Denbury Resources Inc. (NYSE: DNR) (“Denbury” or the “Company”)
today announced its fourth quarter and full-year 2018 financial and
operating results, along with its 2019 capital budget and currently
estimated 2019 production.
2018 FOURTH QUARTER AND FULL-YEAR
HIGHLIGHTS
Financial
- Delivered net income of $174 million for 4Q 2018 and $323
million for 2018◦ Adjusted net income(1) (a non-GAAP measure) of
$46 million for 4Q 2018 and $220 million for 2018◦ Adjusted
EBITDAX(1) (a non-GAAP measure) of $141 million for 4Q 2018 and
$584 million for 2018◦ Generated $81 million of free cash flow(1)
(a non-GAAP measure) in 2018
- Incurred $323 million of development capital, within original
2018 capital budget range
- Reduced debt principal by $243 million in 2018, ending the year
with no outstanding borrowings on the Company’s bank credit
facility and $39 million of cash on hand, resulting in a total net
debt reduction of over $280 million
- Reduced year-end 2018 ratio of net debt to 2018 Adjusted
EBITDAX(1) to 4.2x (including hedge settlements) and 3.3x
(excluding hedge settlements), compared to 6.6x and 5.9x,
respectively, at year-end 2017
- PV-10 Value(1) (a non-GAAP measure) increased to $4.0 billion,
up 59% from $2.5 billion at year-end 2017
- Reduced full-year 2018 G&A expenses by $30 million, or 30%
from 2017
Operational and Other
- Entered into a Definitive Merger Agreement with Penn Virginia
Corporation
- Proved reserves increased to 262 million barrels of oil
equivalent (“BOE”), representing 111% replacement of 2018
production
- Produced 59,867 BOE per day (“BOE/d”) for 4Q 2018, up 1% from
3Q 2018, and 60,341 BOE/d for full-year 2018, up slightly from
2017
- Drilled seven successful wells during full-year 2018 within the
Cedar Creek Anticline exploitation program
- Sanctioned a major CO2 enhanced oil recovery development
project at Cedar Creek Anticline
2019 BUDGET HIGHLIGHTS
- 2019 development capital budget range of $240 million to $260
million, 20% to 25% lower than in 2018
- Current capital program spreads CO2 pipeline extension to CCA
over two years, with minimal impact to peak production timing
- 2019 production expected to average 56,000 to 60,000 BOE/d
- Expect to generate free cash flow(2) of $50 million to $100
million in 2019 assuming $50 per Bbl WTI oil price
(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) Represents currently
forecasted cash flow, less development capital, capitalized
interest and interest treated as debt reduction.
2018 FOURTH QUARTER RESULTS
Sequential and year-over-year comparisons of
selected quarterly information are shown in the following
table:
|
|
Quarter Ended |
(in
millions, except per share and unit data) |
|
Dec. 31, 2018 |
|
Sept. 30, 2018 |
|
Dec. 31, 2017 |
Net income |
|
$ |
174 |
|
|
$ |
78 |
|
|
$ |
127 |
|
Adjusted
net income(1) (non-GAAP measure) |
|
46 |
|
|
59 |
|
|
48 |
|
Net income per diluted
share |
|
0.38 |
|
|
0.17 |
|
|
0.31 |
|
Adjusted
net income per diluted share(1)(2) (non-GAAP measure) |
|
0.10 |
|
|
0.13 |
|
|
0.12 |
|
Cash flows from
operations |
|
136 |
|
|
148 |
|
|
124 |
|
Adjusted
cash flows from operations less special items(1) (non-GAAP
measure) |
|
133 |
|
|
135 |
|
|
134 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
336 |
|
|
$ |
388 |
|
|
$ |
321 |
|
Payment on settlements
of commodity derivatives |
|
(26 |
) |
|
(62 |
) |
|
(9 |
) |
Revenues
and commodity derivative settlements combined |
|
$ |
310 |
|
|
$ |
326 |
|
|
$ |
312 |
|
|
|
|
|
|
|
|
Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
60.50 |
|
|
$ |
71.44 |
|
|
$ |
57.17 |
|
Average realized oil
price per barrel (including derivative settlements) |
|
55.75 |
|
|
59.78 |
|
|
55.49 |
|
|
|
|
|
|
|
|
Total production
(BOE/d) |
|
59,867 |
|
|
59,181 |
|
|
61,144 |
|
2018 FULL-YEAR RESULTS
Year-over-year comparisons of selected annual
information are shown in the following table:
|
|
Year Ended |
(in
millions, except per share and unit data) |
|
Dec. 31, 2018 |
|
Dec. 31, 2017 |
Net income |
|
$ |
323 |
|
|
$ |
163 |
|
Adjusted
net income(1) (non-GAAP measure) |
|
220 |
|
|
55 |
|
Net income per diluted
share |
|
0.71 |
|
|
0.41 |
|
Adjusted
net income per diluted share(1)(2) (non-GAAP measure) |
|
0.48 |
|
|
0.14 |
|
Cash flows from
operations |
|
530 |
|
|
267 |
|
Adjusted
cash flows from operations less special items(1) (non-GAAP
measure) |
|
527 |
|
|
329 |
|
|
|
|
|
|
Revenues |
|
$ |
1,454 |
|
|
$ |
1,116 |
|
Payment on settlements
of commodity derivatives |
|
(175 |
) |
|
(48 |
) |
Revenues
and commodity derivative settlements combined |
|
$ |
1,279 |
|
|
$ |
1,068 |
|
|
|
|
|
|
Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
66.11 |
|
|
$ |
50.64 |
|
Average realized oil
price per barrel (including derivative settlements) |
|
57.91 |
|
|
48.40 |
|
|
|
|
|
|
Total production
(BOE/d) |
|
60,341 |
|
|
60,298 |
|
(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 456.7 million, 458.5 million, and
405.8 million for the three months ended December 31, 2018,
September 30, 2018 and December 31, 2017, respectively, and 456.2
million and 395.9 million for the years ended December 31, 2018 and
2017, respectively.
MANAGEMENT COMMENT
Chris Kendall, Denbury’s CEO, commented, “I am
pleased with where Denbury stands today and I continue to be very
optimistic about the Company’s future. Through the hard work,
innovative thinking, and dedication of our great employees, in 2018
we set Company records in safety and environmental performance,
drove multiple exploitation successes, significantly reduced debt,
and sanctioned the EOR development of CCA, setting the path toward
unlocking the massive resource and cash flow potential of that
great asset. The resilience of our high margin, low decline
asset base continued to shine, and the resourcefulness of our teams
in deriving even greater value from those high-quality assets was
evident, particularly with the highly successful phase 5
development of the Bell Creek EOR flood. We drove several new
exploitation accomplishments in 2018 with the drilling of seven
successful exploitation wells in the Cedar Creek Anticline and a
promising Tinsley Field Cotton Valley test, and we continue to
identify even more exciting new exploitation opportunities across
our portfolio. While many peer companies are now attempting
to live within cash flow, this discipline is the standard at
Denbury, as evidenced by over $80 million in free cash generated in
2018. We also made great progress on our balance sheet during
the year, reducing net debt over $280 million and improving our
leverage ratio by nearly two and a half turns, ending the year with
cash on hand and nothing drawn on our bank line.
“Considering the uncertainty in the current oil
price environment, we developed our 2019 budget based on a $50 oil
price, exercising the great flexibility provided by our resilient,
low decline assets. The midpoint of our resulting $240 to
$260 million capital budget range is 23% lower than the $323
million of capital we spent in 2018. Based on a $50 oil price
assumption and our current plans and estimates, we expect to
generate between $50 million and $100 million of free cash flow in
2019. This provides us optionality for continuing to improve
the balance sheet or to conserve cash for future development
capital.
“A key factor in our 2019 capital plan is the
timing of our CO2 pipeline extension to Cedar Creek
Anticline. We have adjusted our plan to now complete pipeline
construction in 2020, allowing us to defer roughly $100 million in
spending this year with only a minor impact on the overall
development plan and the expected tertiary production ramp.
“Lastly and importantly, we remain highly
focused on our merger with Penn Virginia Corporation. We
strongly believe this combination is a great opportunity for the
stakeholders of both companies from both a short-term and long-term
perspective and over a wide range of oil prices. Leading up
to the planned April 17 shareholder meetings, we look forward to
engaging with shareholders of both companies to further discuss the
mutual benefits and the great potential created by this
merger.”
REVIEW OF OPERATING AND FINANCIAL RESULTS
Denbury’s production averaged 59,867 BOE/d
during fourth quarter 2018, including 37,764 barrels of oil per day
(“Bbls/d”) from tertiary properties and 22,103 BOE/d from
non-tertiary properties. On a sequential-quarter basis,
production in fourth quarter 2018 increased by 686 BOE/d, or 1%,
from third quarter 2018 (the “prior quarter”), primarily due to
continued response from Bell Creek’s CO2 flood expansion and
additional drilling in the Company’s Cedar Creek Anticline Mission
Canyon drilling program. On an annual basis, Denbury’s 2018
production averaged 60,341 BOE/d, slightly above 2017 levels.
Further production information is provided on page 19 of this press
release.
Denbury’s average realized oil price, excluding
derivative contracts, was $60.50 per Bbl in fourth quarter 2018,
compared to $71.44 per Bbl in the prior quarter and $57.17 per Bbl
in fourth quarter 2017. Including derivative settlements,
Denbury’s average realized oil price was $55.75 per Bbl in fourth
quarter 2018, compared to $59.78 per Bbl in the prior quarter and
$55.49 per Bbl in fourth quarter 2017.
The Company’s average realized oil price in
fourth quarter 2018 was $1.69 per Bbl above NYMEX WTI prices,
compared to $1.84 per Bbl above NYMEX WTI prices in the prior
quarter and $1.70 per Bbl above NYMEX WTI prices in fourth quarter
2017. The sequential decrease was primarily attributable to
softening of the Company’s Rocky Mountain region differentials,
partially offset by improvement in LLS index prices relative to
NYMEX WTI. During fourth quarter 2018, the Company sold
approximately 60% of its crude oil at prices based on, or partially
tied to, the LLS index price, and the balance at prices based on
various other indexes tied to NYMEX WTI prices, primarily in the
Rocky Mountain region.
The Company’s total lease operating expenses in
fourth quarter 2018 were $128 million, an increase of $6 million,
or 5%, on an absolute-dollar basis when compared to the prior
quarter and an increase of $24 million, or 22%, compared to fourth
quarter 2017. The sequential and year-over-year increases
were impacted by higher CO2 expense and increased workover
activity, with the year-over-year increase also impacted by the
fourth quarter of 2017 including a $7 million reduction for pricing
adjustments of certain industrial-sourced CO2.
Taxes other than income, which include ad
valorem, production and franchise taxes, decreased $5 million from
the third quarter of 2018 due to a decrease in oil and natural gas
revenues.
General and administrative expenses were $10
million in fourth quarter 2018, a decrease of $11 million compared
to the prior quarter and a decrease of $10 million compared to
fourth quarter 2017, mainly due to downward adjustments in
estimated performance-based compensation in the current
quarter. On an annual basis, net general and administrative
expenses totaled $71 million, a decrease of $30 million, or 30%,
from 2017 to 2018, with the decrease primarily from
employee-related costs saved due to the August 2017 workforce
reductions and a continued focus on cost efficiencies.
Interest expense, net of capitalized interest,
totaled $18 million in fourth quarter 2018, a slight decrease of $1
million from the prior quarter and a decrease of $6 million from
fourth quarter 2017. Interest expense excludes approximately
$21 million and $15 million in the fourth quarters of 2018 and
2017, respectively, of interest recorded as a reduction of debt for
financial reporting purposes instead of interest expense, due to
the accounting associated with debt exchange transactions completed
in 2017 and 2018. A schedule detailing the components of
interest expense is included on page 21 of this press release.
Depletion, depreciation, and amortization
(“DD&A”) increased to $60 million during fourth quarter 2018,
compared to $53 million in fourth quarter 2017. The
difference was primarily due to an increase in oil and gas property
costs and future development costs and accelerated depreciation of
leasehold improvement costs due to the sublease of office
space.
Other expenses were $73 million in the fourth
quarter of 2018, which includes (1) a $49 million accrued expense
associated with a trial court’s unfavorable ruling related to the
non-delivery of helium volumes from the Company’s Riley Ridge Unit
under a helium supply contract, a matter in which the Company
intends to vigorously defend its position and pursue all of its
rights, which may include an appeal of the trial court’s ruling,
(2) an $18 million impairment for an investment related to a
proposed plant in the Gulf Coast that would potentially supply CO2
to Denbury, due to uncertainty that the project will achieve
financial close, and (3) $4 million of transaction costs related to
the potential merger with Penn Virginia Corporation.
Denbury’s effective tax rates for the fourth
quarter and full-year 2018 were 22% and 21%, respectively, which is
lower than the Company’s statutory rate of 25% primarily due to
recognized tax benefits for enhanced oil recovery credits, as well
as greater tax versus book expense for stock-based
compensation. The Company’s statutory rate decreased from the
prior-year rate of 38% due to reduction of the federal income tax
rate from 35% to 21% as enacted by the Tax Cut and Jobs Act in
December 2017.
2018 PROVED RESERVES
The Company’s total estimated proved oil and
natural gas reserves at December 31, 2018 were 262 million
BOE, consisting of 255 million barrels of crude oil, condensate and
natural gas liquids (together, “liquids”), and 43 billion cubic
feet (7 million BOE) of natural gas. Reserves were 97%
liquids and 88% proved developed, with 58% of total proved reserves
attributable to Denbury’s CO2 tertiary operations. Total
proved reserves increased by 24 million BOE, representing a 111%
replacement of 2018 production. The increase was primarily
due to 22 million BOE of positive revisions of previous estimates
associated with changes in commodity prices, production timing and
performance.
The following table details changes in the
Company’s estimated quantities of proved reserves:
|
|
Oil(MMBbl) |
|
Gas(Bcf) |
|
MMBOE |
|
PV-10 Value(1) |
Balance at December 31,
2017 |
|
253 |
|
|
43 |
|
|
260 |
|
|
$ |
2.5 |
billion |
Revisions
of previous estimates |
|
21 |
|
|
6 |
|
|
22 |
|
|
|
Improved
recovery |
|
2 |
|
|
0 |
|
|
2 |
|
|
|
2018
production |
|
(21 |
) |
|
(4 |
) |
|
(22 |
) |
|
|
Sales of
minerals or other revisions |
|
0 |
|
|
(2 |
) |
|
0 |
|
|
|
Balance at
December 31, 2018 |
|
255 |
|
|
43 |
|
|
262 |
|
|
$ |
4.0 |
billion |
(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.
Year-end 2018 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 $65.56 per Bbl for oil (based on NYMEX prices)
and $3.10 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 2017 were $51.34 per Bbl
of oil and $2.98 per MMBtu for natural gas, adjusted for prices
received at the field. The standardized measure of discounted
estimated future net cash flows after income taxes of Denbury’s
proved reserves at December 31, 2018 (“Standardized Measure”)
was $3.4 billion compared to $2.2 billion at December 31,
2017. PV-10 Value(1) was $4.0 billion at December 31,
2018, compared to $2.5 billion at December 31, 2017, which
represents a 59% year-over-year increase. See the
accompanying schedules for an explanation of the difference between
PV-10 Value(1) and the Standardized Measure and the uses of this
information.
Denbury’s estimated proved CO2 reserves at
year-end 2018, on a gross or 8/8th’s basis for operated fields,
together with its overriding royalty interest in LaBarge Field in
Wyoming, totaled 6.1 trillion cubic feet (“Tcf”), slightly lower
than CO2 reserves of 6.4 Tcf as of December 31, 2017 due
to 2018 production. Of these total CO2 reserves, 5.0 Tcf are
located in the Gulf Coast region and 1.1 Tcf in the Rocky Mountain
region. In addition to these proved CO2 reserves,
Denbury is currently purchasing CO2 from two industrial
facilities in the Gulf Coast region and a gas processing facility
in the Rocky Mountain region, all under long-term contractual
agreements. Although there are no proved CO2 reserves
associated with these long-term agreements, they currently supply
approximately 80 million cubic feet per day, or roughly 15% of the
CO2 Denbury is using for its tertiary operations.
2019 CAPITAL BUDGET AND PRODUCTION
ESTIMATES
Denbury’s 2019 capital budget, excluding
acquisitions and capitalized interest, is between $240 million and
$260 million, a decrease of 20% to 25% from the Company’s 2018
capital spending level. The budget provides for
approximate spending as follows:
- $100 million for tertiary oil field expenditures;
- $70 million for other areas, primarily non-tertiary oil field
expenditures including exploitation projects;
- $30 million for CO2 sources and pipelines; and
- $50 million for other capital items such as capitalized
internal acquisition, exploration and development costs and
pre-production tertiary startup costs.
In addition, capitalized interest for 2019 is
estimated at between $30 million and $40 million. At this
spending level, the Company currently anticipates 2019 production
of between 56,000 and 60,000 BOE/d and expects to generate free
cash flow of $50 million to $100 million assuming a $50 per Bbl WTI
oil price.
FOURTH QUARTER AND FULL-YEAR 2018
RESULTS CONFERENCE CALL INFORMATION
Denbury management will host a conference call
to review and discuss fourth quarter and full-year 2018 financial
and operating results, together with its financial and operating
outlook for 2019 and additional information related to the
acquisition of Penn Virginia, today, Wednesday, February 27, at
10:00 A.M. (Central). Members of Penn Virginia management
will be available to participate in certain portions of the
conference call. Additionally, Denbury will post 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 audio 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 426562.
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 ranges for 2019
production, capital expenditures and free cash flow, 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.
No Offer or Solicitation
This communication relates in part to a proposed
business combination transaction (the “Transaction”) between Penn
Virginia Corporation (“Penn Virginia”) and the Company. This
communication is for informational purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval, in any
jurisdiction, pursuant to the Transaction or otherwise, nor shall
there be any sale, issuance, exchange or transfer of the securities
referred to in this document in any jurisdiction in contravention
of applicable law. No offer of securities shall be made
except by means of a prospectus meeting the requirements of Section
10 of the Securities Act.
Additional Information and Where to Find
It
In connection with the Transaction, the Company
has filed with the Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-4 containing a joint proxy
statement of the Company and Penn Virginia and a prospectus of the
Company. The Transaction will be submitted to the Company’s
stockholders and Penn Virginia’s shareholders for their
consideration. The Company and Penn Virginia intend to file
updates of certain information contained in the joint proxy
statement/prospectus which is contained in the Form S-4, and may
also file other documents with the SEC regarding the
Transaction. A definitive joint proxy statement/prospectus
and any updating materials will be sent to the stockholders of the
Company and the shareholders of Penn Virginia.
INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND PENN
VIRGINIA ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT
PROXY STATEMENT/PROSPECTUS AND ANY UPDATES OR SUPPLEMENTS THERETO
REGARDING THE TRANSACTION, AND ALL OTHER RELEVANT DOCUMENTS THAT
ARE FILED OR WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR
ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION AND RELATED MATTERS.
Investors and security holders will be able to
obtain free copies of the registration statement and the joint
proxy statement/prospectus and all other documents filed or that
will be filed with the SEC by the Company or Penn Virginia through
the website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by the Company will be made available
free of charge on the Company’s website at www.denbury.com or
by directing a request to John Mayer, Director of Investor
Relations, Denbury Resources Inc., 5320 Legacy Drive, Plano, TX
75024, Tel. No. (972) 673-2000. Copies of documents filed with the
SEC by Penn Virginia will be made available free of charge on Penn
Virginia’s website at www.pennvirginia.com, under the heading “SEC
Filings,” or by directing a request to Investor Relations, Penn
Virginia Corporation, 16285 Park Ten Place, Houston, TX 77084,
Suite 500, Tel. No. (713) 722-6500.
Participants in
Solicitation
The Company, Penn Virginia and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies in respect to the Transaction.
Information regarding the Company’s directors
and executive officers is contained in the proxy statement for the
Company’s 2018 Annual Meeting of Stockholders filed with the SEC on
April 12, 2018, and certain of its Current Reports on Form
8-K. You can obtain free copies of these documents at the
SEC’s website at www.sec.gov or by accessing the Company’s website
at www.denbury.com. Information regarding Penn Virginia’s
executive officers and directors is contained in the proxy
statement for Penn Virginia’s 2018 Annual Meeting of Shareholders
filed with the SEC on March 28, 2018, and certain of its Current
Reports on Form 8-K. You can obtain free copies of these documents
at the SEC’s website at www.sec.gov or by accessing Penn Virginia’s
website at www.pennvirginia.com.
Investors may obtain additional information
regarding the interests of those persons and other persons who may
be deemed participants in the Transaction by reading the joint
proxy statement/prospectus regarding the Transaction. You may
obtain free copies of this document as described above.
Forward-Looking Statements and
Cautionary Statements
This communication contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. All statements, other than
statements of historical fact, included in this communication that
address activities, events or developments that the Company or Penn
Virginia expects, believes or anticipates will or may occur in the
future are forward-looking statements, including estimated 2019
production, 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. Words such as “estimate,” “project,”
“predict,” “believe,” “expect,” “anticipate,” “potential,”
“create,” “intend,” “could,” “may,” “foresee,” “plan,” “will,”
“guidance,” “look,” “outlook,” “goal,” “future,” “assume,”
“forecast,” “build,” “focus,” “work,” “continue” or the negative of
such terms or other variations thereof and words and terms of
similar substance used in connection with any discussion of future
plans, actions, or events identify forward-looking statements.
However, the absence of these words does not mean that the
statements are not forward-looking. These forward-looking
statements include, but are not limited to, statements regarding
Penn Virginia and its properties, margins, EOR potential, or
regarding the Transaction, pro forma descriptions of the combined
company and its operations, growth, cash flows, integration and
transition plans, synergies, opportunities and anticipated future
performance. These statements are based on engineering, geological,
financial and operating assumptions that Company and Penn Virginia
management believes are reasonable based on currently available
information; however, managements’ 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. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication. These
include the expected timing and likelihood of completion of the
Transaction, including the timing, receipt and terms and conditions
of any required governmental and regulatory approvals of the
Transaction that could reduce anticipated benefits or cause the
parties to abandon the Transaction, the ability to successfully
integrate the businesses, the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement, the possibility that stockholders of the Company
may not approve the issuance of new shares of common stock in the
Transaction or the amendment of the Company’s charter or that
shareholders of Penn Virginia may not approve the merger agreement,
the risk that the parties may not be able to satisfy the conditions
to the Transaction in a timely manner or at all, the risk that
pendency of the Transaction or announcements related thereto could
have adverse effects on the market price of the Company’s common
stock, the risk that the Transaction could have an adverse effect
on the Company’s and Penn Virginia’s operating results and
businesses generally, or cause them to incur substantial costs, the
risk that problems may arise in successfully integrating the
businesses of the companies, which may result in the combined
company not operating as effectively and efficiently as expected,
the risk that the combined company may be unable to achieve
synergies or it may take longer than expected to achieve those
synergies and other important factors that could cause actual
results to differ materially from those projected. All such factors
are difficult to predict and are beyond the Company’s or Penn
Virginia’s control, including those detailed in the Company’s
annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K that are available on its website at
www.denbury.com and on the SEC’s website at www.sec.gov, and those
detailed in Penn Virginia’s annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K that are
available on Penn Virginia’s website at www.pennvirginia.com and on
the SEC’s website at www.sec.gov. All forward-looking statements
are based on assumptions that the Company or Penn Virginia believe
to be reasonable but that may not prove to be accurate. Any
forward-looking statement speaks only as of the date on which such
statement is made, and the Company and Penn Virginia undertake no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law. Readers are cautioned not to
place undue reliance on these forward-looking statements that speak
only as of the date hereof.
FINANCIAL AND STATISTICAL DATA TABLES
AND RECONCILIATION SCHEDULES
Following are unaudited financial highlights for
the comparative three month and annual periods ended
December 31, 2018 and 2017 and the three month period ended
September 30, 2018. 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, with additional required disclosures included in
the Company’s Form 10-K:
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
In
thousands, except per-share data |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Revenues and
other income |
|
|
|
|
|
|
|
|
|
|
Oil
sales |
|
$ |
324,337 |
|
|
$ |
310,791 |
|
|
$ |
377,329 |
|
|
$ |
1,412,358 |
|
|
$ |
1,079,703 |
|
Natural
gas sales |
|
3,038 |
|
|
2,787 |
|
|
2,299 |
|
|
10,231 |
|
|
9,963 |
|
CO2 sales
and transportation fees |
|
8,729 |
|
|
7,649 |
|
|
8,149 |
|
|
31,145 |
|
|
26,182 |
|
Other
income |
|
2,251 |
|
|
5,362 |
|
|
7,196 |
|
|
19,891 |
|
|
13,938 |
|
Total
revenues and other income |
|
338,355 |
|
|
326,589 |
|
|
394,973 |
|
|
1,473,625 |
|
|
1,129,786 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses |
|
128,453 |
|
|
104,873 |
|
|
122,527 |
|
|
489,720 |
|
|
447,799 |
|
Marketing
and plant operating expenses |
|
13,602 |
|
|
12,062 |
|
|
12,427 |
|
|
50,002 |
|
|
51,820 |
|
CO2
discovery and operating expenses |
|
1,146 |
|
|
647 |
|
|
708 |
|
|
2,816 |
|
|
3,099 |
|
Taxes
other than income |
|
22,773 |
|
|
24,359 |
|
|
27,344 |
|
|
104,670 |
|
|
87,207 |
|
General
and administrative expenses |
|
10,272 |
|
|
20,503 |
|
|
21,579 |
|
|
71,495 |
|
|
101,806 |
|
Interest,
net of amounts capitalized of $10,262, $8,545, $9,514, $37,079 and
$30,762, respectively |
|
17,714 |
|
|
23,478 |
|
|
18,527 |
|
|
69,688 |
|
|
99,263 |
|
Depletion, depreciation, and amortization |
|
59,738 |
|
|
53,265 |
|
|
51,316 |
|
|
216,449 |
|
|
207,713 |
|
Commodity
derivatives expense (income) |
|
(210,688 |
) |
|
87,288 |
|
|
44,577 |
|
|
(21,087 |
) |
|
77,576 |
|
Other
expenses |
|
72,700 |
|
|
7,003 |
|
|
1,933 |
|
|
79,941 |
|
|
7,003 |
|
Total
expenses |
|
115,710 |
|
|
333,478 |
|
|
300,938 |
|
|
1,063,694 |
|
|
1,083,286 |
|
Income (loss)
before income taxes |
|
222,645 |
|
|
(6,889 |
) |
|
94,035 |
|
|
409,931 |
|
|
46,500 |
|
Income tax provision
(benefit) |
|
|
|
|
|
|
|
|
|
|
Current
income taxes |
|
(12,327 |
) |
|
(2,045 |
) |
|
(1,888 |
) |
|
(16,001 |
) |
|
(20,873 |
) |
Deferred
income taxes |
|
60,493 |
|
|
(131,625 |
) |
|
17,504 |
|
|
103,234 |
|
|
(95,779 |
) |
Net
income |
|
$ |
174,479 |
|
|
$ |
126,781 |
|
|
$ |
78,419 |
|
|
$ |
322,698 |
|
|
$ |
163,152 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.39 |
|
|
$ |
0.32 |
|
|
$ |
0.17 |
|
|
$ |
0.75 |
|
|
$ |
0.42 |
|
Diluted |
|
$ |
0.38 |
|
|
$ |
0.31 |
|
|
$ |
0.17 |
|
|
$ |
0.71 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
Basic |
|
451,613 |
|
|
392,354 |
|
|
451,256 |
|
|
432,483 |
|
|
390,928 |
|
Diluted |
|
456,665 |
|
|
405,793 |
|
|
458,450 |
|
|
456,169 |
|
|
395,921 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (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
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
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, |
|
September 30, |
|
|
2018 |
|
2017 |
|
2018 |
In
thousands |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income (GAAP
measure) |
|
$ |
174,479 |
|
|
$ |
0.38 |
|
|
$ |
126,781 |
|
|
$ |
0.31 |
|
|
$ |
78,419 |
|
|
$ |
0.17 |
|
Noncash
fair value losses (gains) on commodity derivatives(1) |
|
(236,198 |
) |
|
(0.52 |
) |
|
78,111 |
|
|
0.19 |
|
|
(17,034 |
) |
|
(0.04 |
) |
Accrued
expense related to litigation over a helium supply contract
(included in other expenses)(2) |
|
49,373 |
|
|
0.11 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Impairment of loan receivable and related assets (included in other
expenses)(3) |
|
17,805 |
|
|
0.04 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition transaction costs related to potential Penn Virginia
transaction (included in other expenses) |
|
4,373 |
|
|
0.01 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Other(4) |
|
1,300 |
|
|
0.00 |
|
|
3,251 |
|
|
0.01 |
|
|
1,497 |
|
|
0.00 |
|
Estimated
income taxes on above adjustments to net income and other discrete
tax items(5) |
|
35,282 |
|
|
0.08 |
|
|
(160,633 |
) |
|
(0.39 |
) |
|
(3,886 |
) |
|
0.00 |
|
Adjusted net income
(non-GAAP measure) |
|
$ |
46,414 |
|
|
$ |
0.10 |
|
|
$ |
47,510 |
|
|
$ |
0.12 |
|
|
$ |
58,996 |
|
|
$ |
0.13 |
|
|
|
Year Ended |
|
|
December 31, |
|
|
2018 |
|
2017 |
In
thousands |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income (GAAP
measure) |
|
$ |
322,698 |
|
|
$ |
0.71 |
|
|
$ |
163,152 |
|
|
$ |
0.41 |
|
Noncash
fair value losses (gains) on commodity derivatives(1) |
|
(196,335 |
) |
|
(0.43 |
) |
|
29,781 |
|
|
0.08 |
|
Accrued
expense related to litigation over a helium supply contract
(included in other expenses)(2) |
|
49,373 |
|
|
0.11 |
|
|
— |
|
|
— |
|
Impairment of loan receivable and related assets (included in other
expenses)(3) |
|
17,805 |
|
|
0.04 |
|
|
— |
|
|
— |
|
Acquisition transaction costs related to potential Penn Virginia
transaction (included in other expenses) |
|
4,373 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Severance-related payments included in general and administrative
expenses(6) |
|
— |
|
|
— |
|
|
6,807 |
|
|
0.02 |
|
Other(4) |
|
4,846 |
|
|
0.01 |
|
|
3,251 |
|
|
0.01 |
|
Estimated
income taxes on above adjustments to net income and other discrete
tax items(5) |
|
17,602 |
|
|
0.03 |
|
|
(147,541 |
) |
|
(0.38 |
) |
Adjusted net income
(non-GAAP measure) |
|
$ |
220,362 |
|
|
$ |
0.48 |
|
|
$ |
55,450 |
|
|
$ |
0.14 |
|
(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) Expense associated with a trial court’s unfavorable
ruling related to the non-delivery of helium volumes from the
Company’s Riley Ridge Unit under a helium supply contract.
The accrual represents the aggregate cap of contractual liquidated
damages the Company would be required to pay of $46 million, plus
other costs associated with the settlement of approximately $3
million through December 31, 2018.(3) Impairment of an outstanding
loan receivable and related assets related to the development of a
proposed plant in the Gulf Coast that would potentially supply CO2
to Denbury, due to uncertainty that the project will achieve
financial close.(4) Other adjustments include (a) $1 million of
costs related to the Company’s land sales during the three months
ended December 31, 2018, (b) a reduction in a contingent
consideration liability related to a prior acquisition and
transaction costs related to the Company’s privately negotiated
debt exchanges during the three months and year ended December 31,
2017, (c) $2 million write-off of debt issuance costs associated
with the Company’s reduction and extension of the senior secured
bank credit facility and $1 million accrual for litigation matters,
partially offset by a $1 million gain on land sales during the
three months ended September 30, 2018, and (d) $3 million gain on
land sales, offset by a similar amount of other expense accrued for
litigation matters and $2 million of transaction costs related to
the Company’s privately negotiated debt exchanges during the year
ended December 31, 2018.(5) The estimated income tax impacts on
adjustments to net income are generally computed based upon a
statutory rate of 25% and 38% for 2018 and 2017, respectively, with
the exception of (1) the tax impact of a (benefit) shortfall on the
stock-based compensation deduction which totaled ($0.1) million,
($0.3) million and ($2) million during the three months ended
December 31, 2018, December 30, 2017 and September 30, 2018,
respectively, and ($2) million and $6 million for the years ended
December 31, 2018 and 2017, respectively, and (2) tax benefits for
enhanced oil recovery income tax credits of $5 million, $2 million
and $5 million during for the three months ended December 31, 2018,
December 31, 2017 and September 30, 2017, respectively, and $11
million and $11 million for the years ended December 31, 2018 and
2017. In addition to these items, the Company recorded a
one-time deferred tax benefit of $132 million reflecting the
re-measurement of our deferred tax assets and liabilities resulting
from the reduction of the federal income tax rate from 35% to 21%
as enacted by the Tax Cut and Jobs Act, as well as valuation
allowances totaling $6 million and $15 million during the three and
twelve months ended December 31, 2017, respectively, all of which
have been adjusted in this table.(6) Severance-related payments
associated with the Company’s August-2017 workforce reduction.
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) to adjusted cash flows from operation less special items
(non-GAAP measure) to adjusted cash flows from operations less
special items and interest treated as debt reduction (non-GAAP
measure) and free cash flow (deficit) (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. Adjusted
cash flows from operations less special items and adjusted cash
flows from operations less special items and interest treated as
debt reduction are additional non-GAAP measures that remove
interest associated with the Company’s senior secured second lien
notes and convertible senior notes not reflected as interest
expense for financial reporting purposes and other special
items. Free cash flow is a non-GAAP measure that represents
adjusted cash flows from operations less special items and interest
treated as debt reduction items less 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 production, prices, operating costs and
related factors, without regard to whether the earned or incurred
item was collected or paid during that period.
|
|
Quarter Ended |
|
Year Ended |
In thousands |
|
December 31, |
|
Sept. 30, |
|
December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Net income
(GAAP measure) |
|
$ |
174,479 |
|
|
$ |
126,781 |
|
|
$ |
78,419 |
|
|
$ |
322,698 |
|
|
$ |
163,152 |
|
Adjustments to
reconcile to adjusted cash flows from operations |
|
|
|
|
|
|
|
|
|
|
Depletion, depreciation, and amortization |
|
59,738 |
|
|
53,265 |
|
|
51,316 |
|
|
216,449 |
|
|
207,713 |
|
Deferred
income taxes |
|
60,493 |
|
|
(131,625 |
) |
|
17,504 |
|
|
103,234 |
|
|
(95,779 |
) |
Stock-based compensation |
|
3,240 |
|
|
2,939 |
|
|
3,559 |
|
|
11,951 |
|
|
15,154 |
|
Noncash
fair value losses (gains) on commodity derivatives |
|
(236,198 |
) |
|
78,111 |
|
|
(17,034 |
) |
|
(196,335 |
) |
|
29,781 |
|
Other |
|
3,607 |
|
|
4,614 |
|
|
753 |
|
|
1,521 |
|
|
9,303 |
|
Adjusted cash
flows from operations (non-GAAP measure)(1) |
|
65,359 |
|
|
134,085 |
|
|
134,517 |
|
|
459,518 |
|
|
329,324 |
|
Net
change in assets and liabilities relating to operations |
|
70,796 |
|
|
(9,801 |
) |
|
13,387 |
|
|
70,167 |
|
|
(62,181 |
) |
Cash flows from
operations (GAAP measure) |
|
$ |
136,155 |
|
|
$ |
124,284 |
|
|
$ |
147,904 |
|
|
$ |
529,685 |
|
|
$ |
267,143 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted cash
flows from operations (non-GAAP measure)(1) |
|
$ |
65,359 |
|
|
$ |
134,085 |
|
|
$ |
134,517 |
|
|
$ |
459,518 |
|
|
$ |
329,324 |
|
Accrued
expense related to litigation over a helium supply contract |
|
49,373 |
|
|
— |
|
|
— |
|
|
49,373 |
|
|
— |
|
Impairment of loan receivable and related assets |
|
17,805 |
|
|
— |
|
|
— |
|
|
17,805 |
|
|
— |
|
Adjusted cash
flows from operations less special items (non-GAAP
measure) |
|
$ |
132,537 |
|
|
$ |
134,085 |
|
|
$ |
134,517 |
|
|
$ |
526,696 |
|
|
$ |
329,324 |
|
Interest
payments treated as debt reduction |
|
(21,262 |
) |
|
(14,712 |
) |
|
(21,186 |
) |
|
(86,111 |
) |
|
(52,473 |
) |
Adjusted cash
flows from operations less special items and interest treated as
debt reduction (non-GAAP measure) |
|
111,275 |
|
|
119,373 |
|
|
113,331 |
|
|
440,585 |
|
|
276,851 |
|
Development capital expenditures |
|
(107,451 |
) |
|
(60,028 |
) |
|
(85,999 |
) |
|
(322,670 |
) |
|
(240,826 |
) |
Capitalized interest |
|
(10,262 |
) |
|
(8,545 |
) |
|
(9,514 |
) |
|
(37,079 |
) |
|
(30,762 |
) |
Free cash flow
(deficit) (non-GAAP measure) |
|
$ |
(6,438 |
) |
|
$ |
50,800 |
|
|
$ |
17,818 |
|
|
$ |
80,836 |
|
|
$ |
5,263 |
|
(1) For the year ended December 31, 2017,
includes severance-related payments associated with the 2017
workforce reduction of approximately $7 million.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of commodity derivatives income
(expense) (GAAP measure) to noncash fair value gains (losses) 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 Consolidated Statements of
Operations in that the noncash fair value gains (losses) 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 gains (losses) 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.
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Payment on settlements
of commodity derivatives |
|
$ |
(25,510 |
) |
|
$ |
(9,177 |
) |
|
$ |
(61,611 |
) |
|
$ |
(175,248 |
) |
|
$ |
(47,795 |
) |
Noncash
fair value gains (losses) on commodity derivatives (non-GAAP
measure) |
|
236,198 |
|
|
(78,111 |
) |
|
17,034 |
|
|
196,335 |
|
|
(29,781 |
) |
Commodity derivatives
income (expense) (GAAP measure) |
|
$ |
210,688 |
|
|
$ |
(87,288 |
) |
|
$ |
(44,577 |
) |
|
$ |
21,087 |
|
|
$ |
(77,576 |
) |
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (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, 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 our operating performance
as compared to that of other companies in our industry, without
regard to financing methods, capital structure or historical costs
basis. It is also commonly used by third parties to assess
the Company’s leverage and 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, 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 our net income to Adjusted
EBITDAX.
|
|
Quarter Ended |
|
Year Ended |
In thousands |
|
December 31, |
|
Sept. 30, |
|
December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Net income (GAAP
measure) |
|
$ |
174,479 |
|
|
$ |
126,781 |
|
|
$ |
78,419 |
|
|
$ |
322,698 |
|
|
$ |
163,152 |
|
Adjustments to
reconcile to Adjusted EBITDAX |
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
17,714 |
|
|
23,478 |
|
|
18,527 |
|
|
69,688 |
|
|
99,263 |
|
Income
tax expense (benefit) |
|
48,166 |
|
|
(133,670 |
) |
|
15,616 |
|
|
87,233 |
|
|
(116,652 |
) |
Depletion, depreciation, and amortization |
|
59,738 |
|
|
53,265 |
|
|
51,316 |
|
|
216,449 |
|
|
207,713 |
|
Noncash
fair value losses (gains) on commodity derivatives |
|
(236,198 |
) |
|
78,111 |
|
|
(17,034 |
) |
|
(196,335 |
) |
|
29,781 |
|
Stock-based compensation |
|
3,240 |
|
|
2,939 |
|
|
3,559 |
|
|
11,951 |
|
|
15,154 |
|
Accrued
expense related to litigation over a helium supply contract |
|
49,373 |
|
|
— |
|
|
— |
|
|
49,373 |
|
|
— |
|
Impairment of loan receivable and related assets |
|
17,805 |
|
|
— |
|
|
— |
|
|
17,805 |
|
|
— |
|
Noncash,
non-recurring and other(1) |
|
6,643 |
|
|
6,473 |
|
|
(2,155 |
) |
|
5,504 |
|
|
23,358 |
|
Adjusted EBITDAX
(non-GAAP measure) |
|
$ |
140,960 |
|
|
$ |
157,377 |
|
|
$ |
148,248 |
|
|
$ |
584,366 |
|
|
$ |
421,769 |
|
(1) Excludes pro forma adjustments related to qualified
acquisitions or dispositions under the Company’s senior secured
bank credit facility.
DENBURY RESOURCES
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 2018 and 2017 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.
|
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
Standardized Measure
(GAAP measure) |
|
$ |
3,351,385 |
|
|
$ |
2,232,429 |
|
Discounted estimated future income tax |
|
673,756 |
|
|
301,369 |
|
PV-10 Value (non-GAAP
measure) |
|
$ |
4,025,141 |
|
|
$ |
2,533,798 |
|
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS (UNAUDITED)
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Production
(daily – net of royalties) |
|
|
|
|
|
|
|
|
|
|
Oil
(barrels) |
|
58,266 |
|
|
59,086 |
|
|
57,410 |
|
|
58,532 |
|
|
58,410 |
|
Gas
(mcf) |
|
9,603 |
|
|
12,351 |
|
|
10,623 |
|
|
10,854 |
|
|
11,329 |
|
BOE
(6:1) |
|
59,867 |
|
|
61,144 |
|
|
59,181 |
|
|
60,341 |
|
|
60,298 |
|
Unit sales
price (excluding derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
60.50 |
|
|
$ |
57.17 |
|
|
$ |
71.44 |
|
|
$ |
66.11 |
|
|
$ |
50.64 |
|
Gas (per
mcf) |
|
3.44 |
|
|
2.45 |
|
|
2.35 |
|
|
2.58 |
|
|
2.41 |
|
BOE
(6:1) |
|
59.44 |
|
|
55.74 |
|
|
69.73 |
|
|
64.59 |
|
|
49.51 |
|
Unit sales
price (including derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
55.75 |
|
|
$ |
55.49 |
|
|
$ |
59.78 |
|
|
$ |
57.91 |
|
|
$ |
48.40 |
|
Gas (per
mcf) |
|
3.44 |
|
|
2.45 |
|
|
2.35 |
|
|
2.58 |
|
|
2.41 |
|
BOE
(6:1) |
|
54.81 |
|
|
54.11 |
|
|
58.41 |
|
|
56.63 |
|
|
47.34 |
|
NYMEX
differentials |
|
|
|
|
|
|
|
|
|
|
Gulf
Coast region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
5.34 |
|
|
$ |
3.00 |
|
|
$ |
3.21 |
|
|
$ |
2.94 |
|
|
$ |
0.22 |
|
Gas (per
mcf) |
|
0.24 |
|
|
(0.04 |
) |
|
0.06 |
|
|
0.09 |
|
|
(0.04 |
) |
Rocky
Mountain region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
(4.31 |
) |
|
$ |
(0.76 |
) |
|
$ |
(0.54 |
) |
|
$ |
(1.50 |
) |
|
$ |
(1.39 |
) |
Gas (per
mcf) |
|
(0.85 |
) |
|
(0.86 |
) |
|
(1.05 |
) |
|
(1.06 |
) |
|
(1.15 |
) |
Total
company |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
1.69 |
|
|
$ |
1.70 |
|
|
$ |
1.84 |
|
|
$ |
1.30 |
|
|
$ |
(0.32 |
) |
Gas (per
mcf) |
|
(0.29 |
) |
|
(0.46 |
) |
|
(0.51 |
) |
|
(0.49 |
) |
|
(0.61 |
) |
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS (UNAUDITED)
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
Average Daily Volumes (BOE/d) (6:1) |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Tertiary oil
production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Delhi |
|
4,526 |
|
|
4,906 |
|
|
4,383 |
|
|
4,368 |
|
|
4,869 |
|
Hastings |
|
5,480 |
|
|
5,747 |
|
|
5,486 |
|
|
5,596 |
|
|
4,830 |
|
Heidelberg |
|
4,269 |
|
|
4,751 |
|
|
4,376 |
|
|
4,355 |
|
|
4,851 |
|
Oyster
Bayou |
|
4,785 |
|
|
4,868 |
|
|
4,578 |
|
|
4,843 |
|
|
5,007 |
|
Tinsley |
|
5,033 |
|
|
6,241 |
|
|
5,294 |
|
|
5,530 |
|
|
6,430 |
|
Other |
|
375 |
|
|
7 |
|
|
240 |
|
|
205 |
|
|
13 |
|
Mature
properties(1) |
|
6,748 |
|
|
6,763 |
|
|
6,612 |
|
|
6,702 |
|
|
7,078 |
|
Total
Gulf Coast region |
|
31,216 |
|
|
33,283 |
|
|
30,969 |
|
|
31,599 |
|
|
33,078 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Bell
Creek |
|
4,421 |
|
|
3,571 |
|
|
3,970 |
|
|
4,113 |
|
|
3,313 |
|
Salt
Creek |
|
2,107 |
|
|
2,172 |
|
|
2,274 |
|
|
2,109 |
|
|
1,115 |
|
Other |
|
20 |
|
|
— |
|
|
6 |
|
|
7 |
|
|
— |
|
Total
Rocky Mountain region |
|
6,548 |
|
|
5,743 |
|
|
6,250 |
|
|
6,229 |
|
|
4,428 |
|
Total tertiary oil
production |
|
37,764 |
|
|
39,026 |
|
|
37,219 |
|
|
37,828 |
|
|
37,506 |
|
Non-tertiary
oil and gas production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Mississippi |
|
1,023 |
|
|
721 |
|
|
1,038 |
|
|
960 |
|
|
981 |
|
Texas |
|
4,319 |
|
|
4,617 |
|
|
4,533 |
|
|
4,546 |
|
|
4,493 |
|
Other |
|
457 |
|
|
472 |
|
|
421 |
|
|
424 |
|
|
478 |
|
Total
Gulf Coast region |
|
5,799 |
|
|
5,810 |
|
|
5,992 |
|
|
5,930 |
|
|
5,952 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Cedar
Creek Anticline |
|
14,961 |
|
|
14,302 |
|
|
14,208 |
|
|
14,837 |
|
|
14,754 |
|
Other |
|
1,343 |
|
|
1,533 |
|
|
1,409 |
|
|
1,431 |
|
|
1,537 |
|
Total
Rocky Mountain region |
|
16,304 |
|
|
15,835 |
|
|
15,617 |
|
|
16,268 |
|
|
16,291 |
|
Total non-tertiary
production |
|
22,103 |
|
|
21,645 |
|
|
21,609 |
|
|
22,198 |
|
|
22,243 |
|
Total
continuing production |
|
59,867 |
|
|
60,671 |
|
|
58,828 |
|
|
60,026 |
|
|
59,749 |
|
Property
sale |
|
|
|
|
|
|
|
|
|
|
Lockhart
Crossing(2) |
|
— |
|
|
473 |
|
|
353 |
|
|
315 |
|
|
549 |
|
Total
production |
|
59,867 |
|
|
61,144 |
|
|
59,181 |
|
|
60,341 |
|
|
60,298 |
|
(1) Mature properties include Brookhaven, Cranfield, Eucutta,
Little Creek, Mallalieu, Martinville, McComb and Soso fields. (2)
Includes production from Lockhart Crossing Field sold in the third
quarter of 2018, the majority of which was previously included in
‘Mature properties’ in the Gulf Coast region.
DENBURY RESOURCES
INC.PER-BOE DATA (UNAUDITED)
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Oil and natural gas
revenues |
|
$ |
59.44 |
|
|
$ |
55.74 |
|
|
$ |
69.73 |
|
|
$ |
64.59 |
|
|
$ |
49.51 |
|
Payment on settlements
of commodity derivatives |
|
(4.63 |
) |
|
(1.63 |
) |
|
(11.32 |
) |
|
(7.96 |
) |
|
(2.17 |
) |
Lease operating
expenses |
|
(23.32 |
) |
|
(18.64 |
) |
|
(22.50 |
) |
|
(22.24 |
) |
|
(20.35 |
) |
Production and ad
valorem taxes |
|
(3.78 |
) |
|
(3.85 |
) |
|
(4.66 |
) |
|
(4.39 |
) |
|
(3.60 |
) |
Marketing expenses, net
of third-party purchases, and plant operating expenses |
|
(1.86 |
) |
|
(1.75 |
) |
|
(1.81 |
) |
|
(1.78 |
) |
|
(1.80 |
) |
Production netback |
|
25.85 |
|
|
29.87 |
|
|
29.44 |
|
|
28.22 |
|
|
21.59 |
|
CO2 sales, net of
operating and exploration expenses |
|
1.37 |
|
|
1.24 |
|
|
1.37 |
|
|
1.28 |
|
|
1.05 |
|
General and
administrative expenses |
|
(1.87 |
) |
|
(3.64 |
) |
|
(3.96 |
) |
|
(3.25 |
) |
|
(4.63 |
) |
Interest expense,
net |
|
(3.22 |
) |
|
(4.17 |
) |
|
(3.40 |
) |
|
(3.16 |
) |
|
(4.51 |
) |
Other |
|
(10.26 |
) |
|
0.53 |
|
|
1.26 |
|
|
(2.23 |
) |
|
1.47 |
|
Changes in assets and
liabilities relating to operations |
|
12.85 |
|
|
(1.74 |
) |
|
2.46 |
|
|
3.19 |
|
|
(2.83 |
) |
Cash
flows from operations |
|
24.72 |
|
|
22.09 |
|
|
27.17 |
|
|
24.05 |
|
|
12.14 |
|
DD&A |
|
(10.85 |
) |
|
(9.47 |
) |
|
(9.43 |
) |
|
(9.83 |
) |
|
(9.44 |
) |
Deferred income
taxes |
|
(10.98 |
) |
|
23.40 |
|
|
(3.21 |
) |
|
(4.69 |
) |
|
4.35 |
|
Noncash fair value
gains (losses) on commodity derivatives |
|
42.88 |
|
|
(13.89 |
) |
|
3.13 |
|
|
8.92 |
|
|
(1.35 |
) |
Other noncash
items |
|
(14.09 |
) |
|
0.41 |
|
|
(3.26 |
) |
|
(3.80 |
) |
|
1.71 |
|
Net
income |
|
$ |
31.68 |
|
|
$ |
22.54 |
|
|
$ |
14.40 |
|
|
$ |
14.65 |
|
|
$ |
7.41 |
|
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED)(1)
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Capital expenditures by
project |
|
|
|
|
|
|
|
|
|
|
Tertiary
oil fields |
|
$ |
35,427 |
|
|
$ |
30,661 |
|
|
$ |
43,047 |
|
|
$ |
142,560 |
|
|
$ |
129,458 |
|
Non-tertiary fields |
|
53,097 |
|
|
12,624 |
|
|
18,975 |
|
|
104,811 |
|
|
53,647 |
|
Capitalized internal costs(2) |
|
12,572 |
|
|
14,884 |
|
|
11,280 |
|
|
46,599 |
|
|
52,616 |
|
Oil and
natural gas capital expenditures |
|
101,096 |
|
|
58,169 |
|
|
73,302 |
|
|
293,970 |
|
|
235,721 |
|
CO2
pipelines, sources and other |
|
6,355 |
|
|
1,859 |
|
|
12,697 |
|
|
28,700 |
|
|
5,105 |
|
Capital expenditures, before acquisitions and capitalized
interest |
|
107,451 |
|
|
60,028 |
|
|
85,999 |
|
|
322,670 |
|
|
240,826 |
|
Acquisitions of oil and
natural gas properties |
|
391 |
|
|
(2,238 |
) |
|
129 |
|
|
541 |
|
|
88,777 |
|
Capital expenditures, before capitalized
interest |
|
107,842 |
|
|
57,790 |
|
|
86,128 |
|
|
323,211 |
|
|
329,603 |
|
Capitalized
interest |
|
10,262 |
|
|
8,545 |
|
|
9,514 |
|
|
37,079 |
|
|
30,762 |
|
Capital expenditures, total |
|
$ |
118,104 |
|
|
$ |
66,335 |
|
|
$ |
95,642 |
|
|
$ |
360,290 |
|
|
$ |
360,365 |
|
(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.INTEREST AND FINANCING EXPENSES
(UNAUDITED)
|
|
Quarter Ended |
|
Year Ended |
|
|
December 31, |
|
Sept. 30, |
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Cash interest(1) |
|
$ |
47,972 |
|
|
$ |
45,345 |
|
|
$ |
46,515 |
|
|
$ |
186,632 |
|
|
$ |
176,307 |
|
Interest not reflected
as expense for financial reporting purposes (1) |
|
(21,262 |
) |
|
(14,712 |
) |
|
(21,186 |
) |
|
(86,111 |
) |
|
(52,473 |
) |
Noncash interest
expense |
|
1,266 |
|
|
1,390 |
|
|
2,712 |
|
|
6,246 |
|
|
6,191 |
|
Less: capitalized
interest |
|
(10,262 |
) |
|
(8,545 |
) |
|
(9,514 |
) |
|
(37,079 |
) |
|
(30,762 |
) |
Interest
expense, net |
|
$ |
17,714 |
|
|
$ |
23,478 |
|
|
$ |
18,527 |
|
|
$ |
69,688 |
|
|
$ |
99,263 |
|
(1) Cash interest is presented on an accrual basis and includes
interest which is paid semiannually on the Company’s 9% Senior
Secured Second Lien Notes due 2021, 9¼% Senior Secured Second Lien
Notes due 2022, 5% Convertible Senior Notes due 2023, and 3½%
Convertible Senior Notes due 2024, most of which is accounted for
as a reduction of debt and therefore not reflected as interest for
financial reporting purposes.
SELECTED BALANCE SHEET AND CASH FLOW
DATA (UNAUDITED)(1)
|
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
Cash and cash
equivalents |
|
$ |
38,560 |
|
|
$ |
58 |
|
Total assets |
|
4,723,222 |
|
|
4,471,299 |
|
|
|
|
|
|
Borrowings under senior
secured bank credit facility |
|
$ |
— |
|
|
$ |
475,000 |
|
Borrowings under senior
secured second lien notes (principal only)(1) |
|
1,520,587 |
|
|
996,487 |
|
Borrowings under senior
convertible notes (principal only)(1)(2) |
|
— |
|
|
84,650 |
|
Borrowings under senior
subordinated notes (principal only) |
|
826,185 |
|
|
1,000,527 |
|
Financing and capital
leases |
|
185,435 |
|
|
218,727 |
|
Total
debt (principal only) |
|
$ |
2,532,207 |
|
|
$ |
2,775,391 |
|
|
|
|
|
|
Total stockholders’
equity |
|
$ |
1,141,777 |
|
|
$ |
648,165 |
|
(1) Excludes $250 million and $317 million of
future interest payable on the notes as of December 31, 2018
and December 31, 2017, respectively, accounted for as debt for
financial reporting purposes.(2) During the second quarter of 2018,
all $85 million principal balance outstanding of the Company’s 3½%
Convertible Senior Notes due 2024 and $59 million principal balance
outstanding of the Company’s 5% Convertible Senior Notes due 2023
were converted into approximately 55 million shares of the
Company’s common stock.
|
|
Year Ended |
|
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
Cash provided by (used
in) |
|
|
|
|
Operating
activities |
|
$ |
529,685 |
|
|
$ |
267,143 |
|
Investing
activities |
|
(333,276 |
) |
|
(356,814 |
) |
Financing
activities |
|
(157,452 |
) |
|
88,613 |
|
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
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