Denbury Resources Inc. (NYSE:DNR) (“Denbury” or the “Company”)
today announced net income of $0.4 million, or $0.00 per diluted
share, for the third quarter of 2017. Excluding special
items, the Company reported adjusted net income(1) (a non-GAAP
measure) for the quarter of $14 million, or $0.04(1)(2) per diluted
share. Adjusted net income(1) for the third quarter of 2017
differs from the quarter’s GAAP net income due to the exclusion of
$25 million ($16 million after tax) of expense from noncash fair
value adjustments on commodity derivatives(1) (a non-GAAP measure)
and $7 million in severance-related payments associated with the
Company’s workforce reduction, offset in part by a $9 million tax
benefit for enhanced oil recovery income tax credits and other tax
adjustments, with the GAAP and non-GAAP measures reconciled in
tables beginning on page 7.
Sequential and year-over-year comparisons of
selected quarterly financial items are shown in the following
table:
|
|
Quarter Ended |
($ in
millions, except per-share and unit data) |
|
Sept. 30, 2017 |
|
30-Jun-17 |
|
Sept. 30, 2016 |
Net income (loss) |
|
$ |
0 |
|
|
$ |
14 |
|
|
$ |
(25 |
|
Adjusted net income(1)
(non-GAAP measure) |
|
14 |
|
|
1 |
|
|
1 |
|
Net income (loss) per
diluted share |
|
0 |
|
|
0.04 |
|
|
(0.06 |
|
Adjusted net income per
diluted share(1)(2) (non-GAAP measure) |
|
0.04 |
|
|
0 |
|
|
0 |
|
Cash flows from
operations |
|
66 |
|
|
53 |
|
|
96 |
|
Adjusted cash flows
from operations(1) (non-GAAP measure) |
|
68 |
|
|
65 |
|
|
62 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
266 |
|
|
$ |
257 |
|
|
$ |
246 |
|
Receipt (payment) on
settlements of commodity derivatives |
|
0 |
|
|
(12 |
) |
|
(7 |
|
Revenues
and commodity derivative settlements combined |
|
$ |
266 |
|
|
$ |
245 |
|
|
$ |
239 |
|
|
|
|
|
|
|
|
Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
47.78 |
|
|
$ |
47.16 |
|
|
$ |
43.45 |
|
Average realized oil
price per barrel (including derivative settlements) |
|
47.8 |
|
|
44.92 |
|
|
42.12 |
|
|
|
|
|
|
|
|
Total continuing
production (BOE/d)(3) |
|
60,328 |
|
|
59,774 |
|
|
60,714 |
|
(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 393.0 million, 391.8 million, and
390.2 million for the three months ended September 30, 2017, June
30, 2017 and September 30, 2016, respectively.(3)
Total continuing production excludes production from the Williston
Basin sold during the third quarter of 2016.
MANAGEMENT COMMENT
Chris Kendall, Denbury’s President and CEO,
commented, “We made great progress on several fronts in the third
quarter, reflecting both the quality of our assets and, more
importantly, the dedication of our workforce to Denbury’s long-term
success. Even with the impact of Hurricane Harvey, we
arrested the production decline that began in early 2015. We
expect production to further increase in the fourth quarter,
positioning us nicely heading into 2018. We made significant
improvements in our cost structure, both through a workforce
reduction and other identified cost savings, and held our
normalized LOE flat with the second quarter. Our capital
discipline, combined with our low decline, low capital intensity
asset base, delivered yet another quarter of investing within cash
flow, and we expect cash flow and development capital to be nearly
balanced for the full year. Finally, our bank group recently
reaffirmed the $1.05 billion borrowing base of our bank credit
facility, ensuring a continued strong liquidity cushion as we head
into 2018.”
REVIEW OF OPERATING AND FINANCIAL
RESULTS
Denbury’s production averaged 60,328 barrels of
oil equivalent (“BOE”) per day (“BOE/d”) during the third quarter
of 2017, up 1% (554 BOE/d) from the second quarter of 2017.
Denbury’s production for the current quarter was reduced by
approximately 2,000 BOE/d due to Hurricane Harvey, while the
acquisition of Salt Creek Field on June 30, 2017 added
approximately 2,200 BOE/d. Due to conditions associated with
Hurricane Harvey, the Company suspended operations and temporarily
shut-in all production at its Houston area fields (including
Hastings, Oyster Bayou, Conroe, Thompson, Webster and Manvel
fields) for an approximate 10-day period, representing net
production of approximately 16,000 BOE/d, and the only field that
remained partially shut-in was Thompson Field. Thompson Field
had net production just prior to the storm of approximately 1,000
BOE/d, nearly all of which has now been returned to
production. Further production information is provided on
page 11 of this press release.
Denbury’s average realized oil price per barrel
(“Bbl”), excluding derivative settlements, was $47.78 in the third
quarter of 2017, compared to $47.16 in the second quarter of 2017,
and $43.45 in the prior-year third quarter. Including
derivative settlements, Denbury’s average realized oil price per
Bbl was $47.80 in the third quarter of 2017, compared to $44.92 in
the second quarter of 2017, and $42.12 in the prior-year third
quarter. The Company’s realized oil price in the third
quarter of 2017 was $0.34 per Bbl below NYMEX oil prices, compared
to $1.16 per Bbl below NYMEX in the second quarter of 2017, and
$1.57 per Bbl below NYMEX in the third quarter of 2016, with the
improvement in the price differential impacted by the improvement
in LLS index prices relative to NYMEX, as well as continued
improvement in Rocky Mountain region differentials during the third
quarter of 2017. During the third quarter of 2017, the
Company sold approximately 65% 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 prices,
primarily in the Rocky Mountain region.
Receipts on settlements of oil derivative
contracts were $0.1 million in the third quarter of 2017, compared
to payments of $12 million in the second quarter of 2017, and
payments of $7 million in the third quarter of 2016. The
prior-period settlements resulted in a decrease in average net
realized prices of $2.24 per Bbl in the second quarter of 2017 and
a decrease of $1.33 per Bbl in the third quarter of 2016.
The Company’s total lease operating expenses in
the third quarter of 2017 were $118 million, an increase of $6
million, or 6%, on an absolute-dollar basis when compared to those
in the second quarter of 2017, and an increase of $11 million, or
11%, when compared to the third quarter of 2016. The higher
expense in the third quarter of 2017 was due primarily to the
Company’s acquisition of a non-operated working interest in Salt
Creek Field on June 30, 2017, and to a lesser degree associated
with increases related to clean-up expenses for Hurricane Harvey
and higher CO2 expense, primarily due to costs associated with a
CO2 well workover during the third quarter of 2017.
Offsetting these increases were lower expenses across various
categories, a portion of which is due to the down-time associated
with fields impacted by Hurricane Harvey. During the third
quarter of 2017, the Company’s CO2 use averaged 487 million cubic
feet per day, an increase of 6% when compared to the third quarter
of 2016 and a decrease of 20% when compared to the second quarter
of 2017. The increase in CO2 use when compared to prior year
is primarily attributable to the Hastings redevelopment project,
with the sequential decrease impacted by Hurricane Harvey in the
third quarter of 2017, as well as a decrease in injected volumes at
Grieve Field, as the field had reached its target operating
pressure.
General and administrative expenses were $27
million in the third quarter of 2017, an increase of $1 million
when compared to the second quarter of 2017 and an increase of $3
million when compared to the third quarter of 2016, with the
increase during both periods attributable to severance-related
payments associated with the August 2017 workforce reduction,
partially offset by overall reductions in compensation-related
expenses due to lower headcount.
Interest expense, net of capitalized interest,
totaled $25 million in the third quarter of 2017, relatively
unchanged from the third quarter of 2016. Interest expense in
the third quarters of 2017 and 2016 exclude approximately $13
million of interest on the Company’s 9% Senior Secured Second Lien
Notes due 2021, which was recorded as debt for financial reporting
purposes and is therefore not reflected as interest expense.
A schedule detailing the components of interest expense is included
on page 13 of this press release.
Depletion, depreciation, and amortization
(“DD&A”) decreased to $52 million in the third quarter of 2017,
compared to $55 million in the third quarter of 2016. This
decrease was primarily driven by a decrease in plant depreciation
due to accelerated depreciation on the Riley Ridge gas processing
facility during the fourth quarter of 2016.
Denbury’s effective tax rate for the three and
nine months ended September 30, 2017 differed from the Company’s
statutory rate of 38%, primarily due to the impact of recognizing a
tax benefit of $9 million in the current quarter for enhanced oil
recovery credits, which was offset in part by stock-based
compensation shortfalls (tax deduction less than book expense) of
$2 million and $6 million for the three and nine months ended
September 30, 2017, respectively. With pre-tax income for the
three months ended September 30, 2017 being close to break-even,
the net tax benefit from these items had a significant impact on
the current quarter’s effective tax rate.
BANK CREDIT FACILITY
The Company today also announced that its $1.05
billion borrowing base under its senior secured bank credit
facility (the “Facility”) was reaffirmed in conjunction with its
regularly scheduled fall borrowing base redetermination.
As of September 30, 2017, the Company had a
total of $495 million of borrowings outstanding under its Facility,
compared to $490 million as of June 30, 2017 and $301 million as of
December 31, 2016. The $194 million increase in borrowings
over the nine-month period is primarily due to the Company’s
capital expenditure level, which includes $91 million of oil and
natural gas property acquisitions in the first nine months of 2017,
$52 million of cash outflows for working capital changes, and
repayments of other non-bank debt of $46 million. After
consideration of $62 million of outstanding letters of credit, the
Company had $493 million of borrowing base availability as of
September 30, 2017. Assuming oil prices remain in the
low-to-mid $50’s per Bbl for the remainder of 2017, and based on
currently-projected cash flows and capital spending levels, the
Company anticipates that its bank debt at the end of 2017 should be
in the range of $450 to $475 million.
2017 CAPITAL BUDGET AND ESTIMATED
PRODUCTION
The Company’s 2017 capital budget, excluding
acquisitions and capitalized interest, remains unchanged from the
previously estimated amount of approximately $250 million.
The capital budget consists of approximately $195 million of
tertiary, non-tertiary, and CO2 supply and pipeline projects, plus
approximately $55 million of estimated capitalized costs (including
capitalized internal acquisition, exploration and development costs
and pre-production tertiary startup costs). Of this combined
capital expenditure amount, approximately $181 million (72%) has
been incurred through the third quarter of 2017. Prior to
Hurricane Harvey, the Company was on track to meet the midpoint of
its 60,000 to 62,000 BOE/d full-year production guidance
range. Considering the previously mentioned and still
anticipated 500 to 700 BOE/d full-year impact of Hurricane Harvey,
the Company expects its 2017 production to fall within, but in the
lower half of the previous guidance range.
CONFERENCE CALL INFORMATION
Denbury management will host a conference call
to review and discuss third quarter 2017 financial and operating
results, as well as financial and operating guidance for 2017,
today, Tuesday, November 7, at 10:00 A.M. (Central).
Additionally, Denbury has published presentation materials on its
website which will be referenced during the conference call.
Individuals who would like to participate should dial 800.230.1093
or 612.332.0226 ten minutes before the scheduled start time.
To access a live webcast of the conference call and accompanying
slide presentation, please visit the investor relations section of
the Company’s website at www.denbury.com. The webcast will be
archived on the website, and a telephonic replay will be accessible
for at least one month after the call by dialing 800.475.6701 or
320.365.3844 and entering confirmation number 426557.
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 2017
production, capital expenditures, bank debt levels 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.
FINANCIAL AND STATISTICAL DATA TABLES
AND RECONCILIATION SCHEDULES
Following are unaudited financial highlights for
the comparative three and nine month periods ended September 30,
2017 and 2016 and the three month period ended June 30, 2017.
All production volumes and dollars are expressed on a net revenue
interest basis with gas volumes converted to equivalent barrels at
6:1.
DENBURY RESOURCES
INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following information is based on GAAP
reported earnings (along with additional required disclosures)
included or to be included in the Company’s periodic reports:
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
In
thousands, except per-share data |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Revenues and
other income |
|
|
|
|
|
|
|
|
|
|
Oil
sales |
|
$ |
256,621 |
|
|
$ |
237,053 |
|
|
$ |
248,317 |
|
|
$ |
768,912 |
|
|
$ |
666,441 |
|
Natural
gas sales |
|
2,409 |
|
|
2,877 |
|
|
2,563 |
|
|
7,176 |
|
|
7,960 |
|
CO2 sales
and transportation fees |
|
6,590 |
|
|
6,253 |
|
|
6,555 |
|
|
18,533 |
|
|
19,147 |
|
Interest
income and other income |
|
939 |
|
|
7,802 |
|
|
3,749 |
|
|
8,576 |
|
|
10,429 |
|
Total
revenues and other income |
|
266,559 |
|
|
253,985 |
|
|
261,184 |
|
|
803,197 |
|
|
703,977 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses |
|
117,768 |
|
|
106,522 |
|
|
111,318 |
|
|
342,926 |
|
|
308,988 |
|
Marketing
and plant operating expenses |
|
11,816 |
|
|
14,452 |
|
|
13,877 |
|
|
39,758 |
|
|
40,645 |
|
CO2
discovery and operating expenses |
|
1,346 |
|
|
861 |
|
|
513 |
|
|
2,452 |
|
|
2,539 |
|
Taxes
other than income |
|
20,233 |
|
|
20,401 |
|
|
20,175 |
|
|
62,848 |
|
|
59,997 |
|
General
and administrative expenses |
|
27,273 |
|
|
24,643 |
|
|
25,789 |
|
|
81,303 |
|
|
81,089 |
|
Interest,
net of amounts capitalized of $9,416, $6,875, $8,147, $22,217 and
$18,944, respectively |
|
24,546 |
|
|
24,778 |
|
|
24,061 |
|
|
75,785 |
|
|
103,007 |
|
Depletion, depreciation, and amortization |
|
52,101 |
|
|
55,012 |
|
|
51,152 |
|
|
154,448 |
|
|
198,919 |
|
Commodity
derivatives expense (income) |
|
25,263 |
|
|
(21,224 |
) |
|
(10,373 |
) |
|
(9,712 |
) |
|
99,811 |
|
Gain on
debt extinguishment |
|
— |
|
|
(7,826 |
) |
|
— |
|
|
— |
|
|
(115,095 |
) |
Write-down of oil and natural gas properties |
|
— |
|
|
75,521 |
|
|
— |
|
|
— |
|
|
810,921 |
|
Other
expenses |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
36,232 |
|
Total
expenses |
|
280,346 |
|
|
293,140 |
|
|
236,512 |
|
|
749,808 |
|
|
1,627,053 |
|
Income (loss)
before income taxes |
|
(13,787 |
) |
|
(39,155 |
) |
|
24,672 |
|
|
53,389 |
|
|
(923,076 |
) |
Income tax provision
(benefit) |
|
|
|
|
|
|
|
|
|
|
Current
income taxes |
|
1,072 |
|
|
(1,046 |
) |
|
(5,965 |
) |
|
(18,828 |
) |
|
(1,051 |
) |
Deferred
income taxes |
|
(15,301 |
) |
|
(13,519 |
) |
|
16,238 |
|
|
35,846 |
|
|
(331,574 |
) |
Net income
(loss) |
|
$ |
442 |
|
|
$ |
(24,590 |
) |
|
$ |
14,399 |
|
|
$ |
36,371 |
|
|
$ |
(590,451 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) per common share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
— |
|
|
$ |
(0.06 |
) |
|
$ |
0.04 |
|
|
$ |
0.09 |
|
|
$ |
(1.60 |
) |
Diluted |
|
$ |
— |
|
|
$ |
(0.06 |
) |
|
$ |
0.04 |
|
|
$ |
0.09 |
|
|
$ |
(1.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
Basic |
|
392,013 |
|
|
388,572 |
|
|
389,904 |
|
|
390,448 |
|
|
368,863 |
|
Diluted |
|
393,023 |
|
|
388,572 |
|
|
391,827 |
|
|
392,625 |
|
|
368,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DENBURY RESOURCES
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 or unusual 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.
|
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
In
thousands, except per-share data |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income
(loss) (GAAP measure) |
|
$ |
442 |
|
|
$ |
0 |
|
|
$ |
(24,590 |
) |
|
$ |
(0.06 |
) |
|
$ |
14,399 |
|
|
$ |
0.04 |
|
Adjustments to
reconcile to adjusted net income (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
fair value adjustments on commodity derivatives (1) |
|
25,352 |
|
|
0.06 |
|
|
(28,519 |
) |
|
(0.07 |
) |
|
(22,140 |
) |
|
(0.06 |
) |
Write-down of oil and natural gas properties (2) |
|
— |
|
|
— |
|
|
75,521 |
|
|
0.19 |
|
|
— |
|
|
— |
|
Gain on
debt extinguishment (3) |
|
— |
|
|
— |
|
|
(7,826 |
) |
|
(0.02 |
) |
|
— |
|
|
— |
|
Severance-related payments included in general and administrative
expenses (6) |
|
6,807 |
|
|
0.02 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Estimated
income taxes on above adjustments to net income (loss) and other
discrete tax items (8) |
|
(18,676 |
) |
|
(0.04 |
) |
|
(13,322 |
) |
|
(0.04 |
) |
|
8,609 |
|
|
0.02 |
|
Adjusted net
income (non-GAAP measure) |
|
$ |
13,925 |
|
|
$ |
0.04 |
|
|
$ |
1,264 |
|
|
$ |
0 |
|
|
$ |
868 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, |
|
|
2017 |
|
2016 |
In
thousands, except per-share data |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income
(loss) (GAAP measure) |
|
$ |
36,371 |
|
|
$ |
0.09 |
|
|
$ |
(590,451 |
) |
|
$ |
(1.60 |
) |
Adjustments to
reconcile to adjusted net income (non-GAAP measure) |
|
|
|
|
|
|
|
|
Noncash
fair value adjustments on commodity derivatives (1) |
|
(48,330 |
) |
|
(0.12 |
) |
|
216,769 |
|
|
0.59 |
|
Write-down of oil and natural gas properties (2) |
|
— |
|
|
— |
|
|
810,921 |
|
|
2.19 |
|
Gain on
debt extinguishment (3) |
|
— |
|
|
— |
|
|
(115,095 |
) |
|
(0.31 |
) |
Legal
settlements included in other expenses (4) |
|
— |
|
|
— |
|
|
30,250 |
|
|
0.08 |
|
Write-off
of debt issuance costs included in interest expense (5) |
|
— |
|
|
— |
|
|
5,553 |
|
|
0.02 |
|
Severance-related payments included in general and administrative
expenses (6) |
|
6,807 |
|
|
0.02 |
|
|
9,315 |
|
|
0.03 |
|
Transaction costs and other (7) |
|
— |
|
|
— |
|
|
5,638 |
|
|
0.02 |
|
Estimated
income taxes on above adjustments to net income (loss) and other
discrete tax items (8) |
|
13,092 |
|
|
0.03 |
|
|
(351,932 |
) |
|
(0.96 |
) |
Adjusted net
income (non-GAAP measure) |
|
$ |
7,940 |
|
|
$ |
0.02 |
|
|
$ |
20,968 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The net change between
periods of the fair market values of open commodity derivative
positions, excluding the impact of settlements on commodity
derivatives during the period.(2) Full cost pool
ceiling test write-downs related to the Company’s oil and natural
gas properties.(3) Gain on extinguishment related
to the Company’s debt exchange during the three months ended June
30, 2016 and open-market debt repurchases during the three and nine
months ended September 30, 2016.(4) Settlements
related to previously outstanding litigation, the most significant
of which pertaining to a $28 million payment to Evolution in
connection with the settlement resolving all outstanding disputes
and claims.(5) Write-off of debt issuance costs
associated with the Company’s senior secured bank credit facility,
related to the May 2016 redetermination which reduced the Company’s
borrowing base, with the nine-month period further impacted by
reductions in the Company’s lender commitments resulting from the
February 2016 amendment.(6) Severance-related
payments associated with the Company’s August-2017 and
February-2016 workforce reductions.(7)
Transaction costs related to the Company’s debt exchange and a loss
on sublease during the nine months ended September 30,
2016.(8) The estimated income tax impacts on
adjustments to net income (loss) are generally computed based upon
a statutory rate of 38%, applicable to all periods presented, with
the exception of the write-down on oil and natural gas properties,
which is computed individually based upon the Company’s effective
tax rate, as well as adjusting for the tax impact of a shortfall on
the stock-based compensation deduction which totaled $2 million and
$1 million during the three months ended September 30, 2017 and
2016, respectively, and $6 million and $9 million for the nine
months ended September 30, 2017 and 2016, respectively, and a $9
million tax benefit for enhanced oil recovery income tax credits
during the three and nine months ended September 30, 2017.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of cash flows from operations
(GAAP measure) to adjusted cash flows from operations (non-GAAP
measure)
Adjusted cash flows from operations is a
non-GAAP measure that represents cash flows provided by operations
before changes in assets and liabilities, as summarized from the
Company’s Unaudited Condensed Consolidated Statements of Cash
Flows. Adjusted cash flows from operations measures the cash
flows earned or incurred from operating activities without regard
to the collection or payment of associated receivables or
payables. Management believes that it is important to
consider this additional measure, along with cash flows from
operations, as it believes the non-GAAP measure can often be a
better way to discuss changes in operating trends in its business
caused by changes in production, prices, operating costs and
related factors, without regard to whether the earned or incurred
item was collected or paid during that period.
|
|
Three Months Ended |
|
Nine Months Ended |
In thousands |
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Net income
(loss) (GAAP measure) |
|
$ |
442 |
|
|
$ |
(24,590 |
) |
|
$ |
14,399 |
|
|
$ |
36,371 |
|
|
$ |
(590,451 |
) |
Adjustments to
reconcile to adjusted cash flows from operations |
|
|
|
|
|
|
|
|
|
|
Depletion, depreciation, and amortization |
|
52,101 |
|
|
55,012 |
|
|
51,152 |
|
|
154,448 |
|
|
198,919 |
|
Deferred
income taxes |
|
(15,301 |
) |
|
(13,519 |
) |
|
16,238 |
|
|
35,846 |
|
|
(331,574 |
) |
Stock-based compensation |
|
3,274 |
|
|
5,560 |
|
|
4,835 |
|
|
12,215 |
|
|
9,682 |
|
Noncash
fair value adjustments on commodity derivatives |
|
25,352 |
|
|
(28,519 |
) |
|
(22,140 |
) |
|
(48,330 |
) |
|
216,769 |
|
Gain on
debt extinguishment |
|
— |
|
|
(7,826 |
) |
|
— |
|
|
— |
|
|
(115,095 |
) |
Write-down of oil and natural gas properties |
|
— |
|
|
75,521 |
|
|
— |
|
|
— |
|
|
810,921 |
|
Other |
|
2,351 |
|
|
(59 |
) |
|
781 |
|
|
4,689 |
|
|
12,270 |
|
Adjusted cash
flows from operations (non-GAAP |
|
68,219 |
|
|
61,580 |
|
|
65,265 |
|
|
195,239 |
|
|
211,441 |
|
measure) (1) |
Net
change in assets and liabilities relating to operations |
|
(2,568 |
) |
|
34,835 |
|
|
(12,319 |
) |
|
(52,380 |
) |
|
(52,082 |
) |
Cash flows from
operations (GAAP measure) |
|
$ |
65,651 |
|
|
$ |
96,415 |
|
|
$ |
52,946 |
|
|
$ |
142,859 |
|
|
$ |
159,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The three and nine-months
periods ended September 30, 2017 includes severance-related
payments associated with the 2017 workforce reduction of
approximately $7 million. The nine-month period ended
September 30, 2016 includes a $28 million payment to Evolution in
connection with the Company’s settlement agreement to resolve all
outstanding disputes and claims and includes severance-related
payments associated with the 2016 workforce reduction of
approximately $9 million.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of commodity derivatives income
(expense) (GAAP measure) to noncash fair value adjustments on
commodity derivatives (non-GAAP measure)
Noncash fair value adjustments on commodity
derivatives is a non-GAAP measure and is different from “Commodity
derivatives expense (income)” in the Unaudited Condensed
Consolidated Statements of Operations in that the noncash fair
value adjustments on commodity derivatives represents only the net
change between periods of the fair market values of open commodity
derivative positions, and excludes the impact of settlements on
commodity derivatives during the period. Management believes
that noncash fair value adjustments on commodity derivatives is a
useful supplemental disclosure to “Commodity derivatives expense
(income)” because the GAAP measure also includes settlements on
commodity derivatives during the period; the non-GAAP measure is
widely used within the industry and by securities analysts, banks
and credit rating agencies in calculating EBITDA and in adjusting
net income (loss) to present those measures on a comparative basis
across companies, as well as to assess compliance with certain debt
covenants.
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
In
thousands |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Receipt (payment) on
settlements of commodity derivatives |
|
$ |
89 |
|
|
$ |
(7,295 |
) |
|
$ |
(11,767 |
) |
|
$ |
(38,618 |
) |
|
$ |
116,958 |
|
Noncash fair value
adjustments on commodity derivatives (non-GAAP measure) |
|
(25,352 |
) |
|
28,519 |
|
|
22,140 |
|
|
48,330 |
|
|
(216,769 |
) |
Commodity
derivatives income (expense) (GAAP measure) |
|
$ |
(25,263 |
) |
|
$ |
21,224 |
|
|
$ |
10,373 |
|
|
$ |
9,712 |
|
|
$ |
(99,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DENBURY RESOURCES INC.OPERATING
HIGHLIGHTS (UNAUDITED)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Production
(daily – net of royalties) |
|
|
|
|
|
|
|
|
|
|
Oil
(barrels) |
|
58,376 |
|
|
59,297 |
|
|
57,867 |
|
|
58,182 |
|
|
62,451 |
|
Gas
(mcf) |
|
11,710 |
|
|
13,416 |
|
|
11,444 |
|
|
10,985 |
|
|
15,995 |
|
BOE
(6:1) |
|
60,328 |
|
|
61,533 |
|
|
59,774 |
|
|
60,013 |
|
|
65,117 |
|
Unit sales
price (excluding derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
47.78 |
|
|
$ |
43.45 |
|
|
$ |
47.16 |
|
|
$ |
48.41 |
|
|
$ |
38.95 |
|
Gas (per
mcf) |
|
2.24 |
|
|
2.33 |
|
|
2.46 |
|
|
2.39 |
|
|
1.82 |
|
BOE
(6:1) |
|
46.67 |
|
|
42.38 |
|
|
46.12 |
|
|
47.37 |
|
|
37.8 |
|
Unit sales
price (including derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
47.8 |
|
|
$ |
42.12 |
|
|
$ |
44.92 |
|
|
$ |
45.98 |
|
|
$ |
45.78 |
|
Gas (per
mcf) |
|
2.24 |
|
|
2.33 |
|
|
2.46 |
|
|
2.39 |
|
|
1.82 |
|
BOE
(6:1) |
|
46.69 |
|
|
41.09 |
|
|
43.96 |
|
|
45.01 |
|
|
44.35 |
|
NYMEX
differentials |
|
|
|
|
|
|
|
|
|
|
Gulf
Coast region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
(0.78 |
) |
|
$ |
(0.71 |
) |
|
$ |
(1.55 |
) |
Gas (per
mcf) |
|
(0.11 |
) |
|
(0.28 |
) |
|
(0.03 |
) |
|
(0.03 |
) |
|
(0.46 |
) |
Rocky
Mountain region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
(0.98 |
) |
|
$ |
(3.08 |
) |
|
$ |
(1.96 |
) |
|
$ |
(1.69 |
) |
|
$ |
(4.29 |
) |
Gas (per
mcf) |
|
(1.38 |
) |
|
(0.72 |
) |
|
(1.42 |
) |
|
(1.25 |
) |
|
(0.63 |
) |
Total
company |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
(0.34 |
) |
|
$ |
(1.57 |
) |
|
$ |
(1.16 |
) |
|
$ |
(1.04 |
) |
|
$ |
(2.51 |
) |
Gas (per
mcf) |
|
(0.72 |
) |
|
(0.47 |
) |
|
(0.69 |
) |
|
(0.67 |
) |
|
(0.53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DENBURY RESOURCES INC.OPERATING
HIGHLIGHTS (UNAUDITED)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
Average Daily Volumes (BOE/d) (6:1) |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Tertiary oil
production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Mature
properties (1) |
|
7,450 |
|
|
8,653 |
|
|
7,737 |
|
|
7,764 |
|
|
9,242 |
|
Delhi |
|
4,619 |
|
|
4,262 |
|
|
4,965 |
|
|
4,857 |
|
|
4,077 |
|
Hastings |
|
4,867 |
|
|
4,729 |
|
|
4,400 |
|
|
4,520 |
|
|
4,922 |
|
Heidelberg |
|
4,927 |
|
|
5,000 |
|
|
4,996 |
|
|
4,885 |
|
|
5,197 |
|
Oyster
Bayou |
|
4,870 |
|
|
4,767 |
|
|
5,217 |
|
|
5,053 |
|
|
5,115 |
|
Tinsley |
|
6,506 |
|
|
6,756 |
|
|
6,311 |
|
|
6,494 |
|
|
7,328 |
|
Total
Gulf Coast region |
|
33,239 |
|
|
34,167 |
|
|
33,626 |
|
|
33,573 |
|
|
35,881 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Bell
Creek |
|
3,406 |
|
|
3,032 |
|
|
3,060 |
|
|
3,225 |
|
|
3,071 |
|
Salt
Creek (2) |
|
2,228 |
|
|
— |
|
|
23 |
|
|
759 |
|
|
— |
|
Total
Rocky Mountain region |
|
5,634 |
|
|
3,032 |
|
|
3,083 |
|
|
3,984 |
|
|
3,071 |
|
Total tertiary oil
production |
|
38,873 |
|
|
37,199 |
|
|
36,709 |
|
|
37,557 |
|
|
38,952 |
|
Non-tertiary
oil and gas production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Mississippi |
|
867 |
|
|
963 |
|
|
1,004 |
|
|
1,069 |
|
|
884 |
|
Texas |
|
4,024 |
|
|
4,234 |
|
|
5,002 |
|
|
4,452 |
|
|
4,826 |
|
Other |
|
515 |
|
|
538 |
|
|
460 |
|
|
490 |
|
|
515 |
|
Total
Gulf Coast region |
|
5,406 |
|
|
5,735 |
|
|
6,466 |
|
|
6,011 |
|
|
6,225 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Cedar
Creek Anticline |
|
14,535 |
|
|
16,017 |
|
|
15,124 |
|
|
14,907 |
|
|
16,704 |
|
Other |
|
1,514 |
|
|
1,763 |
|
|
1,475 |
|
|
1,538 |
|
|
1,898 |
|
Total
Rocky Mountain region |
|
16,049 |
|
|
17,780 |
|
|
16,599 |
|
|
16,445 |
|
|
18,602 |
|
Total non-tertiary
production |
|
21,455 |
|
|
23,515 |
|
|
23,065 |
|
|
22,456 |
|
|
24,827 |
|
Total
continuing production |
|
60,328 |
|
|
60,714 |
|
|
59,774 |
|
|
60,013 |
|
|
63,779 |
|
Property
sales |
|
|
|
|
|
|
|
|
|
|
2016
property divestitures (3) |
|
— |
|
|
819 |
|
|
— |
|
|
— |
|
|
1,338 |
|
Total
production |
|
60,328 |
|
|
61,533 |
|
|
59,774 |
|
|
60,013 |
|
|
65,117 |
|
(1) Mature properties include Brookhaven,
Cranfield, Eucutta, Little Creek, Lockhart Crossing, Mallalieu,
Martinville, McComb and Soso fields.(2) Includes
production related to the acquisition of a 23% non-operated working
interest in Salt Creek Field in Wyoming, which closed on June 30,
2017.(3) Includes non-tertiary production in the Rocky
Mountain region related to the sale of remaining non-core assets in
the Williston Basin of North Dakota and Montana, which closed in
the third quarter of 2016, and other minor property
divestitures.
DENBURY RESOURCES
INC.PER-BOE DATA (UNAUDITED)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Oil and natural gas
revenues |
|
$ |
46.67 |
|
|
$ |
42.38 |
|
|
$ |
46.12 |
|
|
$ |
47.37 |
|
|
$ |
37.8 |
|
Receipt (payment) on
settlements of commodity derivatives |
|
0.02 |
|
|
(1.29 |
) |
|
(2.16 |
) |
|
(2.36 |
) |
|
6.55 |
|
Lease operating
expenses |
|
(21.22 |
) |
|
(18.82 |
) |
|
(20.46 |
) |
|
(20.93 |
) |
|
(17.32 |
) |
Production and ad
valorem taxes |
|
(3.32 |
) |
|
(3.18 |
) |
|
(3.36 |
) |
|
(3.51 |
) |
|
(2.93 |
) |
Marketing expenses, net
of third-party purchases, and plant operating expenses |
|
(1.75 |
) |
|
(1.99 |
) |
|
(1.83 |
) |
|
(1.82 |
) |
|
(1.89 |
) |
Production netback |
|
20.4 |
|
|
17.1 |
|
|
18.31 |
|
|
18.75 |
|
|
22.21 |
|
CO2 sales, net of
operating and exploration expenses |
|
0.95 |
|
|
0.95 |
|
|
1.12 |
|
|
0.98 |
|
|
0.93 |
|
General and
administrative expenses |
|
(4.91 |
) |
|
(4.35 |
) |
|
(4.74 |
) |
|
(4.96 |
) |
|
(4.54 |
) |
Interest expense,
net |
|
(4.42 |
) |
|
(4.38 |
) |
|
(4.42 |
) |
|
(4.63 |
) |
|
(5.77 |
) |
Other |
|
0.27 |
|
|
1.56 |
|
|
1.72 |
|
|
1.78 |
|
|
(0.98 |
) |
Changes in assets and
liabilities relating to operations |
|
(0.46 |
) |
|
6.15 |
|
|
(2.26 |
) |
|
(3.20 |
) |
|
(2.92 |
) |
Cash
flows from operations |
|
11.83 |
|
|
17.03 |
|
|
9.73 |
|
|
8.72 |
|
|
8.93 |
|
DD&A |
|
(9.39 |
) |
|
(9.72 |
) |
|
(9.40 |
) |
|
(9.43 |
) |
|
(11.15 |
) |
Write-down of oil and
natural gas properties |
|
— |
|
|
(13.34 |
) |
|
— |
|
|
— |
|
|
(45.45 |
) |
Deferred income
taxes |
|
2.76 |
|
|
2.39 |
|
|
(2.99 |
) |
|
(2.19 |
) |
|
18.58 |
|
Gain on debt
extinguishment |
|
— |
|
|
1.38 |
|
|
— |
|
|
— |
|
|
6.45 |
|
Noncash fair value
adjustments on commodity derivatives |
|
(4.57 |
) |
|
5.04 |
|
|
4.07 |
|
|
2.95 |
|
|
(12.14 |
) |
Other noncash
items |
|
(0.55 |
) |
|
(7.12 |
) |
|
1.24 |
|
|
2.17 |
|
|
1.69 |
|
Net
income (loss) |
|
$ |
0.08 |
|
|
$ |
(4.34 |
) |
|
$ |
2.65 |
|
|
$ |
2.22 |
|
|
$ |
(33.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL EXPENDITURE SUMMARY (UNAUDITED)
(1)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
In
thousands |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Capital expenditures by
project |
|
|
|
|
|
|
|
|
|
|
Tertiary
oil fields |
|
$ |
34,029 |
|
|
$ |
26,494 |
|
|
$ |
43,561 |
|
|
$ |
98,797 |
|
|
$ |
90,392 |
|
Non-tertiary fields |
|
8,251 |
|
|
8,366 |
|
|
14,332 |
|
|
41,023 |
|
|
19,142 |
|
Capitalized internal costs (2) |
|
11,015 |
|
|
9,729 |
|
|
13,071 |
|
|
37,732 |
|
|
35,516 |
|
Oil and
natural gas capital expenditures |
|
53,295 |
|
|
44,589 |
|
|
70,964 |
|
|
177,552 |
|
|
145,050 |
|
CO2
pipelines, sources and other |
|
2,718 |
|
|
676 |
|
|
518 |
|
|
3,246 |
|
|
828 |
|
Capital expenditures, before acquisitions and capitalized
interest |
|
56,013 |
|
|
45,265 |
|
|
71,482 |
|
|
180,798 |
|
|
145,878 |
|
Acquisitions of oil and
natural gas properties |
|
1,916 |
|
|
9,984 |
|
|
73,001 |
|
|
91,015 |
|
|
10,888 |
|
Capital expenditures, before capitalized
interest |
|
57,929 |
|
|
55,249 |
|
|
144,483 |
|
|
271,813 |
|
|
156,766 |
|
Capitalized
interest |
|
9,416 |
|
|
6,875 |
|
|
8,147 |
|
|
22,217 |
|
|
18,944 |
|
Capital expenditures, total |
|
$ |
67,345 |
|
|
$ |
62,124 |
|
|
$ |
152,630 |
|
|
$ |
294,030 |
|
|
$ |
175,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
In
thousands |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Cash interest (1) |
|
$ |
45,110 |
|
|
$ |
42,718 |
|
|
$ |
43,352 |
|
|
$ |
130,962 |
|
|
$ |
130,511 |
|
Interest on 2021 Senior
Secured Notes not reflected as interest for financial reporting
purposes (1) |
|
(12,604 |
) |
|
(12,533 |
) |
|
(12,588 |
) |
|
(37,761 |
) |
|
(19,569 |
) |
Noncash interest
expense (2) |
|
1,456 |
|
|
1,468 |
|
|
1,444 |
|
|
4,801 |
|
|
11,009 |
|
Less: capitalized
interest |
|
(9,416 |
) |
|
(6,875 |
) |
|
(8,147 |
) |
|
(22,217 |
) |
|
(18,944 |
) |
Interest
expense, net |
|
$ |
24,546 |
|
|
$ |
24,778 |
|
|
$ |
24,061 |
|
|
$ |
75,785 |
|
|
$ |
103,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 issued in
May 2016, most of which is accounted for as debt and therefore not
reflected as interest for financial reporting purposes.(2)
Noncash interest expense includes $6 million during the nine
month period ending September 30, 2016, consisting of the write-off
of debt issuance costs associated with the Company’s senior secured
bank credit facility related to reductions in the Company’s lender
commitments resulting from the February 2016 amendment, as well as
the May 2016 redetermination, which reduced the Company’s borrowing
base.
SELECTED BALANCE SHEET AND CASH FLOW DATA
(UNAUDITED)
|
|
September 30, |
|
December 31, |
In
thousands |
|
2017 |
|
2016 |
Cash and cash
equivalents |
|
$ |
57 |
|
|
$ |
1,606 |
|
Total assets |
|
4,440,929 |
|
|
4,274,578 |
|
|
|
|
|
|
Borrowings under senior
secured bank credit facility |
|
$ |
495,000 |
|
|
$ |
301,000 |
|
Borrowings under senior
secured second lien notes (principal only) (1) |
|
614,919 |
|
|
614,919 |
|
Borrowings under senior
subordinated notes (principal only) |
|
1,612,603 |
|
|
1,612,603 |
|
Financing and capital
leases |
|
229,800 |
|
|
251,389 |
|
Total
debt (principal only) |
|
$ |
2,952,322 |
|
|
$ |
2,779,911 |
|
|
|
|
|
|
Total stockholders’
equity |
|
$ |
517,447 |
|
|
$ |
468,448 |
|
|
|
|
|
|
|
|
|
|
(1) Excludes $204 million and $229 million,
respectively, of future interest payable on the notes as of
September 30, 2017 and December 31, 2016, accounted for as debt for
financial reporting purposes.
|
|
Nine Months Ended |
|
|
September 30, |
In
thousands |
|
2017 |
|
2016 |
Cash provided by (used
in) |
|
|
|
|
Operating
activities |
|
$ |
142,859 |
|
|
$ |
159,359 |
|
Investing
activities |
|
(294,008 |
) |
|
(134,007 |
) |
Financing
activities |
|
149,600 |
|
|
(24,891 |
) |
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Investor Relations, 972.673.2383
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