Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided its fourth quarter and full-year 2021 financial and operating results.

 

 

4Q 2021

 

 

FY 2021

(in thousands, except per-share and volume data)

 

Total

 

Per Diluted

Share

 

 

Total

 

Per Diluted

Share

Net Income

 

$120,631

 

$2.19

 

 

$56,002

 

$1.04

Adjusted net income(1)(2) (non-GAAP)

 

41,670

 

0.76

 

 

137,646

 

2.56

Adjusted EBITDAX(1) (non-GAAP)

 

81,466

 

 

 

 

316,422

 

 

Cash flows from operations

 

69,601

 

 

 

 

317,158

 

 

Adjusted cash flows from operations(1) (non-GAAP)

 

82,824

 

 

 

 

312,115

 

 

Development capital expenditures

 

78,350

 

 

 

 

252,171

 

 

 

 

 

 

 

 

 

 

 

 

Average daily sales volumes (BOE/d)

 

48,882

 

 

 

 

48,770

 

 

Blue Oil (% oil volumes using industrial-sourced CO2)

 

25%

 

 

 

 

24%

 

 

Industrial-sourced CO2 injected (thousand metric tons)

 

841

 

 

 

 

3,271

 

 

 

FULL YEAR 2021 FINANCIAL AND OPERATING HIGHLIGHTS

  • Set a fifth consecutive Company annual record for employee and contractor safety, achieving a Total Recordable Incident Rate of 0.40. Over 600,000 man-hours were completed on the Cedar Creek Anticline (“CCA”) CO2 pipeline and EOR project without a recordable safety incident.
  • Completed the 105-mile CCA CO2 pipeline ahead of schedule and under budget, which made Denbury the largest operator of CO2 pipelines in the U.S. by mileage.
  • Received third-party verification of the negative Carbon Intensity (“CI”) of Denbury’s blue oil production at the West Hastings and Bell Creek CO2 floods, resulting in a CI score ranging between -40 to -20 grams of CO2 equivalent emitted per megajoule of energy.
  • Acquired the Big Sand Draw and Beaver Creek EOR fields in Wyoming, including surface facilities and a 46-mile CO2 transportation pipeline.
  • Divested non-producing surface acreage in the Houston area for $15 million, and sold undeveloped deep mineral rights in Wyoming for $18 million.
  • Generated more than $55 million of free cash flow(1) (a non-GAAP measure).
  • Invested $252 million of development capital, at the low end of the Company’s original development capital guidance range.
  • Reduced the Company’s total debt by $103 million over the last year, and exited 2021 with $532 million of financial liquidity (cash on hand and borrowing capacity under the Company’s existing credit facility).

(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 55.1 million and 53.8 million for the quarter and year ended December 31, 2021, respectively.

 

2021 CCUS HIGHLIGHTS

  • Established the Denbury Carbon Solutions team to drive the Company’s CCUS strategy.
  • 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, 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 industrial-sourced CO2. As part of the evaluation, the parties seek to jointly pursue CO2 offtake opportunities from Mitsui’s potential projects along the Gulf Coast.
  • Announced joint development of a Texas Gulf Coast sequestration site with Gulf Coast Midstream Partners, with the potential to store up to 400 million metric tons of CO2. The EPA Class VI permitting process has been initiated and sequestration is estimated to be available by early 2025.

EXECUTIVE COMMENT

Chris Kendall, Denbury’s President and CEO, commented, “I am incredibly proud of our dedicated employees’ achievements throughout 2021 despite many challenges, including the ongoing pandemic and its impacts. First and foremost, we set another record on safety performance, the top priority for me and the entire Denbury leadership team. We further established the framework upon which we will execute our CCUS vision, placing Denbury as the leader in this evolving industry. Within our core operations, we completed the CCA CO2 pipeline project on time and under budget, and I thank our employees and contractors for their exceptional efforts in achieving this great outcome. We successfully initiated the CCA CO2 flood which we expect will be one of the largest CO2 floods in the world, and I’m pleased to share that we started Phase 1 injection early this month. This important milestone will greatly enhance our EOR business and increase Denbury’s production of carbon negative blue oil, which we believe will become a highly desired commodity. Further and importantly, our strong EOR business will provide significant cash flow with which to fund our CCUS investments.

As we enter 2022, we are extremely excited about what lies ahead for Denbury. Our expansive CO2 pipeline network and proven track record in all aspects of CO2 transportation and injection positions Denbury as the ideal partner to provide CCUS solutions. We demonstrate our expertise continuously by safely transporting and injecting the nearly ten thousand tons of CO2 we receive daily from our industrial partners into underground formations. We built on these strengths in 2021 with the execution and establishment of several new CCUS agreements that further set the stage for even greater success in our CCUS operations. My aspiration is that all of Denbury’s existing and future CCUS customers will recognize Denbury as the experienced and accountable partner upon whom they can rely to safely handle their captured CO2 for decades to come.”

FOURTH QUARTER 2021 FINANCIAL AND OPERATING RESULTS

Denbury’s fourth quarter 2021 total revenues and other income totaled $362 million, a five percent increase over third quarter 2021 levels, driven primarily by an improvement in underlying commodity prices and improved oil price differentials. The Company’s fourth quarter 2021 average pre-hedge realized oil price was $75.68 per barrel (“Bbl”), which was $1.22 per Bbl below NYMEX WTI oil prices. Denbury’s average differential improved more than 50 cents per Bbl from the third quarter of 2021 as values for the Company’s Gulf Coast and Rocky Mountain region sales volumes both improved relative to WTI.

Oil and natural gas sales volumes averaged 48,882 BOE/d during the fourth quarter of 2021, down modestly from the third quarter of 2021 and lower than expectations primarily as a result of unplanned downtime in December. In addition, lower volumes at CCA were attributed to increased oil prices and profitability resulting in more volumes allocated to the third-party net profits interest in that field. Oil represented 97% of the Company’s fourth quarter 2021 volumes, with 25% of the Company’s oil produced through the injection of industrial-sourced CO2, resulting in carbon-negative blue oil.

Lease operating expense in the fourth quarter of 2021 was $116 million, or $25.75 per BOE, consistent with the Company’s expectation. The slight increase on a per BOE basis from the third quarter 2021 was primarily related to higher commodity prices as higher oil prices increase the Company’s CO2 costs and higher natural gas prices increase power expenses. Transportation and marketing expenses for the quarter totaled $7 million, consistent with the third quarter of 2021 and reflecting improved contractual arrangements for certain of the Company’s Rocky Mountain region oil volumes.

General and administrative expenses were $16 million in the fourth quarter of 2021, in line with expectations and relatively consistent with the third quarter of the year. Depletion, depreciation, and amortization (“DD&A”) expense was $37 million during the fourth quarter of 2021, or $8.25 per BOE, essentially flat with the third quarter of the year.

Commodity derivatives expense totaled $23 million in the final quarter of 2021, comprised of cash payments on hedges that settled in the quarter of $98 million, offset by a $75 million non-cash gain representing mark-to-market changes in the value of the Company’s hedging portfolio. The Company’s effective tax rate for the fourth 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

Fourth quarter 2021 development capital expenditures totaled $78 million, bringing full-year 2021 capital expenditures to a total of $252 million, close to the low end of the Company’s original annual guidance range of $250 million to $270 million. Nearly 60% of the fourth quarter total was dedicated to the CCA EOR project, including the completion of the 105-mile CO2 pipeline from Bell Creek to CCA, the booster station install, and the infield distribution system to prepare for CO2 injection. The CCA CO2 Pipeline was completed ahead of schedule and under budget. Line fill of CO2 was also completed in 2021, and CO2 injection into the Cedar Hills South and East Lookout Butte fields commenced in early February 2022. Tertiary oil production response is anticipated in the second half of 2023.

2021 PROVED RESERVES

The Company’s total estimated proved oil and natural gas reserves as of December 31, 2021, were 192 million barrels of oil equivalent (MMBOE), consisting of 189 million barrels of crude oil and 17 billion cubic feet of natural gas. Proved reserves increased by 49 MMBOE during 2021, primarily resulting from increased commodity pricing utilized in determining economic reserves. As of the end of 2021, 95% of proved reserves were proved developed.

Year-end 2021 estimated proved reserves and the discounted net present value of Denbury’s proved reserves, using a 10% per annum discount rate (“PV-10 Value”)(1) (a non-GAAP measure), were computed using first-day-of-the-month 12-month average prices of $66.56 per Bbl for oil (based on NYMEX prices) and $3.60 per million British thermal unit (“MMBtu”) for natural gas (based on Henry Hub cash prices), adjusted for prices received at the field. Comparative prices for 2020 were $39.57 per Bbl of oil and $1.99 per MMBtu for natural gas, adjusted for prices received at the field. The PV-10 Value(1) of Denbury’s proved reserves was $2.7 billion at December 31, 2021, compared to $0.7 billion at December 31, 2020.

Denbury’s estimated proved CO2 reserves at year-end 2021 were 5.5 trillion cubic feet (“Tcf”), including 4.5 Tcf at Jackson Dome in Mississippi (on a gross basis) and 1.0 Tcf at LaBarge Field in Wyoming (overriding royalty interest). Total CO2 reserves reflected a slight reduction from year-end 2020 due to 2021 production.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury management will host a conference call to review and discuss fourth quarter and full-year 2021 financial and operating results, as well as its outlook for 2022, today, Thursday, February 24, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time). Additionally, Denbury will post supporting 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 confirmation number 13723080.

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.

(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.

 

This press release, other than historical information, contains forward-looking statements that involve 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 (the “Emergence Date”), 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 month and annual periods ended December 31, 2021, Successor period from October 1, 2020 through December 31, 2020 and September 19, 2020 through December 31, 2020; Predecessor period from January 1, 2020 through September 18, 2020; and certain Combined information for the year ended December 31, 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 reported earnings. Additional required disclosures will be included in the Company’s Form 10-K:

 

 

 

Quarter Ended

In thousands, except per-share data

 

December 31, 2021

 

December 31, 2020

Revenues and other income

 

 

 

 

 

Oil sales

 

$

329,308

 

 

$

177,458

 

Natural gas sales

 

 

4,040

 

 

 

1,329

 

CO2 sales and transportation fees

 

 

12,576

 

 

 

8,452

 

Oil marketing revenues

 

 

12,204

 

 

 

5,225

 

Other income

 

 

3,770

 

 

 

4,603

 

Total revenues and other income

 

 

361,898

 

 

 

197,067

 

Expenses

 

 

 

 

 

Lease operating expenses

 

 

115,819

 

 

 

89,750

 

Transportation and marketing expenses

 

 

6,513

 

 

 

9,251

 

CO2 operating and discovery expenses

 

 

2,191

 

 

 

1,734

 

Taxes other than income

 

 

25,891

 

 

 

14,511

 

Oil marketing purchases

 

 

11,971

 

 

 

5,179

 

General and administrative expenses

 

 

16,437

 

 

 

17,735

 

Interest, net of amounts capitalized of $1,085 and $1,078, respectively

 

 

690

 

 

 

1,481

 

Depletion, depreciation, and amortization

 

 

37,118

 

 

 

40,529

 

Commodity derivatives expense (income)

 

 

22,832

 

 

 

65,937

 

Write-down of oil and natural gas properties

 

 

 

 

 

1,006

 

Other expenses

 

 

903

 

 

 

5,908

 

Total expenses

 

 

240,365

 

 

 

253,021

 

Income (loss) before income taxes

 

 

121,533

 

 

 

(55,954

)

Income tax provision (benefit)

 

 

 

 

 

Current income taxes

 

 

504

 

 

 

24

 

Deferred income taxes

 

 

398

 

 

 

(2,562

)

Net income (loss)

 

$

120,631

 

 

$

(53,416

)

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

Basic

 

$

2.35

 

 

$

(1.07

)

Diluted

 

$

2.19

 

 

$

(1.07

)

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

Basic

 

 

51,247

 

 

 

50,000

 

Diluted

 

 

55,114

 

 

 

50,000

 

 

 

Year Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2020

 

Period from

Sept. 19, 2020

through

Dec. 31, 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

 

$

1,148,022

 

 

$

689,020

 

 

$

199,769

 

 

$

489,251

 

Natural gas sales

 

 

11,933

 

 

 

4,189

 

 

 

1,339

 

 

 

2,850

 

CO2 sales and transportation fees

 

 

44,175

 

 

 

30,468

 

 

 

9,419

 

 

 

21,049

 

Oil marketing revenues

 

 

38,742

 

 

 

13,919

 

 

 

5,376

 

 

 

8,543

 

Other income

 

 

15,288

 

 

 

13,116

 

 

 

4,697

 

 

 

8,419

 

Total revenues and other income

 

 

1,258,160

 

 

 

750,712

 

 

 

220,600

 

 

 

530,112

 

Expenses

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

424,550

 

 

 

351,505

 

 

 

101,234

 

 

 

250,271

 

Transportation and marketing expenses

 

 

28,817

 

 

 

37,759

 

 

 

10,595

 

 

 

27,164

 

CO2 operating and discovery expenses

 

 

6,678

 

 

 

4,568

 

 

 

1,976

 

 

 

2,592

 

Taxes other than income

 

 

91,390

 

 

 

60,115

 

 

 

16,584

 

 

 

43,531

 

Oil marketing purchases

 

 

37,734

 

 

 

13,717

 

 

 

5,318

 

 

 

8,399

 

General and administrative expenses

 

 

79,258

 

 

 

67,992

 

 

 

19,470

 

 

 

48,522

 

Interest, net of amounts capitalized of $4,585, $24,146, $1,261 and $22,885, respectively

 

 

4,147

 

 

 

50,082

 

 

 

1,815

 

 

 

48,267

 

Depletion, depreciation, and amortization

 

 

150,640

 

 

 

234,405

 

 

 

45,812

 

 

 

188,593

 

Commodity derivatives expense (income)

 

 

352,984

 

 

 

(40,130

)

 

 

61,902

 

 

 

(102,032

)

Gain on debt extinguishment

 

 

 

 

 

(18,994

)

 

 

 

 

 

(18,994

)

Write-down of oil and natural gas properties

 

 

14,377

 

 

 

997,664

 

 

 

1,006

 

 

 

996,658

 

Restructuring items, net

 

 

 

 

 

849,980

 

 

 

 

 

 

849,980

 

Other expenses

 

 

10,816

 

 

 

43,940

 

 

 

8,072

 

 

 

35,868

 

Total expenses

 

 

1,201,391

 

 

 

2,652,603

 

 

 

273,784

 

 

 

2,378,819

 

Income (loss) before income taxes

 

 

56,769

 

 

 

(1,901,891

)

 

 

(53,184

)

 

 

(1,848,707

)

Income tax provision (benefit)

 

 

 

 

 

 

 

 

 

Current income taxes

 

 

403

 

 

 

(7,230

)

 

 

30

 

 

 

(7,260

)

Deferred income taxes

 

 

364

 

 

 

(411,425

)

 

 

(2,556

)

 

 

(408,869

)

Net income (loss)

 

$

56,002

 

 

$

(1,483,236

)

 

$

(50,658

)

 

$

(1,432,578

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

Basic

 

$

1.10

 

 

 

 

$

(1.01

)

 

$

(2.89

)

Diluted

 

$

1.04

 

 

 

 

$

(1.01

)

 

$

(2.89

)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

 

50,918

 

 

 

 

 

50,000

 

 

 

495,560

 

Diluted

 

 

53,818

 

 

 

 

 

50,000

 

 

 

495,560

 

(1)

Combined results for the year ended December 31, 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 not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

         

DENBURY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Quarter Ended

In thousands

 

December 31, 2021

 

December 31, 2020

Cash flows from operating activities

 

 

 

 

Net income (loss)

 

$

120,631

 

 

$

(53,416

)

Adjustments to reconcile net income (loss) to cash flows from operating activities

 

 

 

 

Depletion, depreciation, and amortization

 

 

37,118

 

 

 

40,529

 

Write-down of oil and natural gas properties

 

 

 

 

 

1,006

 

Deferred income taxes

 

 

398

 

 

 

(2,562

)

Stock-based compensation

 

 

2,534

 

 

 

8,212

 

Commodity derivatives expense

 

 

22,832

 

 

 

65,937

 

Receipt (payment) on settlements of commodity derivatives

 

 

(97,774

)

 

 

14,429

 

Debt issuance costs and discounts

 

 

685

 

 

 

685

 

Gain from asset sales and other

 

 

(3,583

)

 

 

(3,546

)

Other, net

 

 

(17

)

 

 

608

 

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

Accrued production receivable

 

 

1,004

 

 

 

(17,126

)

Trade and other receivables

 

 

1,525

 

 

 

14,201

 

Other current and long-term assets

 

 

3,053

 

 

 

(2,500

)

Accounts payable and accrued liabilities

 

 

(18,984

)

 

 

(59,187

)

Oil and natural gas production payable

 

 

6,183

 

 

 

4,152

 

Other liabilities

 

 

(6,004

)

 

 

(4,006

)

Net cash provided by operating activities

 

 

69,601

 

 

 

7,416

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Oil and natural gas capital expenditures

 

 

(37,870

)

 

 

(15,839

)

Acquisitions of oil and natural gas properties

 

 

(52

)

 

 

(81

)

Pipeline capital expenditures

 

 

(50,100

)

 

 

(612

)

Net proceeds from sales of oil and natural gas properties and equipment

 

 

 

 

 

58

 

Other

 

 

3,331

 

 

 

16,150

 

Net cash used in investing activities

 

 

(84,691

)

 

 

(324

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Bank repayments

 

 

(236,000

)

 

 

(135,000

)

Bank borrowings

 

 

271,000

 

 

 

120,000

 

Costs of debt financing

 

 

 

 

 

(8

)

Pipeline financing repayments

 

 

(17,332

)

 

 

(22,884

)

Other

 

 

(696

)

 

 

1,638

 

Net cash provided by (used in) financing activities

 

 

16,972

 

 

 

(36,254

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

1,882

 

 

 

(29,162

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

48,462

 

 

 

71,410

 

Cash, cash equivalents, and restricted cash at end of period

 

$

50,344

 

 

$

42,248

 

       

 

 

Year Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2020

 

Period from

Sept. 19, 2020

through

Dec. 31, 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)

 

$

56,002

 

 

$

(1,483,236

)

 

$

(50,658

)

 

$

(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

 

 

150,640

 

 

 

234,405

 

 

 

45,812

 

 

 

188,593

 

Write-down of oil and natural gas properties

 

 

14,377

 

 

 

997,664

 

 

 

1,006

 

 

 

996,658

 

Deferred income taxes

 

 

364

 

 

 

(411,425

)

 

 

(2,556

)

 

 

(408,869

)

Stock-based compensation

 

 

25,322

 

 

 

12,323

 

 

 

8,212

 

 

 

4,111

 

Commodity derivatives expense (income)

 

 

352,984

 

 

 

(40,130

)

 

 

61,902

 

 

 

(102,032

)

Receipt (payment) on settlements of commodity derivatives

 

 

(277,240

)

 

 

102,485

 

 

 

21,089

 

 

 

81,396

 

Gain on debt extinguishment

 

 

 

 

 

(18,994

)

 

 

 

 

 

(18,994

)

Debt issuance costs and discounts

 

 

2,740

 

 

 

12,370

 

 

 

799

 

 

 

11,571

 

Gain from asset sales and other

 

 

(10,609

)

 

 

(10,269

)

 

 

(3,546

)

 

 

(6,723

)

Other, net

 

 

(2,465

)

 

 

8,359

 

 

 

1,197

 

 

 

7,162

 

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

 

 

 

 

Accrued production receivable

 

 

(51,944

)

 

 

47,986

 

 

 

21,411

 

 

 

26,575

 

Trade and other receivables

 

 

(284

)

 

 

(6,776

)

 

 

15,567

 

 

 

(22,343

)

Other current and long-term assets

 

 

10,390

 

 

 

(1,052

)

 

 

(1,795

)

 

 

743

 

Accounts payable and accrued liabilities(2)

 

 

28,500

 

 

 

(83,269

)

 

 

(67,167

)

 

 

(16,102

)

Oil and natural gas production payable

 

 

29,351

 

 

 

(13,704

)

 

 

(6,912

)

 

 

(6,792

)

Other liabilities

 

 

(10,970

)

 

 

(3,912

)

 

 

(4,035

)

 

 

123

 

Net cash provided by operating activities

 

 

317,158

 

 

 

153,734

 

 

 

40,326

 

 

 

113,408

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Oil and natural gas capital expenditures

 

 

(150,911

)

 

 

(117,546

)

 

 

(17,964

)

 

 

(99,582

)

Acquisitions of oil and natural gas properties

 

 

(10,979

)

 

 

(82

)

 

 

(82

)

 

 

 

Pipeline capital expenditures

 

 

(69,223

)

 

 

(12,219

)

 

 

(618

)

 

 

(11,601

)

Net proceeds from sales of oil and natural gas properties and equipment

 

 

19,053

 

 

 

42,260

 

 

 

938

 

 

 

41,322

 

Other

 

 

9,128

 

 

 

28,589

 

 

 

15,842

 

 

 

12,747

 

Net cash used in investing activities

 

 

(202,932

)

 

 

(58,998

)

 

 

(1,884

)

 

 

(57,114

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Bank repayments

 

 

(933,000

)

 

 

(741,000

)

 

 

(190,000

)

 

 

(551,000

)

Bank borrowings

 

 

898,000

 

 

 

811,000

 

 

 

120,000

 

 

 

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

 

 

 

 

 

(12,490

)

 

 

(8

)

 

 

(12,482

)

Pipeline financing repayments

 

 

(68,008

)

 

 

(74,730

)

 

 

(22,938

)

 

 

(51,792

)

Other

 

 

(3,122

)

 

 

(7,725

)

 

 

1,638

 

 

 

(9,363

)

Net cash provided by (used in) financing activities

 

 

(106,130

)

 

 

(85,533

)

 

 

(91,308

)

 

 

5,775

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

8,096

 

 

 

9,203

 

 

 

(52,866

)

 

 

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

 

$

50,344

 

 

$

42,248

 

 

$

42,248

 

 

$

95,114

 

(1)

Combined results for the year ended December 31, 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 not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

(2)

Working capital changes during the Successor period from September 19, 2020 through December 31, 2020 and the combined year ended December 31, 2020 include an approximately $52 million cash outflow related to settlement of the Riley Ridge helium supply contract claim with APMTG Helium, LLC (“APMTG”).

         

DENBURY INC. CONSOLIDATED BALANCE SHEETS

 

In thousands, except par value and share data

 

December 31, 2021

 

December 31, 2020

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

3,671

 

 

$

518

 

Restricted cash

 

 

 

 

 

1,000

 

Accrued production receivable

 

 

143,365

 

 

 

91,421

 

Trade and other receivables, net

 

 

19,270

 

 

 

19,682

 

Derivative assets

 

 

 

 

 

187

 

Prepaids

 

 

9,099

 

 

 

14,038

 

Total current assets

 

 

175,405

 

 

 

126,846

 

Property and equipment

 

 

 

 

Oil and natural gas properties (using full cost accounting)

 

 

 

 

Proved properties

 

 

1,109,011

 

 

 

851,208

 

Unevaluated properties

 

 

112,169

 

 

 

85,304

 

CO2 properties

 

 

183,369

 

 

 

188,288

 

Pipelines

 

 

224,394

 

 

 

133,485

 

Other property and equipment

 

 

93,950

 

 

 

86,610

 

Less accumulated depletion, depreciation, amortization and impairment

 

 

(181,393

)

 

 

(41,095

)

Net property and equipment

 

 

1,541,500

 

 

 

1,303,800

 

Operating lease right-of-use assets

 

 

19,502

 

 

 

20,342

 

Intangible assets, net

 

 

88,248

 

 

 

97,362

 

Other assets

 

 

78,298

 

 

 

86,408

 

Total assets

 

$

1,902,953

 

 

$

1,634,758

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

$

191,598

 

 

$

112,671

 

Oil and gas production payable

 

 

75,899

 

 

 

49,165

 

Derivative liabilities

 

 

134,509

 

 

 

53,865

 

Current maturities of long-term debt

 

 

 

 

 

68,008

 

Operating lease liabilities

 

 

4,677

 

 

 

1,350

 

Total current liabilities

 

 

406,683

 

 

 

285,059

 

Long-term liabilities

 

 

 

 

Long-term debt, net of current portion

 

 

35,000

 

 

 

70,000

 

Asset retirement obligations

 

 

284,238

 

 

 

179,338

 

Derivative liabilities

 

 

 

 

 

5,087

 

Deferred tax liabilities, net

 

 

1,638

 

 

 

1,274

 

Operating lease liabilities

 

 

17,094

 

 

 

19,460

 

Other liabilities

 

 

22,910

 

 

 

20,872

 

Total long-term liabilities

 

 

360,880

 

 

 

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; 50,193,656 and 49,999,999 shares issued, respectively

 

 

50

 

 

 

50

 

Paid-in capital in excess of par

 

 

1,129,996

 

 

 

1,104,276

 

Retained earnings (accumulated deficit)

 

 

5,344

 

 

 

(50,658

)

Total stockholders’ equity

 

 

1,135,390

 

 

 

1,053,668

 

Total liabilities and stockholders’ equity

 

$

1,902,953

 

 

$

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

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2021

 

2020

 

2021

 

2020

Average daily sales (BOE/d)

 

 

 

 

 

 

 

 

Tertiary

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

23,933

 

 

25,794

 

 

24,306

 

 

26,675

Rocky Mountain region

 

 

8,882

 

 

7,086

 

 

8,475

 

 

7,460

Total tertiary sales

 

 

32,815

 

 

32,880

 

 

32,781

 

 

34,135

 

 

 

 

 

 

 

 

 

Non-tertiary

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

3,929

 

 

3,523

 

 

3,683

 

 

4,001

Rocky Mountain region

 

 

12,138

 

 

12,402

 

 

12,306

 

 

13,015

Total non-tertiary sales

 

 

16,067

 

 

15,925

 

 

15,989

 

 

17,016

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

Oil (Bbls/d)

 

 

47,298

 

 

47,471

 

 

47,281

 

 

49,828

Natural gas (Mcf/d)

 

 

9,508

 

 

8,002

 

 

8,933

 

 

7,938

BOE/d (6:1)

 

 

48,882

 

 

48,805

 

 

48,770

 

 

51,151

 

 

 

 

 

 

 

 

 

Unit sales price (excluding derivative settlements)

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

 

 

 

 

 

 

Oil (per Bbl)

 

$

75.48

 

40.81

 

66.48

 

38.44

Natural gas (per mcf)

 

 

5.01

 

 

2.37

 

 

3.97

 

 

1.98

 

 

 

 

 

 

 

 

 

Rocky Mountain region

 

 

 

 

 

 

 

 

Oil (per Bbl)

 

$

75.95

 

40.36

 

66.58

 

36.79

Natural gas (per mcf)

 

 

4.34

 

 

1.07

 

 

3.44

 

 

0.77

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

Oil (per Bbl)(1)

 

$

75.68

 

$

40.63

 

$

66.52

 

$

37.78

Natural gas (per mcf)

 

 

4.62

 

 

1.81

 

 

3.66

 

 

1.44

BOE (6:1)

 

 

74.12

 

 

39.82

 

 

65.16

 

 

37.03

(1)

Total company realized oil prices including derivative settlements were $53.21 per Bbl and $43.94 per Bbl during the three months ended December 31, 2021 and 2020, respectively, and $50.46 per Bbl and $43.40 per Bbl during the year ended December 31, 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 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

December 31, 2021

 

Quarter Ended

December 31, 2020

 

 

Successor

 

Successor

In thousands, except per-share data

 

Amount

 

Per Diluted

Share

 

Amount

 

Per Diluted

Share

Net income (loss) (GAAP measure)

 

$

120,631

 

 

$

2.19

 

 

$

(53,416

)

 

$

(1.07

)

Adjustments to reconcile to adjusted net income (non-GAAP measure)

 

 

 

 

 

 

 

 

Noncash fair value losses (gains) on commodity derivatives(2)

 

 

(74,942

)

 

 

(1.36

)

 

 

80,366

 

 

 

1.61

 

Write-down of oil and natural gas properties(4)

 

 

 

 

 

 

 

 

1,006

 

 

 

0.02

 

Expense associated with restructuring(8)

 

 

 

 

 

 

 

 

4,061

 

 

 

0.08

 

Insurance reimbursements(9)

 

 

(2,399

)

 

 

(0.04

)

 

 

 

 

 

 

Noncash fair value adjustment - contingent consideration(10)

 

 

270

 

 

 

0.00

 

 

 

 

 

 

 

Other(11)

 

 

(1,890

)

 

 

(0.03

)

 

 

(2,896

)

 

 

(0.06

)

Estimated income taxes on above adjustments to net income (loss) and other discrete tax items(12)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (non-GAAP measure)

 

$

41,670

 

 

$

0.76

 

 

$

29,121

 

 

$

0.58

 

 

 

 

Year Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2020

 

 

Successor

 

Combined

(Non-GAAP)(1)

In thousands, except per-share data

 

Amount

 

Per Diluted

Share

 

Amount

Net income (loss) (GAAP measure)

 

$

56,002

 

 

$

1.04

 

 

$

(1,483,236

)

Adjustments to reconcile to adjusted net income (non-GAAP measure)

 

 

 

 

 

 

Noncash fair value losses on commodity derivatives(2)

 

 

75,744

 

 

 

1.41

 

 

 

62,355

 

Reorganization items, net(3)

 

 

 

 

 

 

 

 

849,980

 

Write-down of oil and natural gas properties(4)

 

 

14,377

 

 

 

0.27

 

 

 

997,664

 

Accelerated depreciation charge(5)

 

 

 

 

 

 

 

 

39,159

 

Gain on debt extinguishment(6)

 

 

 

 

 

 

 

 

(18,994

)

Severance-related expense included in general and administrative expenses(7)

 

 

 

 

 

 

 

 

2,361

 

Expense associated with restructuring(8)

 

 

 

 

 

 

 

 

28,168

 

Insurance reimbursements(9)

 

 

(2,399

)

 

 

(0.04

)

 

 

(15,402

)

Noncash fair value adjustment - contingent consideration(10)

 

 

2,346

 

 

 

0.04

 

 

 

 

Other(11)

 

 

(8,424

)

 

 

(0.16

)

 

 

727

 

Estimated income taxes on above adjustments to net income (loss) and other discrete tax items(12)

 

 

 

 

 

 

 

 

(418,655

)

Adjusted net income (non-GAAP measure)

 

$

137,646

 

 

$

2.56

 

 

$

44,127

 

(1)

Combined results for the year ended December 31, 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 periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

(2)

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.

(3)

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.

(4)

Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.

(5)

Accelerated depreciation for an asset impairment as well as impaired unevaluated properties during the year ended December 31, 2020.

(6)

Gain on debt extinguishment related to the open market repurchases during 2020.

(7)

Severance-related expense associated with the Company’s May-2020 involuntary workforce reduction.

(8)

Expenses incurred before the petition date and after the Emergence Date related to advisor and professional fees associated with review of strategic alternatives and comprehensive restructuring of the Company’s indebtedness.

(9)

Insurance reimbursements during 2021 and 2020 associated with the 2020 Delta-Tinsley CO2 pipeline repair and 2013 incident at Delhi Field, respectively.

(10)

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.

(11)

Other adjustments include (a) $3.3 million gain on land sales, slightly offset by $1.4 million asset retirement obligation impairment during the three months ended December 31, 2021 and (b) $3.7 million gain on land sales and $0.6 million litigation accrual adjustment upon settlement of the APMTG helium supply contract ruling, slightly offset by $0.9 million write-off of trade receivables and $0.5 million of expense associated with Delta-Tinsley CO2 pipeline repairs during the three months ended December 31, 2020. The year ended December 31, 2021 was further impacted by $7.0 million gain on land sales, slightly offset by $0.3 million write-off of trade receivables. The year ended December 31, 2020 was further impacted by $5.9 million gain on land sales, offset by $4.2 million write-off of trade receivables, $3.8 million of expense associated with Delta-Tinsley CO2 pipeline repairs and $1.6 million of expense associated with the APMTG helium supply contract ruling.

(12)

The estimated income tax impacts on adjustments to net income (loss) for the Predecessor period is generally computed based upon a statutory 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 financial 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 non-recurring. 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 its 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 flows 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 net income (loss) to Adjusted EBITDA.

 

 

Quarter Ended

Dec. 31, 2021

 

Quarter Ended

Dec. 31, 2020

 

Year Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2020

In thousands

 

Successor

 

Successor

 

Successor

 

Combined

(Non-GAAP)(1)

Net income (loss) (GAAP measure)

 

$

120,631

 

 

$

(53,416

)

 

$

56,002

 

 

$

(1,483,236

)

Adjustments to reconcile to Adjusted EBITDAX

 

 

 

 

 

 

 

 

Interest expense

 

 

690

 

 

 

1,481

 

 

 

4,147

 

 

 

50,082

 

Income tax expense (benefit)

 

 

902

 

 

 

(2,538

)

 

 

767

 

 

 

(418,655

)

Depletion, depreciation, and amortization

 

 

37,118

 

 

 

40,529

 

 

 

150,640

 

 

 

234,405

 

Noncash fair value losses (gains) on commodity derivatives

 

 

(74,942

)

 

 

80,366

 

 

 

75,744

 

 

 

62,355

 

Stock-based compensation

 

 

2,534

 

 

 

8,212

 

 

 

25,322

 

 

 

12,323

 

Gain on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

(18,994

)

Write-down of oil and natural gas properties

 

 

 

 

 

1,006

 

 

 

14,377

 

 

 

997,664

 

Reorganization items, net

 

 

 

 

 

 

 

 

 

 

 

849,980

 

Severance-related expense

 

 

 

 

 

 

 

 

476

 

 

 

3,315

 

Noncash, non-recurring and other

 

 

(5,467

)

 

 

1,551

 

 

 

(11,053

)

 

 

36,565

 

Adjusted EBITDAX (non-GAAP measure)

 

$

81,466

 

 

$

77,191

 

 

$

316,422

 

 

$

325,804

 

(1)

Combined results for the year ended December 31, 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 periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

         

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 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.

 

 

Quarter Ended

Dec. 31, 2021

 

Quarter Ended

Dec. 31, 2020

 

Year Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2020

In thousands

 

Successor

 

Successor

 

Successor

 

Combined

(Non-GAAP)(1)

Cash flows from operations (GAAP measure)

 

$

69,601

 

 

$

7,416

 

 

$

317,158

 

 

$

153,734

 

Net change in assets and liabilities relating to operations(2)

 

 

13,223

 

 

 

64,466

 

 

 

(5,043

)

 

 

60,727

 

Adjusted cash flows from operations (non-GAAP measure)

 

 

82,824

 

 

 

71,882

 

 

 

312,115

 

 

 

214,461

 

Reorganization items settled in cash(3)

 

 

 

 

 

 

 

 

 

 

 

39,071

 

Interest on notes treated as debt reduction

 

 

 

 

 

 

 

 

 

 

 

(46,417

)

Development capital expenditures

 

 

(78,350

)

 

 

(17,602

)

 

 

(252,171

)

 

 

(95,168

)

Capitalized interest

 

 

(1,085

)

 

 

(1,078

)

 

 

(4,585

)

 

 

(24,146

)

Free cash flow (non-GAAP measure)

 

$

3,389

 

 

$

53,202

 

 

$

55,359

 

 

$

87,801

 

(1)

Combined results for the year ended December 31, 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 periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

(2)

Working capital changes during the quarter and combined year ended December 31, 2020 include an approximately $52 million cash outflow related to settlement of the Riley Ridge helium supply contract claim with APMTG Helium, LLC.

(3)

Includes costs associated with the Company’s restructuring incurred during the period from July 30, 2020 through September 18, 2020.

         

DENBURY INC. CAPITAL EXPENDITURE SUMMARY (UNAUDITED)(1)

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

In thousands

 

2021

 

2020

 

2021

 

2020

Capital expenditures

 

 

 

 

 

 

 

 

CCA EOR field expenditures

 

$

16,664

 

$

 

$

35,754

 

$

810

CCA CO2 pipelines

 

 

28,142

 

 

783

 

 

87,688

 

 

10,942

CCA tertiary development

 

 

44,806

 

 

783

 

 

123,442

 

 

11,752

Non-CCA tertiary and non-tertiary fields

 

 

25,578

 

 

10,271

 

 

97,085

 

 

49,800

CO2 sources and other CO2 pipelines

 

 

618

 

 

287

 

 

1,657

 

 

660

Development excluding CCA tertiary

 

 

26,196

 

 

10,558

 

 

98,742

 

 

50,460

Capitalized internal costs(2)

 

 

7,348

 

 

6,261

 

 

29,987

 

 

32,956

Development capital expenditures

 

 

78,350

 

 

17,602

 

 

252,171

 

 

95,168

Acquisitions of oil and natural gas properties(3)

 

 

52

 

 

81

 

 

10,979

 

 

176

Capital expenditures, before capitalized interest

 

 

78,402

 

 

17,683

 

 

263,150

 

 

95,344

Capitalized interest

 

 

1,085

 

 

1,078

 

 

4,585

 

 

24,146

Capital expenditures, total

 

$

79,487

 

$

18,761

 

$

267,735

 

$

119,490

(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.

 

 

         

DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURE (UNAUDITED)

 

Reconciliation of the standardized measure of discounted estimated future net cash flows after income taxes (GAAP measure) to PV-10 Value (non-GAAP measure)

 

PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is an after-tax number. Denbury’s 2021 and 2020 year-end estimated proved oil and natural gas reserves and proved CO2 reserves quantities were prepared by the independent reservoir engineering firm of DeGolyer and MacNaughton. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC Topic 932. Management believes PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can be impacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property-by-property basis. Because of this, PV-10 Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated future net cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by management and others in the industry to evaluate properties that are bought and sold, to assess the potential return on investment in the Company’s oil and natural gas properties, and to perform impairment testing of oil and natural gas properties. PV-10 Value is not a measure of financial or operating performance under GAAP, nor should it be considered in isolation or as a substitute for the Standardized Measure. PV-10 Value and the Standardized Measure do not purport to represent the fair value of the Company’s oil and natural gas reserves.

In thousands

 

December 31, 2021

 

December 31, 2020

Standardized Measure (GAAP measure)

 

$

2,187,051

 

$

654,734

Discounted estimated future income tax

 

 

486,771

 

 

48,346

PV-10 Value (non-GAAP measure)

 

$

2,673,822

 

$

703,080

   

ESTIMATED QUANTITIES OF PROVED RESERVES ROLLFORWARD

 

 

Oil

(MBbl)

 

Gas

(MMcf)

 

Total

(MBOE)

Balance at December 31, 2020

 

140,499

 

 

15,604

 

 

143,100

 

Revisions of previous estimates(1)

 

55,998

 

 

(615

)

 

55,895

 

Production

 

(17,258

)

 

(3,261

)

 

(17,801

)

Acquisition of minerals in place

 

9,765

 

 

5,764

 

 

10,725

 

Sales of minerals in place

 

(66

)

 

(986

)

 

(230

)

Balance at December 31, 2021

 

188,938

 

 

16,506

 

 

191,689

 

 

 

 

 

 

 

 

Proved Developed Reserves – end of year

 

179,147

 

 

16,506

 

 

181,898

 

Proved Undeveloped Reserves – end of year

 

9,791

 

 

 

 

9,791

 

(1)

Reflects changes in commodity prices resulting in upward revisions of 50.1 MMBOE.

 

DENBURY IR CONTACTS: Brad Whitmarsh, 972.673.2020, brad.whitmarsh@denbury.com Beth Bierhaus, 972.673.2554, beth.bierhaus@denbury.com

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