What You Ought To Know About Denbury Resources Inc. (NYSE:DNR)’s Delhi Field Plant

Denbury Resources Inc. (NYSE:DNR)’s CEO Phil Rykhoek early this month provided an update on the company’s new Delhi Field plant on the Gulf Coast. He said that the plant under construction at Delhi Field will be dedicated to production of natural gas liquids (NGL). Keep in mind that Denbury Resources doesn’t currently produce NGL and as such it has no revenue in the market. Therefore, the completion of the Delhi Field plant should open a new revenue stream for Denbury Resources.

Investment into the NGL project

Story continues below

Denbury Resources is estimating that construction and completion of the NGL plant at Delhi Field will consume about $20 million. The plant is expected to begin operations by the end of this year and Denbury Resources hinted that the completion target will be met because the construction work is on schedule. Furthermore, the project remains on budget, so Denbury Resources doesn’t expect to spend more than it had planned for the plant.

What’s the impact?

The one obvious impact of the NGL plant at Delhi Field is that it will open up a new revenue opportunity for Denbury Resources. The other impact expected from the completion of the NGL project is that it will boost carbon dioxide recycling efforts.

The completion of the NGL plant will also help Denbury Resources to cut its energy expenses given that the methane recovered from the plant will be used to generate electricity.

Production and revenue

In 2Q2016, Denbury Resources said that it pumped about 3,996 barrels of oil equivalent per day from Delhi Field. In that quarter, the company posted operating revenue of $247 million, which fell 33% YoY.

If you look at the sentiment on Wall Street, you find that Denbury Resources stock has an average price estimate of $3.50, which indicates a small upside potential from the stock prevailing price. In the last session, shares of Denbury Resources retreated 1.25% to close at $3.15 on a day that was characterized by heavy volume trading. Some 20.8 million shares of Denbury Resources were traded compared to daily average volume of 10.95 million.

An ad to help with our costs