A few months ago, Denbury shareholders would have howled at such a move. But that was when Goldman Sachs
Finally, Denbury has cut its capital budget, just like Chesapeake Energy
Denbury still has major growth baked in the cake. True, a slice has been removed, but the icing here is that this growth story is now available for purchase at deep-value prices.