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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220224005149/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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