Thursday, Denbury Resources Inc. (DNR) posted a lower third-quarter profit, primarily due to lower oil and natural gas commodity prices coupled with reduced natural gas production due to the sale of 60% of its Barnett Shale natural gas assets in mid-2009. Denbury reaffirmed its previously lowered 2009 production guidance.
Denbury's third quarter net income declined to $26.88 million or $0.11 per share from $157.55 million or $0.63 per share last year.
Results for the quarter include a non-cash charge of $22.3 million, $13.8 million after taxes, related to the change in fair value of the company's commodity derivative contracts. This compares with a non-cash gain of $86.1 million, $53.4 million after taxes, recorded in the prior-year quarter.
Adjusted net income for the quarter was $40.7 million or $0.16 per basic share, compared with $123.0 million or $0.50 per basic share last year.
On average, 14 analysts polled by Thomson Reuters expected the company to report profit of $0.16 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter decreased to $227.25 million from $410.25 million last year. Analysts expected revenue of $237.09 million for the quarter.
The reduction in net income between the periods is attributed primarily to lower oil and natural gas commodity prices coupled with reduced natural gas production due to the sale of 60% of the company's Barnett Shale natural gas assets in mid-2009, and a $108.4 million net decrease in the fair value changes in commodity derivative contracts in the comparative periods.
Oil and natural gas production averaged 42,659 barrels of oil equivalent per day or BOE/d, a 10% increase from third quarter 2008 production, after adjusting for 60% of the Barnett Shale natural gas assets.
On a sequential basis, the company's oil and natural gas production decreased 4%, primarily due to the decreases in non-tertiary Mississippi production offset in part by a slight increase in tertiary production.
Oil and natural gas revenues, excluding the impact of any derivative contracts, decreased 45%, as lower commodity prices decreased revenues by 38% and lower production, primarily due to the sale of 60% of the Barnett Shale natural gas assets, decreased revenues by 7%.
On a sequential basis, oil and natural gas revenues increased 5%, as higher commodity prices in the third quarter increased revenues by 22% and lower production decreased revenues by 17%.
Looking ahead, Denbury said in light of the recently announced acquisition of Encore Acquisition Company, it has entered into crude oil derivative contracts for the second half of 2010 and calendar 2011 as follows: 5,000 Bbls/d during the third and fourth quarters of 2010 with a floor price of $70 per barrel and an average ceiling price of $96.50 per barrel, and 25,000 Bbls/d during 2011 with a floor price of $70 per barrel and an average ceiling price of $102.58 per barrel.
As a result of the sale of 60% of Barnett Shale properties, the company had previously lowered its 2009 production guidance to an adjusted full-year 2009 average of 47,500 BOE/d. Denbury reaffirmed this annual production target.
DNR is trading down 3.13% at $12.98 on the NYSE.
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