Analyst On Denbury's Acquisition: No Rival Bidders In Sight And Low Chances Of Deal Break, But Risks Remain

KeyBanc Capital Markets analyst Tim Rezvan downgraded Denbury Inc DEN to Sector Weight from Overweight and removed the price target of $102.

The analyst notes DEN's shares losses since the announcement of its acquisition by Exxon Mobil Corp XOM for $4.9 billion due to a positive move in XOM shares and a tight deal spread.

Rezvan does not expect to see another bidder emerge for DEN.

The analyst sees the likelihood of the deal-breaking as extremely low.

However, if it does, Rezvan believes DEN's share price could decline by 10% or more, given part of the rationale for being bought was difficulty contesting for the brownfield emitter deals with investment-grade competitors.

The analyst estimates EPS of $4.96 for FY23 and $5.05 for FY24.

Also, Rezvan expects EBITDA of $556.0 million (vs. consensus $575.4 million) for FY23 and $570.0 million (vs. $643.4 million estimate) for FY24.

Earlier this month, DEN reported Q2 adjusted EPS of $1.06, missing the $1.23 estimate, and sales of $328.98 million, missing the consensus of $349.47 million.

Price Action: DEN shares are trading higher by 3.54% at $90.60 on the last check Thursday.