Denbury Resource's Fortunes Tied To Whether Oil Can Stay Above $55

Johnson Rice & Co. remains on the sidelines on Denbury Resources Inc. DNR shares as it believes that would be tough for the shares to post upside if the oil prices continue to stay below $55.

The brokerage, which has a Hold rating on the stock, still views shares akin to out-of-the-money call options on WTI.

“As WTI approaches $60, we see the company's liquidity concerns receding and the stock performing well. If WTI continues to linger in range below $55, we think the shares will struggle to perform,” analyst Charles Meade wrote in a note.

The comments came after Denbury announced its bank group has reaffirmed the company's borrowing base at $1.05 billion. The company had $260 million outstanding on the facility at the end of third quarter, down $60 million from the second quarter.

“The borrowing base redetermination process is more important than usual for Denbury currently, as the company is effectively locked out of the unsecured note market with its current outstanding notes trading at a significant discount to par,” Meade highlighted.

In addition, Meade pointed out that the current bank agreement continues to permit up to $1 billion in junior lien indebtedness, of which $385 million remains available.

At time of writing, shares of Denbury were down 1.42 percent to $2.77.