NEW YORK (TheStreet) -- Denbury Resources (DNR) dropped 5.6% to $18.27 ahead of the company's 2013 annual analyst day on Monday. Shares sunk after a pre-event press release stated the company would not pursue a master limited partnership (MLP) as it would bring "no clear long-term benefit for Denbury shareholders".
"Our shift to a growth and income company does not contemplate any changes to our corporate structure or the creation of a master limited partnership, since we are not satisfied that any such changes would create a significant and sustained increase in shareholder value," said CEO Phil Rykhoek in a statement.
A shift to an MLP structure would have raised significant capital to fund share buybacks and dividend payments. Denbury noted the cons included potential tax leakage, increased complexity, and reduced cash flow and increased balance sheet debt for the C corporation.
Management also announced a regular full-year dividend of 25 cents a share for 2014 and expects to increase it to between 50 cents and 60 cents a share for the year after. The oil and gas company anticipates increasing its share buyback program to $250 million from $109 million, reducing outstanding shares by 3.5%.
Separately, the Plano, Texas-based company estimated 2014 oil production in the range of 76,500 to 78,500 barrels of oil equivalent a day, at least 9% higher than 2013 output.
TheStreet Ratings team rates Denbury Resources Inc as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate Denbury Resources Inc (DNR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, increase in net income, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 19.5% when compared to the same quarter one year prior, going from $85.37 million to $102.05 million.
- Net operating cash flow has slightly increased to $305.47 million or 4.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.04%.
- Denbury Resources Inc has improved earnings per share by 27.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Denbury Resources Inc reported lower earnings of $1.35 a share vs. $1.41 a share in the prior year. This year, the market expects an improvement in earnings ($1.54 vs. $1.35).
- You can view the full analysis from the report here: DNR Ratings Report