Looking to reduce debt in response to depressed oil prices, Denbury Resources Inc. (NYSE: DNR) announced a plan to exchange $1 billion of its $2.65 billion in debt for $650 million in new notes.
The company has commenced private offers to eligible holders of its outstanding 6⅜% Senior Subordinated Notes due 2021, 5½% Senior Subordinated Notes due 2022, and 4⅝% Senior Subordinated Notes due 2023 to exchange a portion of their Old Notes for up to $650 million of newly issued 7½% Senior Notes due May 15, 2022.
“DNR joins the list of a few other companies in recent months using the debt exchange as a way to try and reduce debt during the downturn. We think it makes sense and will watch DNR's progress; meanwhile we remain Hold-rated on the name as low oil prices remain difficult for all parties involved,” Wunderlich Securities analysts said in a note to investors Tuesday.
The move to reduce debt comes not long after Stifel analysts lowered its rating of Denbury to Sell given a “diminished oil and natural gas price outlook coupled with the company's debt-heavy balance sheet.” Stifel’s Sell rating was announced December 7. In an update Tuesday afternoon, Stifel analysts said they viewed the refinancing positively, pointing to the near 10% uptick in Denbury stock, but reiterated the Sell rating "based on the company's heavy balance sheet and challenging operating margins in the wake of this month's oil price decline," they said.
Looking forward, the company has pre-released its 2016 budget, noting plans to spend between $250-$300 million, based on current futures prices. The budget is 15% lower at the midpoint than the $300-325 million offered by the company in November, noted Raymond James Tuesday morning, and nearly 50% lower than the analysts' 2015 capex forecast. For reference, the analysts offered, "2014 spending was just over $1 billion." Raymond James anaysts envision 2016 production dipping by about 5% despite Denbury's suggestion that production volumes will be kept flast.
DNR shares were trading up 3.82% to US$1.965 Tuesday morning, and up over 8% by Tuesday afternoon to US$2.055.