Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today
provided results for the third quarter of 2021.
FINANCIAL AND OPERATING HIGHLIGHTS
3Q 2021
YTD 2021
(in thousands, except per-share and volume
data)
Total
Per Diluted Share
Total
Per Diluted Share
Net Income (Loss)
$82,708
$1.51
$(64,629)
$(1.27)
Adjusted net income(1)(2) (non-GAAP)
40,360
0.74
95,976
1.80
Adjusted EBITDAX(1) (non-GAAP)
80,587
234,956
Cash flows from operations
104,019
247,557
Adjusted cash flows from operations(1)
(non-GAAP)
77,550
229,291
Development capital expenditures
99,640
173,821
Average daily sales volumes (BOE/d)
49,682
48,732
Blue Oil (% oil volumes using
industrial-sourced CO2)
25%
24%
Industrial-sourced CO2 injected (thousand
metric tons)
862
2,430
- Progressed installation of the 105-mile extension of the
Greencore CO2 Pipeline to the Cedar Creek Anticline (“CCA”) EOR
project ahead of plan, with completion expected before the end of
November 2021.
- Completed the Oyster Bayou A1 CO2 development expansion with
initial production commencing late in the third quarter.
- Reduced total debt by $52 million during the third quarter,
exiting the quarter with no outstanding long-term debt and
liquidity of $565 million.
- Issued Denbury’s 2021 Corporate Responsibility Report,
highlighting the Company’s net negative combined Scope 1 and 2 CO2
emissions for 2019 and 2020 and its target to be fully negative
through Scope 3 within this decade.
(1)
A non-GAAP measure. See accompanying
schedules that reconcile GAAP to non-GAAP measures along with a
statement indicating why the Company believes the non-GAAP measures
provide useful information for investors.
(2)
Calculated using weighted average diluted
shares outstanding of 54.7 million and 53.4 million for the three
and nine months ended September 30, 2021, respectively.
RECENT CCUS HIGHLIGHTS
- Executed a term sheet with Mitsubishi Corporation for the
transport and storage of CO2 captured from Mitsubishi’s proposed
ammonia project along the U.S. Gulf Coast. The agreement covers a
20-year period, and Mitsubishi’s project is targeted to produce
associated CO2 emissions of approximately 1.8 million metric tons
per year (“MMTPA”), beginning in the latter half of the
decade.
- Commenced a joint evaluation with Mitsui E&P USA LLC of
potential opportunities across the U.S. Gulf Coast to develop
carbon-negative oil assets utilizing anthropogenic CO2. As part of
the evaluation, the parties seek to jointly pursue CO2 offtake
opportunities from Mitsui’s potential projects along the U.S. Gulf
Coast.
- Announced joint development of a Texas Gulf Coast sequestration
site with Gulf Coast Midstream Partners. Located in close proximity
to Denbury’s existing CO2 Green Pipeline, the location has the
potential to store up to 400 million metric tons of CO2 at a rate
of up to 9 MMTPA. The EPA Class VI permitting process has been
initiated and sequestration is estimated to be available by early
2025.
EXECUTIVE COMMENT
Chris Kendall, the Company’s President and CEO, commented,
“Denbury’s strong operational execution and continued safety focus,
combined with support from higher oil prices, delivered exceptional
results for the third quarter. We advanced both near and long-term
resource development projects, and I am particularly proud that the
CCA CO2 development, the largest tertiary project in Denbury’s
history, is ahead of schedule with zero recordable safety incidents
incurred to date.”
“The third quarter was also a significant period for our CCUS
business, as the initial term sheets we executed represent the
first steps towards solidifying this substantial growth opportunity
for our Company. We have advanced negotiations for additional CO2
transport and storage arrangements, and I remain confident in
further announcements by the end of 2021. Our successes in 2021
have set the stage for a very exciting future, as we execute on our
strategy to grow the CCUS opportunity while maintaining a strong
EOR-focused production business.”
FINANCIAL AND OPERATING RESULTS
Total revenues and other income in the third quarter of 2021
were $344 million, a 14% increase over second quarter 2021 levels,
supported predominantly by higher oil price realizations and also
slightly higher oil volumes. Denbury’s third quarter 2021 average
pre-hedge realized oil price was $68.88 per barrel (“Bbl”), which
was $1.75 per Bbl below NYMEX WTI oil prices, consistent with the
Company’s guidance. As compared to the second quarter of 2021, the
Company’s average oil differential widened from the $1.32 per Bbl
below NYMEX WTI last quarter, primarily as a result of Gulf Coast
crudes in comparison to WTI.
Denbury’s oil and natural gas sales volumes averaged 49,682
barrels of oil equivalent per day (“BOE/d”) during the third
quarter of 2021. In comparison to the second quarter 2021, third
quarter sales volumes were up 1% primarily attributable to the Wind
River Basin properties, Oyster Bayou performance, and non-tertiary
sales at Conroe Field. Oil represented 97% of the Company’s third
quarter 2021 volumes, and approximately 25% of the Company’s oil
was attributable to the injection of industrial-sourced CO2 in its
EOR operations, resulting in carbon-negative or blue oil.
Lease operating expenses (“LOE”) in the third quarter of 2021
totaled $117 million, or $25.50 per BOE, in line with expectations.
On a per BOE basis, LOE expense increased approximately 3% from the
second quarter of 2021 due in part to higher power and fuel,
contract labor, and workover costs.
Transportation and marketing expenses for the quarter totaled $6
million, an improvement of $3 million from the second quarter of
2021, primarily as a result of a change in transportation and
marketing arrangements for certain of the Company’s Rocky Mountain
region oil volumes.
General and administrative expenses were $15 million in the
third quarter of 2021, in line with expectations and consistent
with the second quarter of 2021. Depletion, depreciation, and
amortization (“DD&A”) was also in line with expectations at $38
million, or $8.25 per BOE for the quarter.
Commodity derivatives expense totaled $42 million in the third
quarter of 2021. Cash payments on hedges that settled in the third
quarter of 2021 totaled $78 million, offset by a $36 million
noncash gain representing mark-to-market changes in the value of
the Company’s hedging portfolio. No new hedges were added by the
Company during the third quarter of 2021.
Other income for the third quarter of 2021 included a $7 million
gain related to the sale of non-producing Houston-area surface
acreage outside of the Company’s planned development area.
The Company’s effective tax rate for the third quarter of 2021
was negligible, as virtually all of the tax expense/benefit
generated is currently fully offset by a change in valuation
allowance on its federal and state deferred tax assets.
CAPITAL EXPENDITURES
Third quarter 2021 development capital expenditures totaled
nearly $100 million, bringing year to-date capital expenditures to
a total of $174 million. Approximately 60% of the third quarter
total was dedicated to the CCA tertiary project, including the
Greencore CO2 Pipeline extension, the infield CCA distribution
system installation, and field work to begin converting water
injection wells to CO2 injection. The Greencore CO2 Pipeline
extension project is running ahead of schedule, and completion is
now anticipated before the end of November 2021. Initial CO2
injection into CCA is expected in the first quarter of 2022, with
production response estimated to commence in the second half of
2023.
Also during the quarter, the Company completed drilling and
injection work at the Oyster Bayou A1 CO2 development expansion in
the Gulf Coast. In addition, the Company drilled a horizontal
infield development well at Coral Creek in the Cedar Creek
Anticline area of the Rocky Mountain region. Production response
from these projects commenced late in the third quarter of
2021.
GUIDANCE
Development capital expenditures for the fourth quarter of the
year are expected between $75 million and $95 million, with the
full year unchanged at a range of $250 million to $270 million.
Planned fourth quarter capital expenditures include the completion
of the Greencore CO2 Pipeline extension and CCA CO2 infield
distribution system, as well as additional field development
activities. For the fourth quarter of 2021, LOE per BOE is
anticipated to be consistent with the unit rate in the third
quarter and sales volumes are anticipated to average nearly 50,000
BOE/d.
Additional fourth quarter guidance details are available in the
Company’s supplemental third quarter 2021 earnings presentation,
which is available in the Investor Relations section of the
Company’s website, www.denbury.com.
CONFERENCE CALL AND WEBCAST INFORMATION
Denbury will host a conference call and webcast to review and
discuss its results and outlook today, Thursday, November 4, at
11:00 a.m. Central Time. Additionally, Denbury will post
presentation materials on its website before market open today. The
presentation webcast will be available, both live and for replay,
on the Investor Relations page of the Company’s website at
www.denbury.com. Individuals who would like to participate in the
conference call should dial the following numbers shortly before
the scheduled start time: 877.705.6003 or 201.493.6725 with
conference number 13696090.
Denbury is an independent energy company with operations and
assets focused on Carbon Capture, Use and Storage (CCUS) and
Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain
regions. For over two decades, the Company has maintained a unique
strategic focus on utilizing CO2 in its EOR operations and since
2012 has also been active in CCUS through the injection of captured
industrial-sourced CO2. The Company currently injects over three
million tons of captured industrial-sourced CO2 annually, and its
objective is to fully offset its Scope 1, 2, and 3 CO2 emissions
within this decade, primarily through increasing the amount of
captured industrial-sourced CO2 used in its operations. For more
information about Denbury, visit www.denbury.com.
This press release, other than historical information, contains
forward-looking statements that involve risks and uncertainties
including estimated 2021 production, capital expenditures, and
costs, the timing of completion of the Greencore pipeline extension
to CCA, and results of ongoing negotiations of CCUS transport and
storage arrangements, and other risks and uncertainties detailed in
the Company’s filings with the Securities and Exchange Commission,
including Denbury’s most recent report on Form 10-K. These risks
and uncertainties are incorporated by this reference as though
fully set forth herein. These statements are based on financial and
market, engineering, geological and operating assumptions that
management believes are reasonable based on currently available
information; however, management’s assumptions and the Company’s
future performance are both subject to a wide range of risks, and
there is no assurance that these goals and projections can or will
be met. Actual results may vary materially. In addition, any
forward-looking statements represent the Company’s estimates only
as of today and should not be relied upon as representing its
estimates as of any future date. Denbury assumes no obligation to
update its forward-looking statements.
FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION
SCHEDULES
References below to “Successor” refer to the new Denbury
reporting entity after the Company’s emergence from bankruptcy on
September 18, 2020, and references to “Predecessor” refer to the
Denbury entity prior to emergence from bankruptcy. The following
tables include selected unaudited financial and operational
information for the Successor three and nine-month periods ended
September 30, 2021, Successor period from September 19, 2020
through September 30, 2020, Predecessor periods from July 1, 2020
through September 18, 2020 and January 1, 2020 through September
18, 2020, and certain Combined information for the three and nine
months ended September 30, 2020, in order to assist investors in
understanding the comparability of the Company’s financial and
operational results for the applicable periods. All sales volumes
and dollars are expressed on a net revenue interest basis with gas
volumes converted to equivalent barrels at 6:1.
DENBURY INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following information is based on GAAP reporting earnings
(along with additional required disclosures) included or to be
included in the Company’s periodic reports:
Quarter Ended Sept. 30, 2021
Quarter Ended Sept. 30, 2020
Period from Sept. 19, 2020
through Sept. 30, 2020
Period from July 1, 2020 through
Sept. 18, 2020
In thousands, except per-share data
Successor
Combined (Non-GAAP)(1)
Successor
Predecessor
Revenues and other income
Oil sales
$
305,093
$
174,447
$
22,311
$
152,136
Natural gas sales
3,361
964
10
954
CO2 sales and transportation fees
12,237
7,484
967
6,517
Oil marketing revenues
12,593
3,483
151
3,332
Other income
10,451
7,191
94
7,097
Total revenues and other income
343,735
193,569
23,533
170,036
Expenses
Lease operating expenses
116,536
71,192
11,484
59,708
Transportation and marketing expenses
5,985
9,499
1,344
8,155
CO2 operating and discovery expenses
1,963
1,197
242
955
Taxes other than income
24,154
15,546
2,073
13,473
Oil marketing purchases
11,940
3,427
139
3,288
General and administrative expenses
15,388
16,748
1,735
15,013
Interest, net of amounts capitalized of
$1,249, $4,887, $183 and $4,704, respectively
669
8,038
334
7,704
Depletion, depreciation, and
amortization
37,691
41,600
5,283
36,317
Commodity derivatives expense (income)
41,745
574
(4,035
)
4,609
Write-down of oil and natural gas
properties
—
261,677
—
261,677
Restructuring items, net
—
849,980
—
849,980
Other expenses
4,553
24,248
2,164
22,084
Total expenses
260,624
1,303,726
20,763
1,282,963
Income (loss) before income
taxes
83,111
(1,110,157
)
2,770
(1,112,927
)
Income tax provision (benefit)
Current income taxes
350
(1,445
)
6
(1,451
)
Deferred income taxes
53
(302,350
)
6
(302,356
)
Net income (loss)
$
82,708
$
(806,362
)
$
2,758
$
(809,120
)
Net income (loss) per common
share
Basic
$
1.62
$
0.06
$
(1.63
)
Diluted
$
1.51
$
0.06
$
(1.63
)
Weighted average common shares
outstanding
Basic
51,094
50,000
497,398
Diluted
54,714
50,000
497,398
(1)
Combined results for the quarter ended
September 30, 2020 are provided for illustrative purposes and are
derived from the financial statement line items from the Successor
and Predecessor periods. Because of the impact of various
adjustments to the financial statements in connection with the
application of fresh start accounting, including asset valuation
adjustments and liability adjustments, certain results of
operations for the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
meaningful information to assist investors in understanding the
Company’s financial results for the applicable period, but should
be not be considered in isolation, as a substitute for, or more
meaningful than, independent results of the Predecessor and
Successor periods for the quarter reported in accordance with
GAAP.
Nine Months Ended Sept. 30,
2021
Nine Months Ended Sept. 30,
2020
Period from Sept. 19, 2020
through Sept. 30, 2020
Period from Jan. 1, 2020 through
Sept. 18, 2020
In thousands, except per-share data
Successor
Combined (Non-GAAP)(1)
Successor
Predecessor
Revenues and other income
Oil sales
$
818,714
$
511,562
$
22,311
$
489,251
Natural gas sales
7,893
2,860
10
2,850
CO2 sales and transportation fees
31,599
22,016
967
21,049
Oil marketing revenues
26,538
8,694
151
8,543
Other income
11,518
8,513
94
8,419
Total revenues and other income
896,262
553,645
23,533
530,112
Expenses
Lease operating expenses
308,731
261,755
11,484
250,271
Transportation and marketing expenses
22,304
28,508
1,344
27,164
CO2 operating and discovery expenses
4,487
2,834
242
2,592
Taxes other than income
65,499
45,604
2,073
43,531
Oil marketing purchases
25,763
8,538
139
8,399
General and administrative expenses
62,821
50,257
1,735
48,522
Interest, net of amounts capitalized of
$3,500, $23,068, $183 and $22,885, respectively
3,457
48,601
334
48,267
Depletion, depreciation, and
amortization
113,522
193,876
5,283
188,593
Commodity derivatives expense (income)
330,152
(106,067
)
(4,035
)
(102,032
)
Gain on debt extinguishment
—
(18,994
)
—
(18,994
)
Write-down of oil and natural gas
properties
14,377
996,658
—
996,658
Restructuring items, net
—
849,980
—
849,980
Other expenses
9,913
38,032
2,164
35,868
Total expenses
961,026
2,399,582
20,763
2,378,819
Income (loss) before income
taxes
(64,764
)
(1,845,937
)
2,770
(1,848,707
)
Income tax provision (benefit)
Current income taxes
(101
)
(7,254
)
6
(7,260
)
Deferred income taxes
(34
)
(408,863
)
6
(408,869
)
Net income (loss)
$
(64,629
)
$
(1,429,820
)
$
2,758
$
(1,432,578
)
Net income (loss) per common
share
Basic
$
(1.27
)
$
0.06
$
(2.89
)
Diluted
$
(1.27
)
$
0.06
$
(2.89
)
Weighted average common shares
outstanding
Basic
50,807
50,000
495,560
Diluted
50,807
50,000
495,560
(1)
Combined results for the nine months ended
September 30, 2020 are provided for illustrative purposes and are
derived from the financial statement line items from the Successor
and Predecessor periods. Because of the impact of various
adjustments to the financial statements in connection with the
application of fresh start accounting, including asset valuation
adjustments and liability adjustments, certain results of
operations for the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
meaningful information to assist investors in understanding the
Company’s financial results for the applicable period, but should
be not be considered in isolation, as a substitute for, or more
meaningful than, independent results of the Predecessor and
Successor periods for the nine months ended September 30, 2020
reported in accordance with GAAP.
DENBURY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarter Ended Sept. 30, 2021
Quarter Ended Sept. 30, 2020
Period from Sept. 19, 2020
through Sept. 30, 2020
Period from July 1, 2020 through
Sept. 18, 2020
In thousands
Successor
Combined (Non-GAAP)(1)
Successor
Predecessor
Cash flows from operating
activities
Net income (loss)
$
82,708
$
(806,362
)
$
2,758
$
(809,120
)
Adjustments to reconcile net income (loss)
to cash flows from operating activities
Noncash reorganization items, net
—
810,909
—
810,909
Depletion, depreciation, and
amortization
37,691
41,600
5,283
36,317
Write-down of oil and natural gas
properties
—
261,677
—
261,677
Deferred income taxes
53
(302,350
)
6
(302,356
)
Stock-based compensation
2,556
571
—
571
Commodity derivatives expense (income)
41,745
574
(4,035
)
4,609
Receipt (payment) on settlements of
commodity derivatives
(77,670
)
17,789
6,660
11,129
Debt issuance costs and discounts
685
1,764
114
1,650
Gain from asset sales and other
(7,055
)
(6,404
)
—
(6,404
)
Other, net
(3,163
)
9,074
589
8,485
Changes in assets and liabilities, net of
effects from acquisitions
Accrued production receivable
(4,067
)
3,049
38,537
(35,488
)
Trade and other receivables
3,769
(4,815
)
1,366
(6,181
)
Other current and long-term assets
6,043
6,000
705
5,295
Accounts payable and accrued
liabilities
20,192
36,213
(7,980
)
44,193
Oil and natural gas production payable
2,944
4,361
(11,064
)
15,425
Other liabilities
(2,412
)
(143
)
(29
)
(114
)
Net cash provided by operating
activities
104,019
73,507
32,910
40,597
Cash flows from investing
activities
Oil and natural gas capital
expenditures
(59,630
)
(21,810
)
(2,125
)
(19,685
)
Acquisitions of oil and natural gas
properties
(116
)
(1
)
(1
)
—
Pipelines and plants capital
expenditures
(14,272
)
(645
)
(6
)
(639
)
Net proceeds from sales of oil and natural
gas properties and equipment
597
1,231
880
351
Other
9,956
12,544
(308
)
12,852
Net cash used in investing
activities
(63,465
)
(8,681
)
(1,560
)
(7,121
)
Cash flows from financing
activities
Bank repayments
(212,000
)
(380,000
)
(55,000
)
(325,000
)
Bank borrowings
177,000
200,000
—
200,000
Interest payments treated as a reduction
of debt
—
(3,911
)
—
(3,911
)
Cash paid in conjunction with debt
repurchases
—
—
—
—
Costs of debt financing
—
(12,183
)
—
(12,183
)
Pipeline financing repayments
(17,166
)
(44,831
)
(54
)
(44,777
)
Other
309
(133
)
—
(133
)
Net cash provided by (used in)
financing activities
(51,857
)
(241,058
)
(55,054
)
(186,004
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
(11,303
)
(176,232
)
(23,704
)
(152,528
)
Cash, cash equivalents, and restricted
cash at beginning of period
59,765
247,642
95,114
247,642
Cash, cash equivalents, and restricted
cash at end of period
$
48,462
$
71,410
$
71,410
$
95,114
(1)
Combined results for the quarter ended
September 30, 2020 are provided for illustrative purposes and are
derived from the financial statement line items from the Successor
and Predecessor periods. Because of the impact of various
adjustments to the financial statements in connection with the
application of fresh start accounting, including asset valuation
adjustments and liability adjustments, certain results of
operations for the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
meaningful information to assist investors in understanding the
Company’s financial results for the applicable period, but should
be not be considered in isolation, as a substitute for, or more
meaningful than, independent results of the Predecessor and
Successor periods for the quarter reported in accordance with
GAAP.
Nine Months Ended Sept. 30,
2021
Nine Months Ended Sept. 30,
2020
Period from Sept. 19, 2020
through Sept. 30, 2020
Period from Jan. 1, 2020 through
Sept. 18, 2020
In thousands
Successor
Combined (Non-GAAP)(1)
Successor
Predecessor
Cash flows from operating
activities
Net income (loss)
$
(64,629
)
$
(1,429,820
)
$
2,758
$
(1,432,578
)
Adjustments to reconcile net income (loss)
to cash flows from operating activities
Noncash reorganization items, net
—
810,909
—
810,909
Depletion, depreciation, and
amortization
113,522
193,876
5,283
188,593
Write-down of oil and natural gas
properties
14,377
996,658
—
996,658
Deferred income taxes
(34
)
(408,863
)
6
(408,869
)
Stock-based compensation
22,788
4,111
—
4,111
Commodity derivatives expense (income)
330,152
(106,067
)
(4,035
)
(102,032
)
Receipt (payment) on settlements of
commodity derivatives
(179,466
)
88,056
6,660
81,396
Gain on debt extinguishment
—
(18,994
)
—
(18,994
)
Debt issuance costs and discounts
2,055
11,685
114
11,571
Gain from asset sales and other
(7,026
)
(6,723
)
—
(6,723
)
Other, net
(2,448
)
7,751
589
7,162
Changes in assets and liabilities, net of
effects from acquisitions
Accrued production receivable
(52,948
)
65,112
38,537
26,575
Trade and other receivables
(1,809
)
(20,977
)
1,366
(22,343
)
Other current and long-term assets
7,337
1,448
705
743
Accounts payable and accrued
liabilities
47,484
(24,082
)
(7,980
)
(16,102
)
Oil and natural gas production payable
23,168
(17,856
)
(11,064
)
(6,792
)
Other liabilities
(4,966
)
94
(29
)
123
Net cash provided by operating
activities
247,557
146,318
32,910
113,408
Cash flows from investing
activities
Oil and natural gas capital
expenditures
(113,041
)
(101,707
)
(2,125
)
(99,582
)
Acquisitions of oil and natural gas
properties
(10,927
)
(1
)
(1
)
—
Pipelines and plants capital
expenditures
(19,123
)
(11,607
)
(6
)
(11,601
)
Net proceeds from sales of oil and natural
gas properties and equipment
19,053
42,202
880
41,322
Other
5,797
12,439
(308
)
12,747
Net cash used in investing
activities
(118,241
)
(58,674
)
(1,560
)
(57,114
)
Cash flows from financing
activities
Bank repayments
(697,000
)
(606,000
)
(55,000
)
(551,000
)
Bank borrowings
627,000
691,000
—
691,000
Interest payments treated as a reduction
of debt
—
(46,417
)
—
(46,417
)
Cash paid in conjunction with debt
repurchases
—
(14,171
)
—
(14,171
)
Costs of debt financing
—
(12,482
)
—
(12,482
)
Pipeline financing repayments
(50,676
)
(51,846
)
(54
)
(51,792
)
Other
(2,426
)
(9,363
)
—
(9,363
)
Net cash provided by (used in)
financing activities
(123,102
)
(49,279
)
(55,054
)
5,775
Net increase (decrease) in cash, cash
equivalents, and restricted cash
6,214
38,365
(23,704
)
62,069
Cash, cash equivalents, and restricted
cash at beginning of period
42,248
33,045
95,114
33,045
Cash, cash equivalents, and restricted
cash at end of period
$
48,462
$
71,410
$
71,410
$
95,114
(1)
Combined results for the nine months ended
September 30, 2020 are provided for illustrative purposes and are
derived from the financial statement line items from the Successor
and Predecessor periods. Because of the impact of various
adjustments to the financial statements in connection with the
application of fresh start accounting, including asset valuation
adjustments and liability adjustments, certain results of
operations for the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
meaningful information to assist investors in understanding the
Company’s financial results for the applicable period, but should
be not be considered in isolation, as a substitute for, or more
meaningful than, independent results of the Predecessor and
Successor periods for the nine months ended September 30, 2020
reported in accordance with GAAP.
DENBURY INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In thousands, except par value and share
data
Sept. 30, 2021
Dec. 31, 2020
Assets
Current assets
Cash and cash equivalents
$
1,783
$
518
Restricted cash
—
1,000
Accrued production receivable
144,370
91,421
Trade and other receivables, net
20,867
19,682
Derivative assets
—
187
Prepaids
10,872
14,038
Total current assets
177,892
126,846
Property and equipment
Oil and natural gas properties (using full
cost accounting)
Proved properties
1,011,545
851,208
Unevaluated properties
108,258
85,304
CO2 properties
188,752
188,288
Pipelines
193,669
133,485
Other property and equipment
94,763
86,610
Less accumulated depletion, depreciation,
amortization and impairment
(151,844
)
(41,095
)
Net property and equipment
1,445,143
1,303,800
Operating lease right-of-use assets
18,253
20,342
Intangible assets, net
90,533
97,362
Other assets
80,444
86,408
Total assets
$
1,812,265
$
1,634,758
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable and accrued
liabilities
$
211,894
$
112,671
Oil and gas production payable
69,717
49,165
Derivative liabilities
193,015
53,865
Current maturities of long-term debt
17,332
68,008
Operating lease liabilities
3,338
1,350
Total current liabilities
495,296
285,059
Long-term liabilities
Long-term debt, net of current portion
—
70,000
Asset retirement obligations
243,184
179,338
Derivative liabilities
16,435
5,087
Deferred tax liabilities, net
1,241
1,274
Operating lease liabilities
17,362
19,460
Other liabilities
25,954
20,872
Total long-term liabilities
304,176
296,031
Commitments and contingencies
Stockholders’ equity
Preferred stock, $.001 par value,
50,000,000 shares authorized, none issued and outstanding
—
—
Common stock, $.001 par value, 250,000,000
shares authorized; 50,120,895 and 49,999,999 shares issued,
respectively
50
50
Paid-in capital in excess of par
1,128,030
1,104,276
Accumulated deficit
(115,287
)
(50,658
)
Total stockholders’ equity
1,012,793
1,053,668
Total liabilities and stockholders’
equity
$
1,812,265
$
1,634,758
DENBURY INC. OPERATING HIGHLIGHTS (UNAUDITED)
All sales volumes and dollars are expressed on a net revenue
interest basis with gas volumes converted to equivalent barrels at
6:1.
Quarter Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Average daily sales (BOE/d)
Tertiary
Gulf Coast region
24,336
25,776
24,432
26,971
Rocky Mountain region
9,033
7,718
8,337
7,586
Total tertiary sales
33,369
33,494
32,769
34,557
Non-tertiary
Gulf Coast region
3,763
3,728
3,600
4,161
Rocky Mountain region
12,550
12,464
12,363
13,221
Total non-tertiary sales
16,313
16,192
15,963
17,382
Total Company
Oil (Bbls/d)
48,145
48,334
47,276
50,619
Natural gas (Mcf/d)
9,222
8,110
8,739
7,916
BOE/d (6:1)
49,682
49,686
48,732
51,939
Unit sales price (excluding derivative
settlements)
Gulf Coast region
Oil (per Bbl)
$
68.86
$
39.49
$
63.47
$
37.70
Natural gas (per mcf)
4.45
2.07
3.59
1.85
Rocky Mountain region
Oil (per Bbl)
$
68.91
$
38.85
$
63.39
$
35.66
Natural gas (per mcf)
3.64
0.38
3.11
0.67
Total Company
Oil (per Bbl)(1)
$
68.88
$
39.23
$
63.44
$
36.88
Natural gas (per mcf)
3.96
1.29
3.31
1.32
BOE (6:1)
67.48
38.37
62.13
36.15
(1)
Total company realized oil prices
including derivative settlements were $51.35 per Bbl and $43.23 per
Bbl during the three months ended September 30, 2021 and 2020,
respectively, and $49.53 per Bbl and $43.23 per Bbl during the nine
months ended September 30, 2021 and 2020, respectively.
DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (loss) (GAAP measure) to
adjusted net income (non-GAAP measure)
Adjusted net income is a non-GAAP measure provided as a
supplement to present an alternative net income (loss) measure
which excludes expense and income items (and their related tax
effects) not directly related to the Company’s ongoing operations.
Management believes that adjusted net income may be helpful to
investors by eliminating the impact of noncash and/or special or
unusual items not indicative of the Company’s performance from
period to period, and is widely used by the investment community,
while also being used by management, in evaluating the
comparability of the Company’s ongoing operational results and
trends. Adjusted net income should not be considered in isolation,
as a substitute for, or more meaningful than, net income (loss) or
any other measure reported in accordance with GAAP, but rather to
provide additional information useful in evaluating the Company’s
operational trends and performance.
Quarter Ended
Quarter Ended
September 30, 2021
September 30, 2020
Successor
Combined (Non-GAAP)(1)
In thousands, except per-share data
Amount
Per Diluted Share
Amount
Net income (loss) (GAAP
measure)(2)
$
82,708
$
1.51
$
(806,362
)
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value losses (gains) on
commodity derivatives(3)
(35,925
)
(0.66
)
18,363
Reorganization items, net(4)
—
—
849,980
Write-down of oil and natural gas
properties(5)
—
—
261,677
Accelerated depreciation charge(6)
—
—
1,791
Expense associated with
restructuring(9)
—
—
16,232
Delhi Field insurance
reimbursements(10)
—
—
(15,402
)
Noncash fair value adjustment - contingent
consideration(11)
436
0.01
—
Other(12)
(6,859
)
(0.12
)
1,013
Estimated income taxes on above
adjustments to net loss and other discrete tax items(14)
—
—
(307,344
)
Adjusted net income (non-GAAP
measure)
$
40,360
$
0.74
$
19,948
Nine Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
Successor
Combined (Non-GAAP)(1)
In thousands, except per-share data
Amount
Per Diluted Share
Amount
Net loss (GAAP measure)(2)
$
(64,629
)
$
(1.27
)
$
(1,429,820
)
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value losses (gains) on
commodity derivatives(3)
150,686
2.82
(18,011
)
Reorganization items, net(4)
—
—
849,980
Write-down of oil and natural gas
properties(5)
14,377
0.27
996,658
Accelerated depreciation charge(6)
—
—
39,159
Gain on debt extinguishment(7)
—
—
(18,994
)
Severance-related expense included in
general and administrative expenses(8)
—
—
2,361
Expense associated with
restructuring(9)
—
—
24,107
Delhi Field insurance
reimbursements(10)
—
—
(15,402
)
Noncash fair value adjustment - contingent
consideration(11)
2,076
0.04
—
Other(12)
(6,534
)
(0.12
)
3,623
Adjustments to reconcile effect of
dilutive securities(13)
—
0.06
—
Estimated income taxes on above
adjustments to net loss and other discrete tax items(14)
—
—
(418,655
)
Adjusted net income (non-GAAP
measure)
$
95,976
$
1.80
$
15,006
(1)
Combined results for the three and nine
months ended September 30, 2020 are provided for illustrative
purposes and are derived from the financial statement line items
from the Successor and Predecessor periods. Because of the impact
of various adjustments to the financial statements in connection
with the application of fresh start accounting, including asset
valuation adjustments and liability adjustments, certain results of
operations of the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
more meaningful information to assist investors in understanding
the Company’s financial results for the applicable period, but
should not be considered in isolation, as a substitute for, or
meaningful than, independent results of the Predecessor and
Successor periods for the quarter and nine months ended September
30, 2020 reported in accordance with GAAP.
(2)
Diluted net income (loss) per common share
includes the impact of potentially dilutive securities including
nonvested restricted stock units and warrants during the Successor
period and includes nonvested restricted stock, nonvested
performance-based equity awards, and shares into which the
Predecessor’s previous convertible senior notes were
convertible.
(3)
The net change between periods of the fair
market values of open commodity derivative positions, excluding the
impact of settlements on commodity derivatives during the
period.
(4)
Reorganization items, net represent (a)
expenses incurred subsequent to the filing petition for Chapter 11
as a direct result of the prepackaged joint plan of reorganization,
(b) gains or losses from liabilities settled, and (c) fresh start
accounting adjustments.
(5)
Full cost pool ceiling test write-downs
related to the Company’s oil and natural gas properties.
(6)
Accelerated depreciation related to
impaired unevaluated properties that were transferred to the full
cost pool.
(7)
Gain on debt extinguishment related to the
Company’s 2020 open market repurchases.
(8)
Severance-related expense associated with
the Company’s May-2020 involuntary workforce reduction.
(9)
Expenses related to advisor and
professional fees associated with review of strategic alternatives
and comprehensive restructuring of the Company’s indebtedness.
(10)
Insurance reimbursements associated with a
2013 incident at Delhi Field.
(11)
Expense related to the change in fair
value of the contingent consideration payments related to our March
2021 Wind River Basin CO2 EOR field acquisition.
(12)
Other adjustments primarily include: (a)
for the three months ended September 30, 2021, $7.0 million gain on
land sales, (b) for the three months ended September 30, 2020, $5.9
million gain on land sales, $4.2 million write-off of trade
receivables, $2.2 million of expense associated with the
Delta-Tinsley CO2 pipeline incident and $0.5 million of expense
associated with the helium supply contract ruling. The nine months
ended September 30, 2021 were impacted by a $0.3 million write-off
of trade receivables during the three months ended March 31, 2021,
and the nine months ended September 30, 2020 were further impacted
by $1.6 million of expense associated with the Delta-Tinsley CO2
pipeline incident and $1.0 million of expense associated with the
helium supply contract ruling.
(13)
Represents the impact to the per-share
calculation using weighted average dilutive shares of 53.4 million
during the nine months ended September 30, 2021 as a result of the
adjustments to the Company’s net loss (GAAP measure) to derive
adjusted net income (non-GAAP measure).
(14)
The estimated income tax impacts on
adjustments to net income for the nine months ended September 30,
2020 are computed based upon a rate of 25% applied to income before
tax, which incorporates discrete tax adjustments primarily
comprised of the tax effect of the ceiling test and accelerated
depreciation, impacts of the CARES Act, valuation allowances, and
the periodic tax impacts of a shortfall (benefit) on the
stock-based compensation deduction.
DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (loss) (GAAP measure) to
Adjusted EBITDAX (non-GAAP measure)
Adjusted EBITDAX is a non-GAAP measure which management uses and
is calculated based upon (but not identical to) a financial
covenant related to “Consolidated EBITDAX” in the Company’s senior
secured bank credit facility, which excludes certain items that are
included in net income (loss), the most directly comparable GAAP
financial measure. Items excluded include interest, income taxes,
depletion, depreciation, and amortization, and items that the
Company believes affect the comparability of operating results such
as items whose timing and/or amount cannot be reasonably estimated
or are nonrecurring. Management believes Adjusted EBITDAX may be
helpful to investors in order to assess the Company’s operating
performance as compared to that of other companies in the industry,
without regard to financing methods, capital structure or
historical costs basis. It is also commonly used by third parties
to assess leverage and the Company’s ability to incur and service
debt and fund capital expenditures. Adjusted EBITDAX should not be
considered in isolation, as a substitute for, or more meaningful
than, net income (loss), cash flow from operations, or any other
measure reported in accordance with GAAP. The Company’s Adjusted
EBITDAX may not be comparable to similarly titled measures of
another company because all companies may not calculate Adjusted
EBITDAX, EBITDAX or EBITDA in the same manner. The following table
presents a reconciliation of the Company’s net income (loss) to
Adjusted EBITDAX.
In thousands
Quarter Ended Sept. 30, 2021
Quarter Ended Sept. 30, 2020
Nine Months Ended Sept. 30,
2021
Nine Months Ended Sept. 30,
2020
Successor
Combined (Non-GAAP)(1)
Successor
Combined (Non-GAAP)(1)
Net income (loss) (GAAP
measure)
$
82,708
$
(806,362
)
$
(64,629
)
$
(1,429,820
)
Adjustments to reconcile to Adjusted
EBITDAX
Interest expense
669
8,038
3,457
48,601
Income tax expense (benefit)
403
(303,795
)
(135
)
(416,117
)
Depletion, depreciation, and
amortization
37,691
41,600
113,522
193,876
Noncash fair value losses (gains) on
commodity derivatives
(35,925
)
18,363
150,686
(18,011
)
Stock-based compensation
2,556
571
22,788
4,111
Gain on debt extinguishment
—
—
—
(18,994
)
Write-down of oil and natural gas
properties
—
261,677
14,377
996,658
Reorganization items, net
—
849,980
—
849,980
Severance-related expense
—
954
476
3,315
Noncash, non-recurring and other
(7,515
)
22,419
(5,586
)
35,014
Adjusted EBITDAX (non-GAAP
measure)(2)
$
80,587
$
93,445
$
234,956
$
248,613
(1)
Combined results for the three and nine
months ended September 30, 2020 are provided for illustrative
purposes and are derived from the financial statement line items
from the Successor and Predecessor periods. Because of the impact
of various adjustments to the financial statements in connection
with the application of fresh start accounting, including asset
valuation adjustments and liability adjustments, certain results of
operations of the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
more meaningful information to assist investors in understanding
the Company’s financial results for the applicable period, but
should not be considered in isolation, as a substitute for, or
meaningful than, independent results of the Predecessor and
Successor periods for the quarter and nine months ended September
30, 2020 reported in accordance with GAAP.
(2)
Excludes pro forma adjustments related to
qualified acquisitions or dispositions under the Company’s senior
secured bank credit facility.
DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of cash flows from operations (GAAP measure)
to adjusted cash flows from operations (non-GAAP measure) and free
cash flow (non-GAAP measure)
Adjusted cash flows from operations is a non-GAAP measure that
represents cash flows provided by operations before changes in
assets and liabilities, as summarized from the Company’s Unaudited
Condensed Consolidated Statements of Cash Flows. Adjusted cash
flows from operations measures the cash flows earned or incurred
from operating activities without regard to the collection or
payment of associated receivables or payables. Free cash flow is a
non-GAAP measure that represents adjusted cash flows from
operations less reorganization items settled in cash, interest
treated as debt reduction, development capital expenditures and
capitalized interest, but before acquisitions. Management believes
that it is important to consider these additional measures, along
with cash flows from operations, as it believes the non-GAAP
measures can often be a better way to discuss changes in operating
trends in its business caused by changes in sales volumes, prices,
operating costs and related factors, without regard to whether the
earned or incurred item was collected or paid during that period.
Adjusted cash flows from operations and free cash flow are not
measures of financial performance under GAAP and should not be
considered as alternatives to cash flows from operations,
investing, or financing activities, nor as a liquidity measure or
indicator of cash flows.
In thousands
Quarter Ended Sept. 30, 2021
Quarter Ended Sept. 30, 2020
Nine Months Ended Sept. 30,
2021
Nine Months Ended Sept. 30,
2020
Successor
Combined (Non-GAAP)(1)
Successor
Combined (Non-GAAP)(1)
Cash flows from operations (GAAP
measure)
$
104,019
$
73,507
$
247,557
$
146,318
Net change in assets and liabilities
relating to operations
(26,469
)
(44,665
)
(18,266
)
(3,739
)
Adjusted cash flows from operations
(non-GAAP measure)(2)
77,550
28,842
229,291
142,579
Reorganization items settled in cash
—
39,071
—
39,071
Interest on notes treated as debt
reduction
—
(3,911
)
—
(46,417
)
Development capital expenditures
(99,640
)
(17,522
)
(173,821
)
(77,566
)
Capitalized interest
(1,249
)
(4,887
)
(3,500
)
(23,068
)
Free cash flow (deficit) (non-GAAP
measure)
$
(23,339
)
$
41,593
$
51,970
$
34,599
(1)
Combined results for the three and nine
months ended September 30, 2020 are provided for illustrative
purposes and are derived from the financial statement line items
from the Successor and Predecessor periods. Because of the impact
of various adjustments to the financial statements in connection
with the application of fresh start accounting, including asset
valuation adjustments and liability adjustments, certain results of
operations of the Successor are not comparable to those of the
Predecessor. Management believes that the combined results provide
more meaningful information to assist investors in understanding
the Company’s financial results for the applicable period, but
should not be considered in isolation, as a substitute for, or
meaningful than, independent results of the Predecessor and
Successor periods for the quarter and nine months ended September
30, 2020 reported in accordance with GAAP.
(2)
Adjusted cash flow from operations for the
three and nine months ended September 30, 2021 includes $2.5
million of nonrecurring accrued litigation. If these amounts were
removed, adjusted cash flow from operations would have been $80.1
million and $231.8 million for the three and nine months ended
September 30, 2021, respectively.
DENBURY INC.
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED)(1)
Quarter Ended
Nine Months Ended
September 30,
September 30,
In thousands
2021
2020
2021
2020
Capital expenditure summary
Tertiary and non-tertiary fields
$
52,083
$
8,511
$
102,640
$
41,679
Capitalized internal costs(2)
7,854
8,351
22,639
26,695
Oil and natural gas capital
expenditures
59,937
16,862
125,279
68,374
CCA CO2 pipeline
39,703
660
48,542
9,192
Development capital
expenditures
99,640
17,522
173,821
77,566
Acquisitions of oil and natural gas
properties(3)
116
15
10,927
95
Capital expenditures, before
capitalized interest
99,756
17,537
184,748
77,661
Capitalized interest
1,249
4,887
3,500
23,068
Capital expenditures, total
$
101,005
$
22,424
$
188,248
$
100,729
(1)
Capital expenditure amounts include accrued capital.
(2)
Includes capitalized internal acquisition, exploration and
development costs and pre-production tertiary startup costs.
(3)
Primarily consists of working interest positions in the Wind
River Basin enhanced oil recovery fields acquired on March 3,
2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104005321/en/
Brad Whitmarsh, Executive Director, Investor Relations,
972.673.2020, brad.whitmarsh@denbury.com Susan James, Manager,
Investor Relations, 972.673.2593, susan.james@denbury.com
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