Magnetar Capital Exits in 4Q14 (Part 3 of 5)

(Continued from Part 2)

In 4Q14, Magnetar eliminated its exposure to Denbury Resources (DNR) by selling 3.3 million shares in the company. The position had accounted for 1% of Magnetar’s third-quarter portfolio.

Denbury Resources (DNR) is an upstream oil and gas company based in Plano, Texas. “Upstream” means the company is primarily engaged in the production of oil and gas. Denbury produces mostly oil and operates in the Gulf Coast and Rocky Mountain regions, spanning Mississippi, Texas, Louisiana, Alabama, Montana, North Dakota, and Wyoming. Denbury Resources primarily extracts oil and gas via carbon dioxide–based enhanced oil recovery, or EOR.

The company basically acquires oil fields that have been tapped out by primary or secondary extraction methods. It then applies EOR to extract more oil from these reservoirs. As seen in the map below, Denbury Resources operational regions have huge potential for this kind of oil extraction.

Th EOR method used to derive most of its production makes the company unique among its upstream peers. That said, other American energy companies like Occidental Petroleum (OXY), Apache (APA), and Anadarko Petroleum (APC) also use CO2 EOR.

Denbury Resources is a relatively small energy company with a market capitalization of just over $3 billion. Nevertheless, the company finds a place in the broad-market SPDR S&P 500 ETF Trust (SPY), making up 0.01% of the ETF.

Production increased by 5% YoY (year-over-year) to 74,875 barrels of oil equivalent per day. Denbury revenues, however, were adversely impacted by lower realized oil prices that fell to $70.80 per barrel from $93 per barrel in 4Q13. Denbury clocked revenues of $480 million versus $599 million in 4Q13.

Nevertheless, the company saw market gains on derivative contracts of $554 million this quarter. In 4Q13, on the other hand, these gains equalled only $6 million. As a result, Denbury’s earnings improved to $364 million against $90 million in 4Q13.

The company is quite cautious about its production outlook for 2015. Its overall guidance range isn’t much higher than 2014 levels. A higher forecast production range for its tertiary extraction is moderated by lower forecast ranges for its non-tertiary fields across the board.

In the next article of our series, we’ll look at Magnetar’s position change in MetLife (MET).

Continue to Part 4

Browse this series on Market Realist:

• Part 1 - Magnetar Capital’s Top Exits in 4Q14
• Part 2 - Magnetar Disposes of Stake in Baker Hughes
• Part 4 - Magnetar Eliminates Exposure to MetLife