Thursday, April 3, 2014

Seeking Alpha: Can Denbury Resources Recover Market Enthusiasm?

Enhanced oil recovery specialist Denbury Resources (DNR) can generate significant cash margins over extended periods of high oil prices, but it doesn't seem to be suiting the needs and tastes of the market right now. Some investors seem disappointed that the company elected not to convert to an MLP structure, while others worry about the company's relatively modest production growth outlook and its sensitivity to lower oil prices.

I don't find Denbury strikingly cheap, at least not in comparison to some other alternatives in the market, but it offers a different risk/reward profile than many other oil stocks. With management now more focused on returning capital to shareholders and with less drillbit risk here (relative at least to companies in the Bakken, Eagle Ford, or Niobrara regions), Denbury strikes me as an option for playing a high oil price outlook with less operational risk.

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Can Denbury Resources Recover Market Enthusiasm?

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