Denbury Resources, Inc. (DNR) reported better-than-expected second-quarter 2008 recurring earnings of $0.57 per diluted share (our estimate was $0.43 per diluted share), compared to $0.22 per share in the prior-year period. We have adjusted the reported earnings of $0.45 per diluted share for non-cash charges of $0.12 per diluted share associated with the company s derivative contracts.

We upgraded shares to Buy from Hold last week following the stock’s roughly 35% pullback since mid-June. We believe that the recent weakness has made valuation very compelling for this niche exploration and production (E&P) name. The stock currently trades at a deep discount to our conservative net asset value (NAV) estimate, offering meaningful upside from current levels.

Denbury’s focus on crude oil extraction from mature fields using CO2 flooding techniques offers sustainable and cost effective production and reserve growth for many years to come. The company’s competitive edge in acquiring mature properties