Board authorizes $100 million increase in
share repurchase program to $350 million
Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today
provided its second quarter 2022 financial and operating
results.
HIGHLIGHTS
- Second quarter 2022 cash flows provided by operating activities
totaled $150 million, and adjusted cash flows from operations(1),
excluding working capital changes, totaled $145 million.
- Generated $55 million of free cash flow(1) during the second
quarter and $106 million year-to-date.
- Repurchased $100 million of the Company’s shares (3.2% of March
2022 shares outstanding) in June and July 2022 at $61.92 per share,
with $29 million repurchased in the second quarter.
- Exited the second quarter with zero debt, a reduction of $35
million from the first quarter 2022.
- Delivered sales volumes of 46,561 barrels of oil equivalent per
day (“BOE/d”), 97% crude oil.
- Increased injection of industrial-sourced CO2 used in the
Company’s Enhanced Oil Recovery (“EOR”) operations to 1.2 million
metric tons for the quarter, up 27% from the first quarter of 2022,
with the increase primarily driven by the Company’s Cedar Creek
Anticline (“CCA”) EOR development.
- Signed a definitive agreement for a planned CO2 storage site
near Donaldsonville, Louisiana, covering approximately 18,000 acres
and located less than five miles from the Company’s Green
Pipeline.
(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 54.9 million for both the three and
six months ended June 30, 2022, respectively.
EXECUTIVE COMMENT
Chris Kendall, the Company’s President and CEO, commented, “In
the second quarter, Denbury maintained excellent safety
performance, continued to advance our CCUS business, made
significant progress on our capital development program, and
delivered robust financial results. Strong oil prices have
meaningfully increased our cash flow outlook and positioned us to
return significant capital to our shareholders, while still
investing for moderate production growth and rapidly growing our
CCUS business. During June and July 2022, we repurchased $100
million of the Company’s outstanding shares, and I’m pleased that
our Board recently increased our share repurchase authorization by
the same amount.
“Despite inflation headwinds and the ongoing supply chain issues
affecting our industry and businesses globally, our teams have
executed well on our 2022 capital program, which we expect will
drive increased production in the latter part of this year. The
development of our major EOR project at Cedar Creek Anticline is
progressing well, and we are excited about the expected production
and cash flow benefit to our business beginning next year and for
decades to come.
“On the CCUS front, we continue to expand what we believe is the
industry’s superior CCUS platform, adding another planned CO2
storage site in the emissions-intensive Louisiana industrial
corridor. With multiple ongoing industrial customer negotiations,
we remain on track to substantially exceed our 2022 goals for CO2
offtake. Our proven track record in providing highly reliable CO2
transportation and secure underground injection, combined with our
ideally-placed infrastructure, is unmatched in the industry and
positions us well for continued success and growth in CCUS.”
SECOND QUARTER FINANCIAL AND OPERATIONAL RESULTS
2Q 2022
YTD 2022
(in thousands, except per-share and volume
data)
Total
Per Diluted
Share
Total
Per Diluted
Share
Net Income
$155,494
$2.83
$154,622
$2.81
Adjusted net income(1)(2) (non-GAAP)
93,001
1.69
186,123
3.39
Adjusted EBITDAX(1) (non-GAAP)
154,404
285,251
Cash flows from operations
149,965
240,108
Adjusted cash flows from operations(1)
(non-GAAP)
145,190
275,770
Oil & gas development capital
expenditures
86,290
143,896
CCUS capital expenditures - storage sites
and related assets
2,951
23,900
Average daily sales volumes (BOE/d)
46,561
46,742
Blue Oil (% oil volumes using
industrial-sourced CO2)
28%
26%
Industrial-sourced CO2 injected (thousand
metric tons)
1,185
2,124
Total revenues and other income in the second quarter of 2022
were $482 million, a 17% increase over first quarter 2022 levels,
supported by higher oil price realizations. The Company’s average
oil price differential in both the Rocky Mountain and Gulf Coast
regions was better than expected and strengthened significantly
during the second quarter based on improved local markets for the
Company’s high-quality production. Denbury’s second quarter 2022
average pre-hedge realized oil price was $108.81 per barrel
(“Bbl”), which was $0.09 per Bbl above the average NYMEX WTI oil
price for the period.
Denbury’s oil and natural gas sales volumes averaged 46,561
BOE/d during the second quarter of 2022, in line with expectations.
Oil represented 97% of the Company’s second quarter 2022 volumes,
and approximately 28% 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. Second quarter sales
volumes were slightly lower compared to the first quarter of 2022,
as the Gulf Coast volumes were impacted by compressor downtime and
well repair activities, while volumes in the Rocky Mountain region
increased primarily due to CO2 flood response at Grieve,
development and workover activities at Beaver Creek, as well as
reduced weather downtime at CCA.
Lease operating expenses (“LOE”) in the second quarter of 2022
totaled $124 million, which included a benefit of approximately $7
million as a result of a settlement of a 2013 insurance claim
related to property damage at our Delhi field. Excluding this
benefit, LOE per BOE was $30.93, up from the first quarter of 2022
primarily as a result of service cost inflation, higher workover
activity levels, increased power and fuel costs and increased CO2
costs.
General and administrative (“G&A”) expenses were $19 million
in the second quarter of 2022, slightly higher than the first
quarter of 2022 due primarily to an increase in stock-based
compensation.
On a pre-hedge basis, per barrel cash operating margins
(revenues less LOE, production and ad valorem taxes, transportation
and marketing expenses, and G&A and interest costs) expanded
22% in the quarter to $61.31 per BOE, excluding the insurance
reimbursement item impacting LOE.
Commodity derivatives expense in the second quarter of 2022
totaled $57 million, comprised of cash payments of $128 million on
hedges that settled in the quarter and a non-cash fair value gain
of $71 million. The non-cash fair value gain primarily represented
the expiration of hedge contracts during the second quarter of
2022. Depletion, depreciation, and amortization was $35 million, or
$8.35 per BOE for the quarter, relatively consistent with the first
quarter of the year.
The Company’s second quarter 2022 effective income tax rate was
approximately 14%, consistent with expectations and lower than the
Company’s 25% statutory rate due to a $19 million valuation
allowance release during the second quarter of 2022. Current taxes
totaled $3 million for the second quarter of 2022, or 12% of total
income taxes.
CAPITAL EXPENDITURES
Second quarter 2022 capital expenditures, excluding capitalized
interest, totaled $89 million, with $86 million related to oil and
gas development capital and $3 million related to CCUS business
activities. Capital expenditures at the CCA EOR project totaled $21
million for the second quarter of 2022, including field development
and infrastructure expenditures, as well as the capitalization of
pre-production CO2 injection. CO2 injection at the CCA EOR project
continues to progress well, with oil production response still
expected during the second half of 2023.
Non-CCA oil and gas development capital increased 74% from the
first quarter of the year with focus on expansion in existing EOR
assets, including Beaver Creek, Cranfield, Heidelberg and Soso
field activities.
FINANCIAL POSITION, LIQUIDITY AND SHARE REPURCHASES
Denbury ended the second quarter 2022 with no debt and $738
million of financial liquidity (including cash on hand and
borrowing capacity under the Company’s bank credit facility). The
Company repurchased $29 million of its common stock during the
second quarter and a total of $100 million, or 1.6 million shares
(3.2% of March 2022 shares outstanding), through July 2022.
Denbury’s Board of Directors recently authorized a $100 million
increase in the share repurchase program raising the total
authorization to $350 million (which represents approximately 10%
of Denbury’s current market capitalization). $250 million is
available for repurchase under the plan. The timing and amount of
any share repurchases will be determined by Denbury’s management at
its discretion based on ongoing assessments of the capital needs of
the business, the market price of Denbury’s common stock and
general market conditions.
During the second quarter, the Company amended its bank credit
agreement, which among other things: (i) increased the borrowing
base and lender commitments from $575 million to $750 million, (ii)
extended the maturity date from January 30, 2024, to May 4, 2027,
and (iii) relaxed certain covenants, such as permitting the Company
to implement shareholder returns and make other unlimited
restricted payments and investments so long as certain leverage and
availability requirements are met.
OUTLOOK
Denbury is increasing its anticipated full-year 2022 oil and gas
capital expenditures to $360 million, up from the previously-guided
$320 million. Approximately half of the increase is due to overall
service cost inflation impacting the Company’s operations,
primarily related to labor and steel costs. The remainder of the
increase is associated with CCA EOR development capital, where the
Company is accelerating the purchase of compression equipment and
the construction of CO2 recycle facilities to mitigate timing risks
associated with ongoing supply chain disruptions and to ensure the
field is ready to process the expected oil production response. The
Company anticipates oil and gas capital expenditures to peak in the
third quarter of the year.
Capital expenditures for the CCUS business are planned at $50
million for 2022, but could increase depending on activity levels
in the second half of the year. Denbury’s current plans for 2022
include drilling one or more stratigraphic test wells in the
Company’s potential CO2 sequestration sites.
The Company’s full-year 2022 production guidance range is
unchanged at between 46,000 and 49,000 BOE/d. For the third
quarter, the Company anticipates sales volumes will be roughly flat
compared to the second quarter of the year before increasing
significantly in the fourth quarter, driven by incremental
production from multiple projects in the Company’s 2022 capital
program.
Updates to Denbury’s 2022 guidance can be found in the
supporting materials on Denbury’s website.
CONFERENCE CALL AND WEBCAST
Denbury management will host a conference call and webcast to
review second quarter 2022 financial and operating results and its
outlook for future periods, today, Thursday, August 4, 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 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: 844.200.6205 or 929.526.1599 with access
code 048168.
ABOUT DENBURY
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 four
million tons of captured industrial-sourced CO2 annually, with an
objective to fully offset its Scope 1, 2, and 3 CO2 emissions by
2030, 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 and updated supporting materials, other than
historical information, contains forward-looking statements that
involve risks and uncertainties including: expectations as to
future oil prices, operating costs, production levels and cash
flows; anticipated levels of 2022 capital expenditures, lease
operating expenses and general and administrative expenses, along
with other financial forecasts; future tax benefits; the expected
timing of first tertiary production at CCA; statements or
predictions related to the ultimate economics of proposed carbon
capture, use and storage arrangements and the CO2 volumes covered
by such 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 oil pricing,
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,
especially in light of the Russian war against Ukraine, changes in
European energy supplies, rising levels of economic uncertainty due
to inflation, rising interest rates, and the continuing impact of
COVID-19. 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
The following tables include selected unaudited financial and
operational information for the comparative three and six-month
periods ended June 30, 2022 and 2021. 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
Six Months Ended
June 30,
June 30,
In thousands, except per-share data
2022
2021
2022
2021
Revenues and other income
Oil sales
$
446,592
$
280,577
$
827,834
$
513,621
Natural gas sales
5,378
2,131
9,047
4,532
CO2 sales and transportation fees
12,610
10,134
26,032
19,362
Oil marketing revenues
16,786
7,819
30,062
13,945
Other income
790
707
1,040
1,067
Total revenues and other income
482,156
301,368
894,015
552,527
Expenses
Lease operating expenses
124,351
110,225
242,179
192,195
Transportation and marketing expenses
4,802
8,522
9,447
16,319
CO2 operating and discovery expenses
1,681
1,531
4,498
2,524
Taxes other than income
36,317
22,382
67,698
41,345
Oil marketing purchases
15,027
7,738
28,067
13,823
General and administrative expenses
19,235
15,450
37,927
47,433
Interest, net of amounts capitalized of
$975, $1,168, $2,133 and $2,251, respectively
1,526
1,252
2,183
2,788
Depletion, depreciation, and
amortization
35,400
36,381
70,745
75,831
Commodity derivatives expense
56,854
172,664
249,573
288,407
Write-down of oil and natural gas
properties
—
—
—
14,377
Other expenses
6,621
3,214
8,733
5,360
Total expenses
301,814
379,359
721,050
700,402
Income (loss) before income
taxes
180,342
(77,991
)
172,965
(147,875
)
Income tax provision (benefit)
Current income taxes
2,912
(260
)
2,351
(451
)
Deferred income taxes
21,936
(36
)
15,992
(87
)
Net income (loss)
$
155,494
$
(77,695
)
$
154,622
$
(147,337
)
Net income (loss) per common
share
Basic
$
3.00
$
(1.52
)
$
2.99
$
(2.91
)
Diluted
$
2.83
$
(1.52
)
$
2.81
$
(2.91
)
Weighted average common shares
outstanding
Basic
51,757
50,999
51,680
50,661
Diluted
54,886
50,999
54,931
50,661
DENBURY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarter Ended
Six Months Ended
June 30,
June 30,
In thousands
2022
2021
2022
2021
Cash flows from operating
activities
Net income (loss)
$
155,494
$
(77,695
)
$
154,622
$
(147,337
)
Adjustments to reconcile net income (loss)
to cash flows from operating activities
Depletion, depreciation, and
amortization
35,400
36,381
70,745
75,831
Write-down of oil and natural gas
properties
—
—
—
14,377
Deferred income taxes
21,936
(36
)
15,992
(87
)
Stock-based compensation
4,104
2,552
7,075
20,232
Commodity derivatives expense
56,854
172,664
249,573
288,407
Payment on settlements of commodity
derivatives
(127,959
)
(63,343
)
(221,016
)
(101,796
)
Debt issuance costs
1,249
685
1,934
1,370
Other, net
(1,888
)
17
(3,155
)
744
Changes in assets and liabilities, net of
effects from acquisitions
Accrued production receivable
(12,991
)
(12,131
)
(85,786
)
(48,881
)
Trade and other receivables
(13,427
)
(6,443
)
(11,783
)
(5,578
)
Other current and long-term assets
(12,364
)
3,836
(12,175
)
1,294
Accounts payable and accrued
liabilities
40,600
28,694
52,010
27,292
Oil and natural gas production payable
9,981
7,429
33,329
20,224
Asset retirement obligations and other
liabilities
(7,024
)
(1,728
)
(11,257
)
(2,554
)
Net cash provided by operating
activities
149,965
90,882
240,108
143,538
Cash flows from investing
activities
Oil and natural gas capital
expenditures
(80,815
)
(33,784
)
(139,522
)
(53,411
)
CCUS storage sites and related capital
expenditures
(2,858
)
—
(17,758
)
—
Acquisitions of oil and natural gas
properties
(374
)
(146
)
(374
)
(10,811
)
Pipelines and plants capital
expenditures
(5,060
)
(4,393
)
(20,264
)
(4,851
)
Net proceeds from sales of oil and natural
gas properties and equipment
137
18,453
237
18,456
Other
(4,127
)
(1,243
)
(5,623
)
(4,159
)
Net cash used in investing
activities
(93,097
)
(21,113
)
(183,304
)
(54,776
)
Cash flows from financing
activities
Bank repayments
(250,000
)
(283,000
)
(524,000
)
(485,000
)
Bank borrowings
215,000
243,000
489,000
450,000
Pipeline financing repayments
—
(17,001
)
—
(33,510
)
Common stock repurchase program
(23,374
)
—
(23,374
)
—
Other
1,680
278
(1,388
)
(2,735
)
Net cash used in financing
activities
(56,694
)
(56,723
)
(59,762
)
(71,245
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
174
13,046
(2,958
)
17,517
Cash, cash equivalents, and restricted
cash at beginning of period
47,212
46,719
50,344
42,248
Cash, cash equivalents, and restricted
cash at end of period
$
47,386
$
59,765
$
47,386
$
59,765
DENBURY INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In thousands, except par value and share
data
June 30, 2022
Dec. 31, 2021
Assets
Current assets
Cash and cash equivalents
$
517
$
3,671
Accrued production receivable
229,151
143,365
Trade and other receivables, net
30,918
19,270
Derivative assets
2,829
—
Prepaids
18,686
9,099
Total current assets
282,101
175,405
Property and equipment
Oil and natural gas properties (using full
cost accounting)
Proved properties
1,217,778
1,109,011
Unevaluated properties
155,901
112,169
CO2 properties
184,861
183,369
Pipelines
226,318
224,394
CCUS storage sites and related assets
24,026
—
Other property and equipment
98,777
93,950
Less accumulated depletion, depreciation,
amortization and impairment
(240,133
)
(181,393
)
Net property and equipment
1,667,528
1,541,500
Operating lease right-of-use assets
18,118
19,502
Derivative assets
2,071
—
Intangible assets, net
83,688
88,248
Restricted cash for future asset
retirement obligations
46,869
46,673
Other assets
38,305
31,625
Total assets
$
2,138,680
$
1,902,953
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable and accrued
liabilities
$
262,752
$
191,598
Oil and gas production payable
109,228
75,899
Derivative liabilities
162,551
134,509
Operating lease liabilities
4,670
4,677
Total current liabilities
539,201
406,683
Long-term liabilities
Long-term debt, net of current portion
—
35,000
Asset retirement obligations
273,852
284,238
Derivative liabilities
5,415
—
Deferred tax liabilities, net
17,630
1,638
Operating lease liabilities
15,571
17,094
Other liabilities
18,170
22,910
Total long-term liabilities
330,638
360,880
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; 50,875,988 and 50,193,656 shares issued,
respectively
51
50
Paid-in capital in excess of par
1,137,575
1,129,996
Retained earnings
159,966
5,344
Treasury stock, at cost, 457,549 and 0
shares, respectively
(28,751
)
—
Total stockholders’ equity
1,268,841
1,135,390
Total liabilities and stockholders’
equity
$
2,138,680
$
1,902,953
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
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Average daily sales (BOE/d)
Tertiary
Gulf Coast region
22,205
24,680
22,608
24,481
Rocky Mountain region
9,186
8,772
9,203
7,984
Total tertiary sales
31,391
33,452
31,811
32,465
Non-tertiary
Gulf Coast region
3,566
3,415
3,598
3,518
Rocky Mountain region
11,604
12,266
11,333
12,267
Total non-tertiary sales
15,170
15,681
14,931
15,785
Total Company
Oil (Bbls/d)
45,104
47,653
45,284
46,834
Natural gas (Mcf/d)
8,741
8,882
8,747
8,494
BOE/d (6:1)
46,561
49,133
46,742
48,250
Unit sales price (excluding derivative
settlements)
Gulf Coast region
Oil (per Bbl)
$
108.87
$
64.90
$
100.94
$
60.72
Natural gas (per mcf)
7.49
2.86
6.03
3.15
Rocky Mountain region
Oil (per Bbl)
$
108.72
$
64.44
$
101.07
$
60.40
Natural gas (per mcf)
6.36
2.50
5.53
2.80
Total Company
Oil (per Bbl)(1)
$
108.81
$
64.70
$
101.00
$
60.59
Natural gas (per mcf)
6.76
2.64
5.71
2.95
BOE (6:1)
106.67
63.23
98.92
59.33
(1)
Total company realized oil prices including derivative
settlements were $77.63 per Bbl and $50.10 per Bbl during the three
months ended June 30, 2022 and 2021, respectively, and $74.03 per
Bbl and $48.58 per Bbl during the six months ended June 30, 2022
and 2021, 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
Quarter Ended
June 30, 2022
June 30, 2021
In thousands, except per-share data
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income (loss) (GAAP
measure)(1)
$
155,494
$
2.83
$
(77,695
)
$
(1.52
)
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value losses (gains) on
commodity derivatives(2)
(71,105
)
(1.30
)
109,321
2.01
Delhi Field insurance
reimbursements(3)
(6,692
)
(0.12
)
—
—
Delta pipeline incident costs (included in
other expenses)(4)
3,867
0.07
—
—
Accrued litigation expense(5)
1,444
0.03
—
—
Noncash fair value adjustment - contingent
consideration(7)
(12
)
0.00
1,640
0.03
Adjustments to reconcile effect of
dilutive securities(9)
—
—
—
0.09
Estimated income taxes on above
adjustments to net income (loss) and other discrete tax
items(10)
10,005
0.18
—
—
Adjusted net income (non-GAAP
measure)
$
93,001
$
1.69
$
33,266
$
0.61
Six Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
In thousands, except per-share data
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income (loss) (GAAP
measure)(1)
154,622
$
2.81
(147,337
)
$
(2.91
)
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value losses on commodity
derivatives(2)
28,557
0.52
186,611
3.54
Delhi Field insurance
reimbursements(3)
(6,692
)
(0.12
)
—
—
Delta pipeline incident costs (included in
other expenses)(4)
3,867
0.07
—
—
Accrued litigation expense(5)
1,444
0.03
—
—
Write-down of oil and natural gas
properties(6)
—
—
14,377
0.27
Noncash fair value adjustment - contingent
consideration(7)
173
0.00
1,640
0.03
Other(8)
—
—
325
0.01
Adjustments to reconcile effect of
dilutive securities(9)
—
—
—
0.11
Estimated income taxes on above
adjustments to net income (loss) and other discrete tax
items(10)
4,152
0.08
—
—
Adjusted net income (non-GAAP
measure)
$
186,123
$
3.39
$
55,616
$
1.05
(1)
Diluted net income (loss) per
common share includes the impact of potentially dilutive securities
including nonvested restricted stock, restricted stock units,
performance stock units and warrants.
(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)
Insurance reimbursements
associated with a 2013 insurance claim related to property damage
at Delhi Field.
(4)
Represents an accrual for a
preliminarily assessed civil penalty proposed in May 2022 by the
U.S. Department of Transportation’s Pipeline and Hazardous
Materials Safety Administration related to the Company’s February
2020 Delta-Tinsley pipeline incident.
(5)
Represents accrued litigation
expense, including $1 million recorded in other expenses and $0.4
million recorded in lease operating expenses during the three and
six months ended June 30, 2022.
(6)
Full cost pool ceiling test
write-downs related to the Company’s oil and natural gas
properties.
(7)
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.
(8)
Other adjustments primarily
include <$1 million write-off of trade receivables during the
three months ended March 31, 2021.
(9)
Represents the impact to the
per-share calculation using weighted average dilutive shares of
54.3 million and 52.7 million during the three and six months ended
June 30, 2021, respectively, as a result of the adjustments to the
Company’s net loss (GAAP measure) to derive adjusted net income
(non-GAAP measure).
(10)
The estimated income tax impacts
on adjustments to net income for the three months ended June 30,
2022 are computed based upon a rate of 13.8% applied to income
before tax, which incorporates discrete tax adjustments primarily
comprised of the $18.8 million release of the valuation allowance.
The income tax adjustment for the six months ended June 30, 2022
removes the impact of the valuation allowance reversed during the
three months ended March 31, 2022. During the three months ended
March 31, 2022, largely due to the significant increase in
worldwide oil prices, the Company determined that it was no longer
appropriate to carry a valuation allowance against certain of its
federal and state deferred tax assets, as we now consider it more
likely than not that we will realize those deferred tax assets.
Accordingly, during the three and six months ended June 30, 2022,
we reversed $18.8 million and $24.7 million of the valuation
allowance, which lowered our deferred tax expense. In addition, we
expect to reverse an additional $40.2 million of valuation
allowance during the second half of 2022.
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 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
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Net income (loss) (GAAP
measure)
$
155,494
$
(77,695
)
$
154,622
$
(147,337
)
Adjustments to reconcile to Adjusted
EBITDAX
Interest expense
1,526
1,252
2,183
2,788
Income tax expense (benefit)
24,848
(296
)
18,343
(538
)
Depletion, depreciation, and
amortization
35,400
36,381
70,745
75,831
Noncash fair value losses (gains) on
commodity derivatives
(71,105
)
109,321
28,557
186,611
Stock-based compensation
4,104
2,552
7,075
20,232
Write-down of oil and natural gas
properties
—
—
—
14,377
Severance-related expense
—
476
—
476
Noncash, non-recurring and other
4,137
462
3,726
1,929
Adjusted EBITDAX (non-GAAP
measure)
$
154,404
$
72,453
$
285,251
$
154,369
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 oil and gas development expenditures, CCUS
asset capital 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
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Cash flows from operations (GAAP
measure)
$
149,965
$
90,882
$
240,108
$
143,538
Net change in assets and liabilities
relating to operations
(4,775
)
(19,657
)
35,662
8,203
Adjusted cash flows from operations
(non-GAAP measure)
145,190
71,225
275,770
151,741
Oil & gas development expenditures
(86,290
)
(54,102
)
(143,896
)
(74,181
)
CCUS storage sites and related capital
expenditures
(2,951
)
—
(23,900
)
—
Capitalized interest
(975
)
(1,168
)
(2,133
)
(2,251
)
Free cash flow (non-GAAP
measure)
$
54,974
$
15,955
$
105,841
$
75,309
DENBURY INC.
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED)(1)
Quarter Ended
Six Months Ended
June 30,
June 30,
In thousands
2022
2021
2022
2021
Capital expenditure summary
CCA EOR field expenditures(2)
$
21,483
$
9,091
$
39,205
$
9,100
CCA CO2 pipelines
(950
)
9,951
1,241
9,999
CCA tertiary development
20,533
19,042
40,446
19,099
Non-CCA tertiary and non-tertiary
fields
57,074
27,875
86,437
40,297
CO2 sources and other CO2 pipelines
1,380
—
2,110
—
Capitalized internal costs(3)
7,303
7,185
14,903
14,785
Oil & gas development capital
expenditures
86,290
54,102
143,896
74,181
CCUS storage sites and related capital
expenditures
2,951
—
23,900
—
Acquisitions of oil and gas
properties(4)
3
146
374
10,811
Capitalized interest
975
1,168
2,133
2,251
Total capital expenditures
$
90,219
$
55,416
$
170,303
$
87,243
(1)
Capital expenditure amounts
incurred during the period, including accrued capital costs.
(2)
Includes pre-production CO2 costs
associated with the CCA EOR development project totaling $8.0
million and $10.8 million during the three and six months ended
June 30, 2022.
(3)
Includes capitalized internal
acquisition, exploration and development costs and pre-production
tertiary startup costs.
(4)
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/20220804005151/en/
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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