Denbury Resources Inc. (NYSE:DNR) Not Immune To Prolonged Oil Slump

[[tagnumber 0]][[tagnumber 1]]Denbury Resources Inc. (NYSE:DNR) is one of those stocks whose chart performance is closely tied to that of crude oil and the reason is clear and simple: this is an independent oil & gas producer with almost 440MMBoe of estimated proved energy reserves, 360MMboe of which allocated to oil alone. In this respect, DNR has suffered as much as any other business in the industry for the last twelve months with oil‘s huge slump in value still remaining the main culprit for that.[[tagnumber 2]] [[tagnumber 0]]According to the most recent data published by the U.S. Energy Information Administration /EIA/, the spot price for [[tagnumber 4]]both WTI light and European Brent clocked in at less than $40 a barrel[[tagnumber 5]]. At $39.69 per barrel, Brent crude hit a price level it had not reached since February, 2009. The same goes for Cushing Oklahoma WTI light crude with a closing Dec. 7 spot price of $37.64. Again, the lowest level in more than 6 years.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 8]]While there are a number of factors at play in the current oil market medium, there is one that has a fairly direct impact on oil prices that is especially important to U.S. companies in particular. You‘ve got it right – it‘s the weekly stockpiles stored nationwide. The latter have more or less been on the rise since early–2014. Back then, America‘s oil reserves averaged 1.7 billion per week. Less than two years later, the total quantity of crude oil and petroleum products (including the U.S. Strategic Petroleum Reserve) in stock has already cracked the two–billion–barrel threshold for the first time in 25 years and has fluctuated around that level for the last six weeks. As of Dec. 4, oil stock reserves in the States amounted to 2 billion 663 thousand barrels.[[tagnumber 2]] [[tagnumber 0]]Since rising stockpiles mean that the supply glut is nowhere near coming to an end yet, this market environment is likely to continue to eat into the oil producers‘ assets and revenue streams. This is fairly evident in Denbury‘s most recent 10–Q report covering the period ended Sep. 30, 2015. The highlights include:[[tagnumber 2]] [[tagnumber 12]] [[tagnumber 13]]cash reserves – $12.2 million, [[tagnumber 4]]down 50%[[tagnumber 5]] from Q4‘14;[[tagnumber 16]] [[tagnumber 13]]current assets – [[tagnumber 4]]$465.6 million[[tagnumber 5]] vs [[tagnumber 4]]$812.7 million[[tagnumber 5]] a/o Dec. 31, 2014;[[tagnumber 16]] [[tagnumber 13]]total assets – [[tagnumber 4]]$7.3 billion[[tagnumber 5]] as opposed to [[tagnumber 4]]$12.7 billion[[tagnumber 5]] just nine months earlier;[[tagnumber 16]] [[tagnumber 13]]stockholders‘ equity – $2.1 billion, [[tagnumber 4]]down 63%[[tagnumber 5]] from the 4th quarter of last year;[[tagnumber 16]] [[tagnumber 13]]revenue – [[tagnumber 4]]$304 million[[tagnumber 5]] vs [[tagnumber 4]]$638 million[[tagnumber 5]] on a YoY basis;[[tagnumber 16]] [[tagnumber 13]]net loss – [[tagnumber 4]]$2.2 billion[[tagnumber 5]] in comparison with a net income of $269 million realized in Q3‘14.[[tagnumber 16]] [[tagnumber 43]] [[tagnumber 0]]As it is, the recent oil slump has had a devastating impact on Denbury‘s bottom line, the implication being that the company had to [[tagnumber 4]]write off $3 billion worth of assets[[tagnumber 5]] (both tangible and goodwill impairment), thus opening a huge gap in its financial position. With cash reserves growing thinner each quarter, the suspension of DNR‘s quarterly cash dividend implemented on Sep. 21 hardly comes as a surprise. As a result of this move, management is expected to spare approximately $20+ million of cash per quarter, starting from Q4 2015. Whether Denbury‘s officers will succeed in keeping the company financially stable thanks to this measure alone, however, is far from clear yet. Rather, they are likely to deploy other tools, as well, such as the stock repurchase program they reinstated on the same day they suspended DNR‘s dividend program. DNR‘s management has since [[tagnumber 4]]bought back a total of 4.4 million shares[[tagnumber 5]] at a [[tagnumber 4]]weighted average price of $2.66[[tagnumber 5]] per share. Considering that the no expiration date appears to have been etched in stone, further interventions aimed at boosting the current DNR stock price may not (and should not) slip under investors‘ radar.[[tagnumber 2]] [[tagnumber 0]]Roughly an hour into today‘s session, Denbury Resources Inc is quoted at $2.87 per share, up 4.18% from yesterday‘s close, with 2.65 million shares having already changed hands. The next serious movement could occur after the EIA has published this week‘s oil stockpiles, should they change considerably of course.[[tagnumber 2]]