Denbury Resources Inc. (NYSE:DNR) (“Denbury” or the “Company”)
today announced a net loss of $381 million, or $1.03 per diluted
share, for the second quarter of 2016. The Company also
reported adjusted net income(1) (a non-GAAP measure) for the
quarter of $29 million, or $0.08(1)(2) per diluted share.
Adjusted net income(1) for the second quarter of 2016 differs from
the quarter’s GAAP net loss primarily due to the exclusion of (1) a
$479 million ($299 million after tax) full cost pool ceiling test
write-down, (2) a $150 million ($93 million after tax) loss due to
noncash fair value adjustments on commodity derivatives(1) (a
non-GAAP measure) and (3) a $28 million ($17 million after tax)
payment related to a previously announced legal settlement, with
the GAAP and non-GAAP measures reconciled in tables beginning on
page 8.
Sequential and year-over-year comparisons of
selected quarterly financial items are shown in the following
table:
| |
|
Quarter Ended |
| ($ in
millions, except per-share and unit data) |
|
June 30, 2016 |
|
March 31, 2016 |
|
June 30, 2015 |
| Net loss |
|
$ |
(381 |
) |
|
$ |
(185 |
) |
|
$ |
(1,148 |
) |
| Adjusted net income
(loss)(1) (non-GAAP measure) |
|
29 |
|
|
(9 |
) |
|
47 |
|
| Net loss per diluted
share |
|
(1.03 |
) |
|
(0.53 |
) |
|
(3.28 |
) |
| Adjusted net income
(loss) per diluted share(1)(2) (non-GAAP measure) |
|
0.08 |
|
|
(0.03 |
) |
|
0.13 |
|
| Cash flows from
operations |
|
61 |
|
|
2 |
|
|
289 |
|
| Adjusted cash flows
from operations(1)(3)(4) (non-GAAP measure) |
|
93 |
|
|
57 |
|
|
252 |
|
| |
|
|
|
|
|
|
| Revenues |
|
$ |
253 |
|
|
$ |
194 |
|
|
$ |
374 |
|
| Receipt on settlements
of commodity derivatives |
|
52 |
|
|
72 |
|
|
124 |
|
| Total |
|
$ |
305 |
|
|
$ |
266 |
|
|
$ |
498 |
|
| |
|
|
|
|
|
|
| Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
43.38 |
|
|
$ |
30.71 |
|
|
$ |
56.92 |
|
| Average realized oil
price per barrel (including derivative settlements) |
|
52.61 |
|
|
42.71 |
|
|
76.30 |
|
| Lease operating
expenses per BOE |
|
17.04 |
|
|
16.23 |
|
|
19.70 |
|
| |
|
|
|
|
|
|
| Total production
(BOE/d) |
|
64,506 |
|
|
69,351 |
|
|
73,716 |
|
(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 average diluted shares
outstanding of 372.4 million and 351.1 million for the three months
ended June 30, 2016 and 2015, respectively.(3) Adjusted
cash flow from operations for the three-month period ended June 30,
2016 includes a $28 million payment to Evolution in connection with
our settlement agreement to resolve all outstanding disputes and
claims, and the three-month period ended March 31, 2016 includes
severance-related payments associated with the 2016 workforce
reduction of approximately $9 million. Excluding these
payments, adjusted cash flows from operations would have totaled
$121 million and $66 million for the three months ended June 30,
2016 and March 31, 2016, respectively.(4) Adjusted cash flows
from operations reflects cash flows from operations before working
capital changes.
MANAGEMENT COMMENT
Phil Rykhoek, Denbury’s President and CEO,
commented, “During the second quarter of 2016, we continued to make
significant strides in our core objectives for 2016, which include
lowering costs, preserving cash and liquidity, and reducing
leverage. We have continued to steadily improve our business,
working towards maximizing our efficiency and shaping the path for
the future of the Company. Our overall cash costs per barrel
of oil equivalent (“BOE”) were reduced by another $0.60 this
quarter to approximately $32 per BOE, as reductions in general and
administrative costs more than offset a slight increase in unit
operating expenses. Lease operating expenses totaled $100
million during the second quarter of 2016, a 24% decrease from the
prior-year quarter, and general and administrative expenses totaled
$23 million, a decrease of 41% from the prior-year quarter, further
evidencing the success of our cost reduction efforts.
“Our 2016 production remains on track to meet
the mid-point of our 2016 guidance when adjusted for extraordinary
weather-related downtime and our pending asset sale. During
the second quarter, we experienced two separate 100-year flood
events at Thompson Field, resulting in minimal production there
this quarter which, coupled with weather-related production
downtime at Conroe Field, negatively impacted our second quarter
production by approximately 1,450 BOE/d. Also, in the third
quarter, we expect to close on the sale of our non-core Williston
assets, which produced approximately 1,300 BOE/d in the first half
of the year. After adjusting for these two items, the
mid-point of our full-year guidance is now approximately 1,000
BOE/d lower than our previous guidance.
“During the first half of 2016, we entered into
debt exchange and purchase transactions, resulting in a net
reduction of our debt principal balance of approximately $540
million, and have recently reduced debt by another $5 million
through open-market debt purchases. We remain focused on
preserving our liquidity in this low oil price environment and
continue to look for opportunities to reduce debt and enhance our
balance sheet.”
DEBT
REDUCTION
As previously disclosed, during May 2016, the
Company entered into privately negotiated exchange agreements to
exchange $1,058 million in aggregate principal amount of its
outstanding senior subordinated notes for $615 million in aggregate
principal amount of the Company’s new 9% Senior Secured Second Lien
Notes due 2021 (“Senior Secured Notes”) plus 40.7 million shares of
the Company’s common stock, resulting in a $12 million pre-tax gain
on debt extinguishment. For financial reporting purposes,
$255 million of future interest on the Senior Secured Notes has
been recorded as debt, and will be reduced as semi-annual interest
payments are made, with the remaining $23 million of future
interest to be recognized as interest expense over the term of the
Senior Secured Notes. Therefore, future interest expense on
the Senior Secured Notes reflected in the Company’s financial
statements will be significantly lower than the actual cash
interest payments to be made, and management currently anticipates
that for the remainder of 2016 approximately $13 million of
interest per quarter on the Senior Secured Notes will not be
reflected as interest expense.
In July 2016, the Company spent $14 million
(excluding accrued interest) to repurchase an additional $3 million
principal amount of senior subordinated notes due 2021 and $16
million principal amount of senior subordinated notes due
2022. These transactions resulted in a net reduction of
approximately $5 million in the Company’s debt principal
balance.
PRODUCTION
Denbury’s total production for the second
quarter of 2016 averaged 64,506 BOE per day (“BOE/d”), including
39,212 barrels per day (“Bbls/d”) from tertiary properties and
25,294 BOE/d from non-tertiary properties. Production in the
second quarter of 2016 decreased 7% sequentially and 12% compared
to the second quarter of 2015. The higher than anticipated
decline was primarily due to weather-related shut-in
production.
In April 2016, a series of strong thunderstorms
in the Houston area damaged a primary tank battery in Conroe Field
and flooded Thompson Field. While most of the Conroe
production was brought back online in June, additional record
rainfall in May 2016 flooded Thompson Field a second time, forcing
most of that field to remain shut in through the end of the
quarter. The Company is currently working to restore full
production, most of which is expected to be back online during the
third quarter. Together, these storms and flooding impacted
quarterly production by approximately 1,450 BOE/d.
During the second quarter, the Company’s
quarterly production was further impacted by production shut-in due
to economics, resulting in a decrease to quarterly production of
approximately 2,750 BOE/d, representing an incremental decrease of
approximately 300 BOE/d compared to the first quarter of 2016 and
approximately 2,100 BOE/d compared to the second quarter of
2015. As of June 30, 2016, approximately 2,600 BOE/d remained
shut in due to economics. Second quarter of 2016 production
was 96% oil, similar to the prior-year period.
Tertiary oil production during the second
quarter of 2016 decreased 3%, or 1,252 Bbls/d, on a
sequential-quarter basis and 8%, or 3,372 Bbls/d, from the second
quarter of 2015. The decreases during both periods were
largely driven by Tinsley Field facility seasonal processing
constraints and Oyster Bayou Field maintenance and workovers,
partially offset by increased production at Delhi and Bell Creek
fields.
Non-tertiary oil-equivalent production was down
12%, or 3,593 BOE/d, on a sequential-quarter basis and 19%, or
5,838 BOE/d, from second quarter of 2015. These decreases
were greater than anticipated primarily due to the previously
discussed weather-related shut-in production at Conroe and Thompson
fields.
REVIEW OF FINANCIAL
RESULTS
Oil and natural gas revenues, excluding the
impact of derivative contracts, decreased 33% when comparing the
second quarters of 2016 and 2015, due to a 21% decline in realized
commodity prices and a 12% decrease in production. Denbury’s
average realized oil price per Bbl, excluding derivative
settlements, was $43.38 in the second quarter of 2016, compared to
$30.71 in the first quarter of 2016 and $56.92 in the prior-year
second quarter. Including derivative settlements, Denbury’s
average realized oil price per Bbl was $52.61 in the second quarter
of 2016, compared to $42.71 in the first quarter of 2016 and $76.30
in the prior-year second quarter. The oil price realized
relative to NYMEX oil prices (the Company’s NYMEX oil price
differential) in the second quarter of 2016 was $2.18 per Bbl below
NYMEX prices, compared to a differential of $3.02 per Bbl below
NYMEX in the first quarter of 2016 and $0.89 per Bbl below NYMEX in
the second quarter of 2015, largely due to volatility in oil sold
at the Light Louisiana Sweet index.
The Company’s lease operating expenses over the
past two years have decreased across all expense categories, and
total lease operating expenses decreased 24% from the second
quarter of 2015, significantly impacted by the reduction in CO2
injection volumes over the past year. During the second
quarter of 2016, the Company’s CO2 use further declined to 459
million cubic feet per day, a decrease of 40% when compared to the
second quarter of 2015. On a per-BOE basis, lease operating
expenses in the second quarter of 2016 averaged $17.04 per BOE, an
increase of 5% from the $16.23 per-BOE average in the first quarter
of 2016, primarily due to a higher workover activity level and
lower production volumes, and decreased 14% from the $19.70 per-BOE
average in the second quarter of 2015 due to cost decreases in most
lease operating expense categories, partially offset by the
reduction in production volumes.
Taxes other than income, which includes ad
valorem, production, and franchise taxes, were relatively unchanged
on a sequential-quarter basis and decreased $14 million from the
prior-year second quarter level due primarily to lower ad valorem
taxes in the 2016 period due to lower assessed tax values and a
decrease in severance taxes due to lower oil and natural gas
revenues.
General and administrative expenses were $23
million in the second quarter of 2016, decreasing $15 million, or
41%, from the prior-year second quarter level. This reduction
was largely due to an approximate 28% reduction in headcount since
March 31, 2015, which has resulted in lower employee compensation
and related costs.
Interest expense, net of capitalized interest,
decreased to $36 million in the second quarter of 2016, compared to
$40 million in the second quarter of 2015. As a result of the
Company’s notes exchange discussed above, interest expense in the
second quarter of 2016 excludes approximately $7 million of
interest on the Company’s new Senior Secured Notes because it is
recorded as debt for financial reporting purposes and is therefore
not reflected as interest expense. Cash interest expense
decreased approximately $3 million between the respective
quarters.
As a result of the continued decrease in average
commodity pricing compared to 2015 levels, the Company recognized a
full cost pool ceiling test write-down of $479 million during the
second quarter of 2016, compared to $256 million during the first
quarter of 2016 and $1.7 billion during the second quarter of
2015. In determining these write-downs, the Company is
required to use the average rolling first-day-of-the-month NYMEX
oil and natural gas prices for the preceding 12 months, adjusted
for market differentials by field. The preceding 12-month
NYMEX prices averaged $43.12 per Bbl for crude oil for the period
ended June 30, 2016, down from $46.26 per Bbl for the period
ended March 31, 2016 and $71.68 per Bbl for the period ended
June 30, 2015.
Denbury’s overall depletion, depreciation, and
amortization (“DD&A”) rate was $11.34 per BOE in the second
quarter of 2016, compared to $22.05 per BOE in the prior-year
second quarter and $12.26 per BOE in the first quarter of 2016,
with the decreases primarily driven by a reduction in depletable
costs resulting from the full cost pool ceiling test write-downs
recognized during 2015 and the first quarter of 2016, as well as
lower production and reductions in future development costs.
Receipts on settlements of oil and natural gas
derivative contracts were $52 million in the second quarter of
2016, compared to receipts of $72 million in the first quarter of
2016 and receipts of $124 million in the prior-year second
quarter. These settlements resulted in increases in average
net realized prices of $8.86 per BOE in the second quarter of 2016,
$11.44 per BOE in the first quarter of 2016, and $18.51 per BOE in
the second quarter of 2015.
Denbury’s effective tax rate for the second
quarter of 2016 was 36.9%, up from 35.6% in the prior-year second
quarter. The effective tax rate for the second quarter of
2016 was lower than the Company’s statutory rate of 38% primarily
due to the Company’s full cost pool ceiling test write-down
recorded during the quarter.
2016 CAPITAL BUDGET AND
ESTIMATED PRODUCTION
The Company’s 2016 capital budget, excluding
acquisitions and capitalized interest, remains unchanged from the
previously estimated amount of approximately $200 million; however,
the Company could potentially adjust this budget higher or lower
based on changes in estimated levels of cash flow. The
capital budget consists of approximately $145 million of tertiary,
non-tertiary, and CO2 supply and pipeline projects, plus
approximately $55 million of estimated capitalized costs (including
capitalized internal acquisition, exploration and development costs
and pre-production tertiary startup costs). Of this combined
capital expenditure amount, approximately $101 million (50%) has
been incurred through the second quarter of 2016.
The Company expects to close the sale of its
interests in non-core Williston assets in the third quarter for $58
million (before final closing adjustments) with an effective date
of April 1, 2016. Production from the Williston assets
averaged approximately 1,300 BOE/d during the first half of
2016. As a result of this pending sale and the impacts of
extraordinary weather-related downtime in the Gulf Coast region,
Denbury now expects full-year 2016 production to range between
64,000 BOE/d and 66,000 BOE/d, as compared to the Company’s
previous guidance of between 64,000 BOE/d and 68,000 BOE/d, with
production for the remainder of the year anticipated to be
relatively flat after adjusting for the Williston asset sale.
CONFERENCE CALL
INFORMATION
Denbury management will host a conference call
to review and discuss second quarter 2016 financial and operating
results, as well as financial and operating guidance for the
remainder of 2016, today, Thursday, August 4, at 10:00 A.M.
(Central). Additionally, Denbury has published presentation
materials on its website which will be referenced during the
conference call. Individuals who would like to participate
should dial 800.230.1093 or 612.332.0226 ten minutes before the
scheduled start time. To access a live webcast of the
conference call and accompanying slide presentation, please visit
the investor relations section of the Company’s website at
www.denbury.com. The webcast will be archived on the website,
and a telephonic replay will be accessible for at least one month
after the call by dialing 800.475.6701 or 320.365.3844 and entering
confirmation number 361969.
Denbury is an independent oil and natural gas
company with operations focused in two key operating areas: the
Gulf Coast and Rocky Mountain regions. The Company’s goal is
to increase the value of its properties through a combination of
exploitation, drilling and proven engineering extraction practices,
with the most significant emphasis relating to CO2 enhanced oil
recovery operations. For more information about Denbury,
please visit www.denbury.com.
This press release, other than historical
financial information, contains forward-looking statements that
involve risks and uncertainties including estimated 2016 production
and capital expenditures 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 engineering, geological, financial 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 business 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.
DENBURY
CONTACTS:Mark C. Allen, Senior Vice President and
Chief Financial Officer, 972.673.2000John Mayer, Investor
Relations, 972.673.2383
FINANCIAL AND STATISTICAL DATA
TABLES AND RECONCILIATION SCHEDULES
Following are unaudited financial highlights for
the comparative three and six month periods ended June 30, 2016 and
2015 and the three month period ended March 31, 2016. All
production volumes and dollars are expressed on a net revenue
interest basis with gas volumes converted to equivalent barrels at
6:1.
DENBURY RESOURCES
INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following information is based on GAAP
reported earnings (along with additional required disclosures)
included or to be included in the Company’s periodic reports:
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
| In
thousands, except per-share data |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Revenues and
other income |
|
|
|
|
|
|
|
|
|
|
| Oil sales |
|
$ |
244,572 |
|
|
$ |
361,732 |
|
|
$ |
184,816 |
|
|
$ |
429,388 |
|
|
$ |
654,002 |
|
| Natural gas sales |
|
2,096 |
|
|
5,159 |
|
|
2,987 |
|
|
5,083 |
|
|
10,359 |
|
| CO2 sales and transportation
fees |
|
6,622 |
|
|
7,152 |
|
|
6,272 |
|
|
12,894 |
|
|
14,124 |
|
| Interest income and other
income |
|
1,858 |
|
|
2,651 |
|
|
769 |
|
|
2,627 |
|
|
5,858 |
|
| Total revenues and other
income |
|
255,148 |
|
|
376,694 |
|
|
194,844 |
|
|
449,992 |
|
|
684,343 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| Lease operating expenses |
|
100,019 |
|
|
132,170 |
|
|
102,447 |
|
|
202,466 |
|
|
273,254 |
|
| Marketing and plant operating
expenses |
|
12,999 |
|
|
14,215 |
|
|
13,194 |
|
|
26,193 |
|
|
25,900 |
|
| CO2 discovery and operating
expenses |
|
1,071 |
|
|
945 |
|
|
607 |
|
|
1,678 |
|
|
1,892 |
|
| Taxes other than income |
|
19,504 |
|
|
33,555 |
|
|
20,092 |
|
|
39,596 |
|
|
60,234 |
|
| General and administrative
expenses |
|
22,545 |
|
|
37,947 |
|
|
33,901 |
|
|
56,446 |
|
|
84,227 |
|
| Interest, net of amounts
capitalized of $6,289, $8,738, $5,780, $12,069 and $17,147,
respectively |
|
36,058 |
|
|
39,863 |
|
|
42,171 |
|
|
78,229 |
|
|
79,962 |
|
| Depletion, depreciation, and
amortization |
|
66,541 |
|
|
147,940 |
|
|
77,366 |
|
|
143,907 |
|
|
297,898 |
|
| Commodity derivatives expense
(income) |
|
98,209 |
|
|
48,926 |
|
|
22,826 |
|
|
121,035 |
|
|
(34,150 |
) |
| Gain on debt extinguishment |
|
(12,278 |
) |
|
— |
|
|
(94,991 |
) |
|
(107,269 |
) |
|
— |
|
| Write-down of oil and natural gas
properties |
|
479,400 |
|
|
1,705,800 |
|
|
256,000 |
|
|
735,400 |
|
|
1,852,000 |
|
| Other expenses |
|
34,688 |
|
|
— |
|
|
1,544 |
|
|
36,232 |
|
|
— |
|
| Total expenses |
|
858,756 |
|
|
2,161,361 |
|
|
475,157 |
|
|
1,333,913 |
|
|
2,641,217 |
|
| Loss before
income taxes |
|
(603,608 |
) |
|
(1,784,667 |
) |
|
(280,313 |
) |
|
(883,921 |
) |
|
(1,956,874 |
) |
| Income tax benefit |
|
|
|
|
|
|
|
|
|
|
| Current income taxes |
|
— |
|
|
(1,696 |
) |
|
(5 |
) |
|
(5 |
) |
|
(121 |
) |
| Deferred income taxes |
|
(222,940 |
) |
|
(634,472 |
) |
|
(95,115 |
) |
|
(318,055 |
) |
|
(700,508 |
) |
| Net
loss |
|
$ |
(380,668 |
) |
|
$ |
(1,148,499 |
) |
|
$ |
(185,193 |
) |
|
$ |
(565,861 |
) |
|
$ |
(1,256,245 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| Net loss per
common share |
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
(1.03 |
) |
|
$ |
(3.28 |
) |
|
$ |
(0.53 |
) |
|
$ |
(1.58 |
) |
|
$ |
(3.59 |
) |
| Diluted |
|
$ |
(1.03 |
) |
|
$ |
(3.28 |
) |
|
$ |
(0.53 |
) |
|
$ |
(1.58 |
) |
|
$ |
(3.59 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| Dividends
declared per common share |
|
$ |
— |
|
|
$ |
0.0625 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.1250 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
| Basic |
|
370,566 |
|
|
350,039 |
|
|
347,235 |
|
|
358,901 |
|
|
349,653 |
|
| Diluted |
|
370,566 |
|
|
350,039 |
|
|
347,235 |
|
|
358,901 |
|
|
349,653 |
|
| |
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net loss (GAAP measure) to
adjusted net income (loss) (non-GAAP measure)
Adjusted net income (loss) 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
(loss) may be helpful to investors by eliminating the impact of
noncash and/or nonrecurring items not indicative of our 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 (loss) should not be considered
in isolation, as a substitute for, or more meaningful than, net
income 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.
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
| In
thousands, except per-share data |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net loss (GAAP
measure) |
|
$ |
(380,668 |
) |
|
$ |
(1,148,499 |
) |
|
$ |
(185,193 |
) |
|
$ |
(565,861 |
) |
|
$ |
(1,256,245 |
) |
| Adjustments to
reconcile to adjusted net income (loss) (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
| Noncash fair value adjustments on
commodity derivatives (1) |
|
150,235 |
|
|
173,077 |
|
|
95,053 |
|
|
245,288 |
|
|
238,466 |
|
| Write-down of oil and natural gas
properties (2) |
|
479,400 |
|
|
1,705,800 |
|
|
256,000 |
|
|
735,400 |
|
|
1,852,000 |
|
| Gain on debt extinguishment
(3) |
|
(12,278 |
) |
|
— |
|
|
(94,991 |
) |
|
(107,269 |
) |
|
— |
|
| Legal settlements included in other
expenses (4) |
|
30,250 |
|
|
— |
|
|
— |
|
|
30,250 |
|
|
— |
|
| Write-off of debt issuance costs
included in interest expense (5) |
|
4,509 |
|
|
— |
|
|
1,044 |
|
|
5,553 |
|
|
— |
|
| Severance-related payments included
in general and administrative expenses (6) |
|
— |
|
|
— |
|
|
9,315 |
|
|
9,315 |
|
|
— |
|
| Transaction costs and other
(7) |
|
4,531 |
|
|
— |
|
|
1,107 |
|
|
5,638 |
|
|
— |
|
| Estimated income taxes on above
adjustments to net loss and other discrete tax items (8) |
|
(247,178 |
) |
|
(683,473 |
) |
|
(91,432 |
) |
|
(338,610 |
) |
|
(763,877 |
) |
| Adjusted net
income (loss) (non-GAAP measure) |
|
$ |
28,801 |
|
|
$ |
46,905 |
|
|
$ |
(9,097 |
) |
|
$ |
19,704 |
|
|
$ |
70,344 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Adjusted net income
(loss) per common share |
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
0.08 |
|
|
$ |
0.13 |
|
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
$ |
0.20 |
|
| Diluted |
|
$ |
0.08 |
|
|
$ |
0.13 |
|
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
$ |
0.20 |
|
(1) 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.(2) Full cost pool ceiling test write-downs
related to the Company’s oil and natural gas properties.(3)
Gain on extinguishment related to the Company’s debt
exchange.(4) Settlements related to previously outstanding
litigation, the most significant of which pertaining to a $28
million payment to Evolution in connection with the settlement
resolving all outstanding disputes and claims.(5) Write-off
of debt issuance costs associated with the Company’s senior secured
bank credit facility, related to reductions in the Company’s lender
commitments resulting from (1) the May 2016 redetermination and (2)
the February 2016 amendment.(6) Severance-related payments
associated with the Company’s February-2016 workforce reduction.(7)
Transaction costs related to the Company’s debt exchange
during the three months ended June 30, 2016 and a loss on sublease
during the three months ended March 31, 2016.(8) The
estimated income tax impacts on adjustments to net loss are
generally computed based upon a statutory rate of 38%, applicable
to all periods presented, with the exception of the write-down on
oil and natural gas properties, which are computed individually
based upon the Company’s effective tax rate. In addition,
recorded valuation allowances of $30.5 million have been adjusted
for the three and six months ended June 30, 2015.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of cash flows from operations
(GAAP measure) to adjusted cash flows from operations (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. Management believes that it is important to
consider this additional measure, along with cash flows from
operations, as it believes the non-GAAP measure can often be a
better way to discuss changes in operating trends in its business
caused by changes in production, prices, operating costs and
related factors, without regard to whether the earned or incurred
item was collected or paid during that period.
| |
|
Three Months Ended |
|
Six Months Ended |
| In thousands |
|
June 30, |
|
March 31, |
|
June 30, |
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net loss (GAAP
measure) |
|
$ |
(380,668 |
) |
|
$ |
(1,148,499 |
) |
|
$ |
(185,193 |
) |
|
$ |
(565,861 |
) |
|
$ |
(1,256,245 |
) |
| Adjustments to
reconcile to adjusted cash flows from operations |
|
|
|
|
|
|
|
|
|
|
| Depletion, depreciation, and
amortization |
|
66,541 |
|
|
147,940 |
|
|
77,366 |
|
|
143,907 |
|
|
297,898 |
|
| Deferred income taxes |
|
(222,940 |
) |
|
(634,472 |
) |
|
(95,115 |
) |
|
(318,055 |
) |
|
(700,508 |
) |
| Stock-based compensation |
|
3,263 |
|
|
7,118 |
|
|
859 |
|
|
4,122 |
|
|
14,967 |
|
| Noncash fair value adjustments on
commodity derivatives |
|
150,235 |
|
|
173,077 |
|
|
95,053 |
|
|
245,288 |
|
|
238,466 |
|
| Gain on debt extinguishment |
|
(12,278 |
) |
|
— |
|
|
(94,991 |
) |
|
(107,269 |
) |
|
— |
|
| Write-down of oil and natural gas
properties |
|
479,400 |
|
|
1,705,800 |
|
|
256,000 |
|
|
735,400 |
|
|
1,852,000 |
|
| Other |
|
9,439 |
|
|
620 |
|
|
2,890 |
|
|
12,329 |
|
|
482 |
|
| Adjusted cash
flows from operations (non-GAAP measure)
(1) |
|
92,992 |
|
|
251,584 |
|
|
56,869 |
|
|
149,861 |
|
|
447,060 |
|
| Net change in assets and
liabilities relating to operations |
|
(32,077 |
) |
|
37,373 |
|
|
(54,840 |
) |
|
(86,917 |
) |
|
(20,339 |
) |
| Cash flows from
operations (GAAP measure) |
|
$ |
60,915 |
|
|
$ |
288,957 |
|
|
$ |
2,029 |
|
|
$ |
62,944 |
|
|
$ |
426,721 |
|
(1) The three and six-month periods ended
June 30, 2016 include a $28 million payment to Evolution in
connection with our settlement agreement to resolve all outstanding
disputes and claims, and the three-month period ended March 31,
2016 includes severance-related payments associated with the 2016
workforce reduction of approximately $9 million. Excluding
these payments, adjusted cash flows from operations would have
totaled $121 million and $66 million for the three months ended
June 30, 2016 and March 31, 2016, respectively, and $187 million
for the six months ended June 30, 2016.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of commodity derivatives income
(expense) (GAAP measure) to noncash fair value adjustments on
commodity derivatives (non-GAAP measure)
Noncash fair value adjustments on commodity
derivatives is a non-GAAP measure and is different from “Commodity
derivatives expense (income)” in the Unaudited Condensed
Consolidated Statements of Operations in that the noncash fair
value adjustments on commodity derivatives represents only the net
change between periods of the fair market values of open commodity
derivative positions, and excludes the impact of settlements on
commodity derivatives during the period. Management believes
that noncash fair value adjustments on commodity derivatives is a
useful supplemental disclosure to “Commodity derivatives expense
(income)” because the GAAP measure also includes settlements on
commodity derivatives during the period; the non-GAAP measure is
widely used within the industry and by securities analysts, banks
and credit rating agencies in calculating EBITDA and in adjusting
net income to present those measures on a comparative basis across
companies, as well as to assess compliance with certain debt
covenants.
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
| In
thousands |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Receipt on settlements
of commodity derivatives |
|
$ |
52,026 |
|
|
$ |
124,151 |
|
|
$ |
72,227 |
|
|
$ |
124,253 |
|
|
$ |
272,616 |
|
| Noncash fair value
adjustments on commodity derivatives (non-GAAP measure) |
|
(150,235 |
) |
|
(173,077 |
) |
|
(95,053 |
) |
|
(245,288 |
) |
|
(238,466 |
) |
| Commodity derivatives income
(expense) (GAAP measure) |
|
$ |
(98,209 |
) |
|
$ |
(48,926 |
) |
|
$ |
(22,826 |
) |
|
$ |
(121,035 |
) |
|
$ |
34,150 |
|
| |
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS
(UNAUDITED)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Production
(daily – net of royalties) |
|
|
|
|
|
|
|
|
|
|
| Oil (barrels) |
|
61,952 |
|
|
69,837 |
|
|
66,139 |
|
|
64,045 |
|
|
70,199 |
|
| Gas (mcf) |
|
15,328 |
|
|
23,273 |
|
|
19,270 |
|
|
17,299 |
|
|
23,014 |
|
| BOE (6:1) |
|
64,506 |
|
|
73,716 |
|
|
69,351 |
|
|
66,929 |
|
|
74,034 |
|
| Unit sales
price (excluding derivative settlements) |
|
|
|
|
|
|
|
|
|
|
| Oil (per barrel) |
|
$ |
43.38 |
|
|
$ |
56.92 |
|
|
$ |
30.71 |
|
|
$ |
36.84 |
|
|
$ |
51.47 |
|
| Gas (per mcf) |
|
1.50 |
|
|
2.44 |
|
|
1.70 |
|
|
1.61 |
|
|
2.49 |
|
| BOE (6:1) |
|
42.02 |
|
|
54.69 |
|
|
29.76 |
|
|
35.67 |
|
|
49.58 |
|
| Unit sales
price (including derivative settlements) |
|
|
|
|
|
|
|
|
|
|
| Oil (per barrel) |
|
$ |
52.61 |
|
|
$ |
76.30 |
|
|
$ |
42.71 |
|
|
$ |
47.50 |
|
|
$ |
72.79 |
|
| Gas (per mcf) |
|
1.50 |
|
|
2.89 |
|
|
1.70 |
|
|
1.61 |
|
|
2.90 |
|
| BOE (6:1) |
|
50.88 |
|
|
73.20 |
|
|
41.20 |
|
|
45.87 |
|
|
69.92 |
|
| NYMEX
differentials |
|
|
|
|
|
|
|
|
|
|
| Gulf Coast region |
|
|
|
|
|
|
|
|
|
|
| Oil (per barrel) |
|
$ |
(1.22 |
) |
|
$ |
1.86 |
|
|
$ |
(1.95 |
) |
|
$ |
(1.78 |
) |
|
$ |
0.79 |
|
| Gas (per mcf) |
|
(0.69 |
) |
|
(0.10 |
) |
|
(0.26 |
) |
|
(0.46 |
) |
|
(0.17 |
) |
| Rocky Mountain region |
|
|
|
|
|
|
|
|
|
|
| Oil (per barrel) |
|
$ |
(3.98 |
) |
|
$ |
(6.48 |
) |
|
$ |
(5.04 |
) |
|
$ |
(4.73 |
) |
|
$ |
(7.19 |
) |
| Gas (per mcf) |
|
(0.80 |
) |
|
(0.68 |
) |
|
(0.34 |
) |
|
(0.56 |
) |
|
(0.51 |
) |
| Total company |
|
|
|
|
|
|
|
|
|
|
| Oil (per barrel) |
|
$ |
(2.18 |
) |
|
$ |
(0.89 |
) |
|
$ |
(3.02 |
) |
|
$ |
(2.81 |
) |
|
$ |
(1.87 |
) |
| Gas (per mcf) |
|
(0.73 |
) |
|
(0.30 |
) |
|
(0.29 |
) |
|
(0.50 |
) |
|
(0.29 |
) |
| |
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS
(UNAUDITED)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
|
Average Daily Volumes (BOE/d) (6:1) |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Tertiary oil
production |
|
|
|
|
|
|
|
|
|
|
| Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
| Mature properties (1) |
|
9,415 |
|
|
11,170 |
|
|
9,666 |
|
|
9,540 |
|
|
10,987 |
|
| Delhi |
|
3,996 |
|
|
3,623 |
|
|
3,971 |
|
|
3,984 |
|
|
3,587 |
|
| Hastings |
|
4,972 |
|
|
5,350 |
|
|
5,068 |
|
|
5,020 |
|
|
5,024 |
|
| Heidelberg |
|
5,246 |
|
|
5,885 |
|
|
5,346 |
|
|
5,296 |
|
|
5,955 |
|
| Oyster Bayou |
|
5,088 |
|
|
5,936 |
|
|
5,494 |
|
|
5,291 |
|
|
5,899 |
|
| Tinsley |
|
7,335 |
|
|
8,740 |
|
|
7,899 |
|
|
7,617 |
|
|
8,833 |
|
| Total Gulf Coast region |
|
36,052 |
|
|
40,704 |
|
|
37,444 |
|
|
36,748 |
|
|
40,285 |
|
| Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
| Bell Creek |
|
3,160 |
|
|
1,880 |
|
|
3,020 |
|
|
3,090 |
|
|
1,922 |
|
| Total Rocky Mountain region |
|
3,160 |
|
|
1,880 |
|
|
3,020 |
|
|
3,090 |
|
|
1,922 |
|
| Total tertiary oil
production |
|
39,212 |
|
|
42,584 |
|
|
40,464 |
|
|
39,838 |
|
|
42,207 |
|
| Non-tertiary
oil and gas production |
|
|
|
|
|
|
|
|
|
|
| Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
| Mississippi |
|
1,280 |
|
|
1,400 |
|
|
978 |
|
|
1,129 |
|
|
1,580 |
|
| Texas |
|
4,104 |
|
|
6,304 |
|
|
6,148 |
|
|
5,126 |
|
|
6,396 |
|
| Other |
|
456 |
|
|
906 |
|
|
549 |
|
|
503 |
|
|
956 |
|
| Total Gulf Coast region |
|
5,840 |
|
|
8,610 |
|
|
7,675 |
|
|
6,758 |
|
|
8,932 |
|
| Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
| Cedar Creek Anticline |
|
16,325 |
|
|
18,089 |
|
|
17,778 |
|
|
17,052 |
|
|
18,304 |
|
| Other |
|
3,129 |
|
|
4,433 |
|
|
3,434 |
|
|
3,281 |
|
|
4,591 |
|
| Total Rocky Mountain region |
|
19,454 |
|
|
22,522 |
|
|
21,212 |
|
|
20,333 |
|
|
22,895 |
|
| Total non-tertiary
production |
|
25,294 |
|
|
31,132 |
|
|
28,887 |
|
|
27,091 |
|
|
31,827 |
|
| Total
production |
|
64,506 |
|
|
73,716 |
|
|
69,351 |
|
|
66,929 |
|
|
74,034 |
|
| Pending
property sales |
|
|
|
|
|
|
|
|
|
|
| Williston Assets (2) |
|
(1,267 |
) |
|
(1,561 |
) |
|
(1,364 |
) |
|
(1,315 |
) |
|
(1,602 |
) |
| Continuing
production |
|
63,239 |
|
|
72,155 |
|
|
67,987 |
|
|
65,614 |
|
|
72,432 |
|
(1) Total mature properties include Brookhaven, Cranfield,
Eucutta, Little Creek, Lockhart Crossing, Mallalieu, Martinville,
McComb and Soso fields.(2) Includes non-tertiary production
in the Rocky Mountain region related to the sale of remaining
non-core assets in the Williston Basin of North Dakota and Montana,
expected to close in the third quarter of 2016.
DENBURY RESOURCES
INC.PER-BOE DATA (UNAUDITED)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Oil and natural gas
revenues |
|
$ |
42.02 |
|
|
$ |
54.69 |
|
|
$ |
29.76 |
|
|
$ |
35.67 |
|
|
$ |
49.58 |
|
| Receipt on settlements
of commodity derivatives |
|
8.86 |
|
|
18.51 |
|
|
11.44 |
|
|
10.20 |
|
|
20.34 |
|
| Lease operating
expenses |
|
(17.04 |
) |
|
(19.70 |
) |
|
(16.23 |
) |
|
(16.62 |
) |
|
(20.39 |
) |
| Production and ad
valorem taxes |
|
(2.90 |
) |
|
(4.43 |
) |
|
(2.72 |
) |
|
(2.81 |
) |
|
(3.93 |
) |
| Marketing expenses, net
of third-party purchases, and plant operating expenses |
|
(1.85 |
) |
|
(1.86 |
) |
|
(1.84 |
) |
|
(1.84 |
) |
|
(1.66 |
) |
| Production netback |
|
29.09 |
|
|
47.21 |
|
|
20.41 |
|
|
24.60 |
|
|
43.94 |
|
| CO2 sales, net of
operating and exploration expenses |
|
0.95 |
|
|
0.93 |
|
|
0.89 |
|
|
0.92 |
|
|
0.91 |
|
| General and
administrative expenses |
|
(3.84 |
) |
|
(5.66 |
) |
|
(5.37 |
) |
|
(4.63 |
) |
|
(6.29 |
) |
| Interest expense,
net |
|
(6.14 |
) |
|
(5.94 |
) |
|
(6.68 |
) |
|
(6.42 |
) |
|
(5.97 |
) |
| Other |
|
(4.22 |
) |
|
0.97 |
|
|
(0.24 |
) |
|
(2.16 |
) |
|
0.77 |
|
| Changes in assets and
liabilities relating to operations |
|
(5.46 |
) |
|
5.57 |
|
|
(8.69 |
) |
|
(7.14 |
) |
|
(1.52 |
) |
| Cash flows from operations |
|
10.38 |
|
|
43.08 |
|
|
0.32 |
|
|
5.17 |
|
|
31.84 |
|
| DD&A |
|
(11.34 |
) |
|
(22.05 |
) |
|
(12.26 |
) |
|
(11.81 |
) |
|
(22.23 |
) |
| Write-down of oil and
natural gas properties |
|
(81.67 |
) |
|
(254.29 |
) |
|
(40.56 |
) |
|
(60.37 |
) |
|
(138.21 |
) |
| Deferred income
taxes |
|
37.98 |
|
|
94.58 |
|
|
15.07 |
|
|
26.11 |
|
|
52.28 |
|
| Gain on debt
extinguishment |
|
2.09 |
|
|
— |
|
|
15.05 |
|
|
8.81 |
|
|
— |
|
| Noncash fair value
adjustments on commodity derivatives |
|
(25.59 |
) |
|
(25.80 |
) |
|
(15.06 |
) |
|
(20.14 |
) |
|
(17.79 |
) |
| Other noncash
items |
|
3.30 |
|
|
(6.73 |
) |
|
8.10 |
|
|
5.78 |
|
|
0.36 |
|
| Net loss |
|
$ |
(64.85 |
) |
|
$ |
(171.21 |
) |
|
$ |
(29.34 |
) |
|
$ |
(46.45 |
) |
|
$ |
(93.75 |
) |
| |
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED) (1)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
March 31, |
|
June 30, |
| In
thousands |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Capital expenditures by
project |
|
|
|
|
|
|
|
|
|
|
| Tertiary oil fields |
|
$ |
31,934 |
|
|
$ |
53,694 |
|
|
$ |
31,964 |
|
|
$ |
63,898 |
|
|
$ |
96,594 |
|
| Non-tertiary fields |
|
4,903 |
|
|
21,595 |
|
|
5,873 |
|
|
10,776 |
|
|
52,579 |
|
| Capitalized internal costs (2) |
|
11,314 |
|
|
15,499 |
|
|
14,473 |
|
|
25,787 |
|
|
33,911 |
|
| Oil and natural gas capital
expenditures |
|
48,151 |
|
|
90,788 |
|
|
52,310 |
|
|
100,461 |
|
|
183,084 |
|
| CO2 pipelines |
|
135 |
|
|
5,517 |
|
|
— |
|
|
135 |
|
|
6,296 |
|
| CO2 sources |
|
— |
|
|
630 |
|
|
— |
|
|
— |
|
|
10,482 |
|
| Other |
|
9 |
|
|
282 |
|
|
8 |
|
|
17 |
|
|
44 |
|
| Capital expenditures,
before acquisitions and capitalized interest |
|
48,295 |
|
|
97,217 |
|
|
52,318 |
|
|
100,613 |
|
|
199,906 |
|
| Acquisitions of oil and
natural gas properties |
|
680 |
|
|
21,698 |
|
|
224 |
|
|
904 |
|
|
21,959 |
|
| Capital expenditures,
before capitalized interest |
|
48,975 |
|
|
118,915 |
|
|
52,542 |
|
|
101,517 |
|
|
221,865 |
|
| Capitalized
interest |
|
6,289 |
|
|
8,738 |
|
|
5,780 |
|
|
12,069 |
|
|
17,147 |
|
| Capital expenditures,
total |
|
$ |
55,264 |
|
|
$ |
127,653 |
|
|
$ |
58,322 |
|
|
$ |
113,586 |
|
|
$ |
239,012 |
|
(1) Capital expenditure amounts include accrued
capital.(2) Includes capitalized internal acquisition,
exploration and development costs and pre-production tertiary
startup costs.
DENBURY RESOURCES
INC.SELECTED BALANCE SHEET AND CASH FLOW DATA
(UNAUDITED) (1)
| |
|
June 30, |
|
December 31, |
| In
thousands |
|
2016 |
|
2015 |
| Cash and cash
equivalents |
|
$ |
2,545 |
|
|
$ |
2,812 |
|
| Total assets |
|
4,989,973 |
|
|
5,885,533 |
|
| |
|
|
|
|
| Borrowings under senior
secured bank credit facility |
|
$ |
320,000 |
|
|
$ |
175,000 |
|
| Borrowings under senior
secured second lien notes (principal only) (2) |
|
614,919 |
|
|
— |
|
| Borrowings under senior
subordinated notes (principal only) |
|
1,642,198 |
|
|
2,852,250 |
|
| Financing and capital
leases |
|
267,572 |
|
|
283,090 |
|
| Total debt (principal only) |
|
$ |
2,844,689 |
|
|
$ |
3,310,340 |
|
| |
|
|
|
|
| Total stockholders’
equity |
|
$ |
865,304 |
|
|
$ |
1,248,912 |
|
(1) Certain amounts as of December 31, 2015 have been
reclassified to conform to the current year presentation. On
the Company’s Unaudited Condensed Consolidated Balance Sheets, (1)
debt issuance costs associated with the Company’s senior
subordinated notes have been reclassified from “Other assets” to
“Long-term debt, net of current portion” and (2) deferred tax
assets have been reclassified from “Deferred tax assets, net” to
“Deferred tax liabilities, net.” Such reclassifications were
made as a result of the adoption of new accounting pronouncements
and had no impact on previously reported net income or cash
flows.(2) Excludes $255 million of future interest payable on
the notes as of June 30, 2016, accounted for as debt for financial
reporting purposes. See Debt Reduction above for further
discussion.
| |
|
Six Months Ended |
| |
|
June 30, |
| In
thousands |
|
2016 |
|
2015 |
| Cash provided by (used
in) |
|
|
|
|
| Operating activities |
|
$ |
62,944 |
|
|
$ |
426,721 |
|
| Investing activities |
|
(127,520 |
) |
|
(336,512 |
) |
| Financing activities |
|
64,309 |
|
|
(108,949 |
) |
| |
|
|
|
|
| Cash dividends
paid |
|
$ |
413 |
|
|
$ |
43,528 |
|
| |
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