Denbury Resources Inc. (NYSE:DNR) has provided an operational report, including that the company has increased its share repurchase authorization and converted 2014 oil collars to fixed price swamps.
Denbury’s board of directors has approved an increase of $250 million to the company's authorized share repurchase program, leaving $422 million of authorized repurchases remaining as of December 31, 2013. The increase raises the total amount authorized under the program since it began in October 2011 to $1.162 billion, of which Denbury has spent $740 million as of December 31, 2013, to acquire 48 million common shares, or about 12% of shares outstanding at September 30, 2011, at an average cost of $15.55 per share. Of the total amount spent on repurchases, $78 million was spent in the fourth quarter of 2013 to acquire 5 million common shares at an average cost of $16.22 per share.
Denbury has converted all of its 2014 oil derivative contracts to fixed price swaps from collars. The company's 2014 fixed price oil swaps now cover 58,000 barrels of oil production per day, or 80% of estimated 2014 average daily oil production, at average NYMEX prices of $93.50 per barrel (Bbl) for the first half of 2014 and $92.50 per Bbl for the second half of 2014.
Denbury’s 2014 oil hedges were previously all costless collars with NYMEX price floors of $80 per Bbl and average NYMEX price ceilings of $102 per Bbl in the first half of 2014 and $98 per Bbl in the second half of 2014. No cash was paid or received to convert the hedge contracts. The conversion significantly tightens the estimated range of Denbury's anticipated cash flow from operations in 2014 from the range previously provided in Denbury's November 2013 analyst day presentation, which was based on estimated average 2014 NYMEX oil prices of between $85 per Bbl and $95 per Bbl. Denbury has also added natural gas hedges to its hedge portfolio and is considering adding hedge positions that extend beyond its typical duration of 18 months to 24 months.
The company has reported the successful startup of the Riley Ridge gas processing plant prior to year-end 2013, as the plant initially separated and sold methane from a produced raw gas stream expected to average 65% carbon dioxide, 20% methane, less than 1% helium, plus various other gases. This startup occurred slightly ahead of the company's most recently estimated start date in the first quarter of 2014. As the plant was placed in service in 2013, Denbury expects to record certain associated tax benefits in the fourth quarter of 2013. Following the planned construction of additional capture equipment and a pipeline to the facility later this decade, the Riley Ridge plant is expected to become Denbury's anchor source of carbon dioxide in the Rocky Mountain region.
Denbury is an independent oil and natural gas company with a primary focus on enhanced oil recovery utilizing carbon dioxide. The company’s operations are focused on the US Gulf Coast and Rocky Mountain regions. Denbury states that the company owns the largest reserves of carbon dioxide used for tertiary oil recovery east of the Mississippi River.