Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today
released its second quarter 2023 results. As a result of the
Company’s pending merger with Exxon Mobil Corporation
(“ExxonMobil”), Denbury will not be hosting a webcast / conference
call, which had previously been scheduled to take place tomorrow,
August 4, nor posting supplemental materials regarding its
quarterly results or future outlook.
KEY 2Q HIGHLIGHTS
- Second quarter 2023 net cash provided by operating activities
totaled $142 million, and adjusted cash flows from operations(1)
totaled $129 million.
- Capital expenditures, excluding capitalized interest, totaled
$132 million, and equity investments totaled $12 million. Total
debt at the end of the second quarter was $85 million.
- Net income(2) for the quarter was $67 million, or $1.25 per
diluted share, and adjusted net income(1)(2) was $57 million, or
$1.06 per diluted share.
- Commenced Enhanced Oil Recovery (“EOR”) production at the Cedar
Creek Anticline (“CCA”) tertiary project, with second quarter
tertiary production at CCA averaging 574 Bbl/d.
- Added four dedicated CO2 sequestration sites to the Company’s
portfolio, including one in Texas, two in Louisiana, and one in
Wyoming. In addition, executed agreement to transport and sequester
1 million metric tons of CO2 per year for a blue methanol project
in Louisiana.
(1) A non-GAAP measure. See accompanying
schedules that reconcile GAAP to non-GAAP measures along with a
statement indicating why the Company believes the non-GAAP measures
provide useful information for investors.
(2) Calculated using weighted average
diluted shares outstanding of 54.0 million for the quarter ended
June 30, 2023.
CEO Comment
Chris Kendall, Denbury’s President and CEO, commented, “I am
extremely proud of our team and our accomplishments through the
first half of the year. During the second quarter, we commenced
initial tertiary production at our flagship CCA CO2 EOR project and
early results from the flood are encouraging. We also continued to
advance our CCUS business, adding four new storage sites and an
additional contract for transportation and storage. On July 13th,
we announced an agreement to combine with ExxonMobil, and we expect
to close the transaction in the fourth quarter of this year,
subject to stockholder and regulatory approvals. We look forward to
bringing our assets and expertise together to accelerate the
development of the CCUS industry.”
Oil & Gas Operations
Results
2Q 2023
1Q 2023
2Q 2022
Sales volumes (BOE/d)
46,982
47,655
46,561
Avg. oil price, including hedges ($ per
Bbl)
$73.83
$75.36
$77.63
Blue oil (% oil volumes using industrial
CO2)
29%
30%
28%
Industrial CO2 injected (million metric
tons)
1.09
1.14
1.19
Industrial CO2 injected (% total CO2 used
in EOR operations)
43%
40%
41%
Oil & gas development capital ($
000s)
$103,395
$99,791
$86,290
Approximately 54% of second quarter sales volumes were from the
Company’s Gulf Coast assets, with the remaining 46% from the Rocky
Mountain region. As compared to the first quarter of the year, Gulf
Coast production was lower by 4%, driven primarily by a planned
facility turnaround at Delhi and lower crude inventory sales at
Tinsley, as expected. Rocky Mountain region sales volumes were
slightly higher than in the first quarter of the year, driven by
initial tertiary production and higher non-tertiary production at
CCA, which more than offset unexpected facility downtime at Bell
Creek.
The Company’s average oil price differential per barrel of oil
(“Bbl”) in the second quarter of 2023 was $1.14 below the West
Texas Intermediate (“WTI”) average, a modest improvement from the
$1.28 below the WTI average in the first quarter of 2023, driven by
Gulf Coast region realizations. Second quarter 2023 commodity
hedging receipts totaled $5 million, or $1.24 per Bbl.
Lease operating expenses (“LOE”) in second quarter 2023 totaled
$130 million, or $30.48 per barrel of oil equivalent (“BOE”). As
compared to the first quarter of the year, higher per unit labor,
workover and other costs offset reduced power and utilities
expenses. CO2 costs, as part of LOE, were also modestly higher than
in the first quarter as the Company began recording a portion of
the CO2 injection at CCA as LOE rather than as capital expenditures
following EOR production startup. General and administrative
expenses totaled nearly $27 million, higher than first quarter
levels driven primarily by employee-related costs, including
salaries, bonus accrual, and stock compensation expense related to
annual equity grants. Depletion, depreciation, and amortization was
$50 million, or $11.63 per BOE for the quarter, higher than first
quarter levels as the Company commenced the recording of proved
reserves associated with the CCA CO2 EOR project.
Nearly half of second quarter 2023 oil & gas development
capital expenditures were spent on the CCA CO2 EOR project,
primarily focused on the construction of CO2 recycle facilities and
well conversions from secondary to tertiary production. Also in the
Rocky Mountain region, capital expenditures included multiple CO2
flood expansion projects, including drilling activity in the Beaver
Creek and Grieve fields. Second quarter capital spend in the Gulf
Coast region included the completion of well conversions at the
Soso Rodessa Phase 2 EOR development, a heat exchanger project at
Delhi, and various other small development projects.
Denbury ended the second quarter with $85 million borrowed on
the Company’s bank credit facility, up $56 million from the end of
2022. Financial liquidity as of June 30, 2023 was $655 million,
including cash on hand and borrowing capacity under the Company’s
credit facility.
Cedar Creek Anticline EOR Development
Tertiary production response at CCA initiated in April 2023,
following commissioning of the first CO2 recycle facility at the
end of the first quarter. Second quarter EOR production averaged
574 barrels of oil per day, which includes both incremental
response from the CO2 flood and production associated with the
waterflood in responding units. A second CO2 recycle facility was
commissioned in June 2023, and two additional CO2 recycle
facilities are currently being constructed and are anticipated to
be commissioned in the fourth quarter of 2023. CCA EOR production
is anticipated to continue to increase throughout the remainder of
2023 and through 2024.
Asset Divestment
On June 30, 2023, the Company closed on a transaction whereby it
exchanged its 49% non-operated interest in the West Yellow Creek
field in Mississippi for a term overriding royalty interest in the
field (7% for the first eight years and 3.4% for the next five
years). The Company also amended its CO2 sales contract as part of
the transaction to continue selling CO2 to the West Yellow Creek
field operator for a fee. Average production from the West Yellow
Creek field was 443 Bbl/d for Denbury in the second quarter of
2023.
Carbon Capture, Utilization, and
Storage (“CCUS”) Results
2Q 2023
1Q 2023
2Q 2022
Announced CO2 transport and/or storage
offtake (cumulative million metric tons per year)
23
22
7
Secured CO2 sequestration capacity
(cumulative million metric tons)
2,020
2,065
1,500
Class VI CO2 injection permit applications
submitted (cumulative)
9
3
-
Stratigraphic test wells drilled
-
1
-
CCUS capital expenditures ($ 000s)
$28,390
$19,688
$2,951
During the second quarter, Denbury executed an agreement with
SunGas Renewables Inc. (“SunGas”) to provide CO2 transportation and
storage services associated with SunGas’ low-carbon methanol
facility to be constructed in Pineville, Louisiana. SunGas’ project
is planned to commence operation in 2027 with an estimated one
million metric tons per year of associated CO2.
Second quarter 2023 capital expenditures for CCUS primarily
represented costs associated with dedicated CO2 sequestration
sites, including lease acquisition bonus, seismic imaging, and land
and legal costs. The Company expanded its sequestration portfolio
by four sites, including one in Texas, two in Louisiana, and one in
Wyoming. The Texas and Louisiana additions, which were previously
announced, bring the Company’s Gulf Coast dedicated sequestration
portfolio to a total of nine sites and nearly two billion metric
tons of CO2 storage potential. In Wyoming, the Company finalized a
definitive agreement for the rights to develop a dedicated CO2
sequestration site on approximately 19,000 acres in Campbell
County, directly underneath the Company’s Greencore CO2 Pipeline.
Denbury estimates potential CO2 sequestration capacity of the site
to be 40 million metric tons, bringing total sequestration capacity
for Denbury in the Rocky Mountain region to 80 million metric tons
of CO2 from two sites.
During the second quarter of 2023, the Company submitted an
application to the U.S. Environmental Protection Agency (“EPA”) for
six Class VI well permits for the Company’s Leo CO2 sequestration
site in Mississippi. Subsequent to quarter-end, the Company
submitted an additional application to the EPA for six Class VI
injection well permits associated with the Draco CO2 sequestration
site in Louisiana, bringing the Company’s total number of submitted
Class VI injection permits to 15.
In April 2023, based on the achievement of certain project
milestones, the Company invested its remaining $10 million
commitment for a total $20 million equity investment into Clean
Hydrogen Works, the development company of a blue hydrogen/ammonia
project planned in Louisiana.
Outlook
As a result of the Company’s pending merger with ExxonMobil,
Denbury’s prior guidance should no longer be relied upon. Denbury
will not be providing or updating quarterly or full-year guidance
in this or future earnings releases or in quarterly supplemental
materials that previously had accompanied quarterly releases.
Information regarding known or expected trends may be addressed in
Denbury’s or ExxonMobil’s future filings with the Securities and
Exchange Commission (“SEC”).
About Denbury
Denbury is an independent energy company with operations and
assets focused on Carbon Capture, Utilization, and Storage (“CCUS”)
and Enhanced Oil Recovery (“EOR”) in the Gulf Coast and Rocky
Mountain regions. For over two decades, the Company has maintained
a unique strategic focus on utilizing CO2 in its EOR operations and
since 2012 has also been active in CCUS through the injection of
captured industrial-sourced CO2. The Company currently injects over
four million tons of captured industrial-sourced CO2 annually, with
an objective to fully offset its Scope 1, 2, and 3 CO2 emissions by
2030, primarily through increasing the amount of captured
industrial-sourced CO2 used in its operations. For more information
about Denbury, visit www.denbury.com.
Follow Denbury on X and LinkedIn.
Important Information about the Transaction and Where to Find
It
In connection with the proposed transaction between Exxon Mobil
Corporation (“ExxonMobil”) and Denbury Inc. (“Denbury”), ExxonMobil
and Denbury will file relevant materials with the SEC, including a
registration statement on Form S-4 filed by ExxonMobil that will
include a proxy statement of Denbury that also constitutes a
prospectus of ExxonMobil. A definitive proxy statement/prospectus
will be mailed to stockholders of Denbury. This communication is
not a substitute for the registration statement, proxy statement or
prospectus or any other document that ExxonMobil or Denbury (as
applicable) may file with the SEC in connection with the proposed
transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION,
INVESTORS AND SECURITY HOLDERS OF EXXONMOBIL AND DENBURY ARE URGED
TO READ THE REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS
AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED
WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE
DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS.
Investors and security holders may obtain free copies of the
registration statement and the proxy statement/prospectus (when
they become available), as well as other filings containing
important information about ExxonMobil or Denbury, without charge
at the SEC’s Internet website (http://www.sec.gov). Copies of the
documents filed with the SEC by ExxonMobil will be available free
of charge on ExxonMobil’s internet website at www.exxonmobil.com
under the tab “investors” and then under the tab “SEC Filings” or
by contacting ExxonMobil’s Investor Relations Department at
investor.relations@exxonmobil.com. Copies of the documents filed
with the SEC by Denbury will be available free of charge on
Denbury’s website at denbury.com under the tab “Investors” and then
under the tab “Financial Information” and then under the tab “SEC
Filings” or by contacting Denbury’s Investor Relations Department
at IR@denbury.com. The information included on, or accessible
through, ExxonMobil’s or Denbury’s website is not incorporated by
reference into this communication.
Participants in the Solicitation
ExxonMobil, Denbury, their respective directors and certain of
their respective executive officers may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information about the directors and executive
officers of Denbury is set forth in its proxy statement for its
2023 annual meeting of stockholders, which was filed with the SEC
on April 18, 2023, and in its Form 10-K for the year ended December
31, 2022, which was filed with the SEC on February 23, 2023.
Information about the directors and executive officers of
ExxonMobil is set forth in its proxy statement for its 2023 annual
meeting of stockholders, which was filed with the SEC on April 13,
2023, and in its Form 10-K for the year ended December 31, 2022,
which was filed with the SEC on February 22, 2023. Additional
information regarding the participants in the proxy solicitations
and a description of their direct or indirect interests, by
security holdings or otherwise, will be contained in the proxy
statement/prospectus and other relevant materials filed with the
SEC when they become available.
No Offer or Solicitation
This communication is for informational purposes and is not
intended to, and shall not, constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any offer, solicitation or
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
Forward-Looking Statements
This communication contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In this context,
forward-looking statements often address future business and
financial events, conditions, expectations, plans or ambitions, and
often contain words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “seek,” “see,” “will,” “would,” “target,”
similar expressions, and variations or negatives of these words,
but not all forward-looking statements include such words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
consummation of the proposed transaction and the anticipated
benefits thereof. All such forward-looking statements are based
upon current plans, estimates, expectations and ambitions that are
subject to risks, uncertainties and assumptions, many of which are
beyond the control of ExxonMobil and Denbury, that could cause
actual results to differ materially from those expressed in such
forward-looking statements. Important risk factors that may cause
such a difference include, but are not limited to: the completion
of the proposed transaction on anticipated terms and timing, or at
all, including obtaining regulatory approvals that may be required
on anticipated terms and Denbury stockholder approval; anticipated
tax treatment, unforeseen liabilities, future capital expenditures,
revenues, expenses, earnings, synergies, economic performance,
indebtedness, financial condition, losses, future prospects,
business and management strategies for the management, expansion
and growth of the combined company’s operations and other
conditions to the completion of the merger, including the
possibility that any of the anticipated benefits of the proposed
transaction will not be realized or will not be realized within the
expected time period; the ability of ExxonMobil and Denbury to
integrate the business successfully and to achieve anticipated
synergies and value creation; potential litigation relating to the
proposed transaction that could be instituted against ExxonMobil,
Denbury or their respective directors; the risk that disruptions
from the proposed transaction will harm ExxonMobil’s or Denbury’s
business, including current plans and operations and that
management’s time and attention will be diverted on
transaction-related issues; potential adverse reactions or changes
to business relationships resulting from the announcement or
completion of the merger; rating agency actions and ExxonMobil and
Denbury’s ability to access short- and long-term debt markets on a
timely and affordable basis; legislative, regulatory and economic
developments, including regulatory implementation of the Inflation
Reduction Act, timely and attractive permitting for carbon capture
and storage by applicable federal and state regulators, and other
regulatory actions targeting public companies in the oil and gas
industry and changes in local, national, or international laws,
regulations, and policies affecting ExxonMobil and Denbury
including with respect to the environment; potential business
uncertainty, including the outcome of commercial negotiations and
changes to existing business relationships during the pendency of
the merger that could affect ExxonMobil’s and/or Denbury’s
financial performance and operating results; certain restrictions
during the pendency of the merger that may impact Denbury’s ability
to pursue certain business opportunities or strategic transactions
or otherwise operate its business; acts of terrorism or outbreak of
war, hostilities, civil unrest, attacks against ExxonMobil or
Denbury, and other political or security disturbances; dilution
caused by ExxonMobil’s issuance of additional shares of its common
stock in connection with the proposed transaction; the possibility
that the transaction may be more expensive to complete than
anticipated, including as a result of unexpected factors or events;
changes in policy and consumer support for emission-reduction
products and technology; the impacts of pandemics or other public
health crises, including the effects of government responses on
people and economies; global or regional changes in the supply and
demand for oil, natural gas, petrochemicals, and feedstocks and
other market or economic conditions that impact demand, prices and
differentials, including reservoir performance; changes in
technical or operating conditions, including unforeseen technical
difficulties; those risks described in Item 1A of ExxonMobil’s
Annual Report on Form 10-K, filed with the SEC on February 22,
2023, and subsequent reports on Forms 10-Q and 8-K, as well as
under the heading “Factors Affecting Future Results” on the
Investors page of ExxonMobil’s website at www.exxonmobil.com
(information included on or accessible through ExxonMobil’s website
is not incorporated by reference into this communication); those
risks described in Item 1A of Denbury’s Annual Report on Form 10-K,
filed with the SEC on February 23, 2023, and subsequent reports on
Forms 10-Q and 8-K; and those risks that will be described in the
registration statement on Form S-4 and accompanying prospectus
available from the sources indicated above. References to resources
or other quantities of oil or natural gas may include amounts that
ExxonMobil or Denbury believe will ultimately be produced, but that
are not yet classified as “proved reserves” under SEC definitions.
These risks, as well as other risks associated with the proposed
transaction, will be more fully discussed in the proxy
statement/prospectus that will be included in the registration
statement on Form S-4 that will be filed with the SEC in connection
with the proposed transaction. While the list of factors presented
here is, and the list of factors to be presented in the
registration statement on Form S-4 will be, considered
representative, no such list should be considered to be a complete
statement of all potential risks and uncertainties. Unlisted
factors may present significant additional obstacles to the
realization of forward-looking statements. We caution you not to
place undue reliance on any of these forward-looking statements as
they are not guarantees of future performance or outcomes and that
actual performance and outcomes, including, without limitation, our
actual results of operations, financial condition and liquidity,
and the development of new markets or market segments in which we
operate, may differ materially from those made in or suggested by
the forward-looking statements contained in this communication.
Neither ExxonMobil nor Denbury assumes any obligation to publicly
provide revisions or updates to any forward-looking statements,
whether as a result of new information, future developments or
otherwise, should circumstances change, except as otherwise
required by securities and other applicable laws. Neither future
distribution of this communication nor the continued availability
of this communication in archive form on ExxonMobil’s or Denbury’s
website should be deemed to constitute an update or re-affirmation
of these statements as of any future date.
This press release, other than historical information, contains
forward-looking statements that involve risks and uncertainties
detailed in the Company’s filings with the Securities and Exchange
Commission, including Denbury’s 2022 Annual Report on Form 10-K.
These risks and uncertainties are incorporated by this reference as
though fully set forth herein. These statements are based on
financial and market, engineering, geological and operating
assumptions that management believes are reasonable based on
currently available information; however, management’s assumptions
and the Company’s future performance are both subject to a wide
range of risks, and there is no assurance that these goals and
projections can or will be met. Actual results may vary materially.
In addition, any forward-looking statements represent the Company’s
estimates only as of today and should not be relied upon as
representing its estimates as of any future date. Denbury assumes
no obligation to update its forward-looking statements.
Financial and Statistical Data Tables and Reconciliation
Schedules
The following tables include selected unaudited financial and
operational information for the comparative three and six-month
periods ended June 30, 2023 and 2022, in order to assist investors
in understanding the comparability of the Company’s financial and
operational results for the applicable periods. All sales volumes
and dollars are expressed on a net revenue interest basis with gas
volumes converted to equivalent barrels at 6:1.
Denbury Inc. Consolidated Statements of
Operations (Unaudited)
The following information is based on
GAAP. Additional required disclosures will be included in the
Company’s periodic reports:
Quarter Ended
Six Months Ended
June 30,
June 30,
In thousands, except per-share data
2023
2022
2023
2022
Revenues and other income
Oil sales
$
301,543
$
446,592
$
614,115
$
827,834
Natural gas sales
1,403
5,378
3,320
9,047
CO2 sales and transportation fees
11,164
12,610
21,850
26,032
Oil marketing revenues
13,983
16,786
28,531
30,062
Other income
890
790
2,185
1,040
Total revenues and other income
328,983
482,156
670,001
894,015
Expenses
Lease operating expenses
130,291
124,351
259,465
242,179
Transportation and marketing expenses
5,159
4,802
10,548
9,447
CO2 operating and discovery expenses
1,597
1,681
2,793
4,498
Taxes other than income
26,937
36,317
55,975
67,698
Oil marketing purchases
13,922
15,027
28,390
28,067
General and administrative expenses
26,895
19,235
49,872
37,927
Interest, net of amounts capitalized of
$2,259, $975, $3,952 and $2,133, respectively
825
1,526
1,752
2,183
Depletion, depreciation, and
amortization
49,767
35,400
91,799
70,745
Commodity derivatives (income) expense
(19,677
)
56,854
(42,800
)
249,573
Other expenses
3,990
6,621
5,481
8,733
Total expenses
239,706
301,814
463,275
721,050
Income before income taxes
89,277
180,342
206,726
172,965
Income tax provision
Current income taxes
857
2,912
3,195
2,351
Deferred income taxes
21,139
21,936
47,051
15,992
Net income
$
67,281
$
155,494
$
156,480
$
154,622
Net income per common share
Basic
$
1.30
$
3.00
$
3.03
$
2.99
Diluted
$
1.25
$
2.83
$
2.90
$
2.81
Weighted average common shares
outstanding
Basic
51,817
51,757
51,661
51,680
Diluted
53,999
54,886
53,882
54,931
Denbury Inc. Consolidated Statements of
Cash Flows (Unaudited)
Quarter Ended
Six Months Ended
June 30,
June 30,
In thousands
2023
2022
2023
2022
Cash flows from operating
activities
Net income
$
67,281
$
155,494
$
156,480
$
154,622
Adjustments to reconcile net income to
cash flows from operating activities
Depletion, depreciation, and
amortization
49,767
35,400
91,799
70,745
Deferred income taxes
21,139
21,936
47,051
15,992
Stock-based compensation
6,548
4,104
11,486
7,075
Commodity derivatives (income) expense
(19,677
)
56,854
(42,800
)
249,573
Receipt (payment) on settlements of
commodity derivatives
5,157
(127,959
)
7,222
(221,016
)
Debt issuance costs and discounts
532
1,249
1,063
1,934
Other, net
(2,218
)
(1,888
)
(4,176
)
(3,155
)
Changes in assets and liabilities, net of
effects from acquisitions
Accrued production receivable
12,062
(12,991
)
12,855
(85,786
)
Trade and other receivables
7,970
(13,427
)
5,545
(11,783
)
Other current and long-term assets
(4,821
)
(12,364
)
(315
)
(12,175
)
Accounts payable and accrued
liabilities
16,624
40,600
(25,623
)
52,010
Oil and natural gas production payable
(7,053
)
9,981
(9,914
)
33,329
Asset retirement obligations and other
liabilities
(10,820
)
(7,024
)
(19,660
)
(11,257
)
Net cash provided by operating
activities
142,491
149,965
231,013
240,108
Cash flows from investing
activities
Oil and natural gas capital
expenditures
(105,636
)
(80,815
)
(210,418
)
(139,522
)
CCUS storage sites and related capital
expenditures
(34,644
)
(2,858
)
(49,289
)
(17,758
)
Acquisitions of oil and natural gas
properties
(7
)
(374
)
(42
)
(374
)
Pipelines and plants capital
expenditures
(668
)
(5,060
)
(1,291
)
(20,264
)
Net proceeds from sales of oil and natural
gas properties and equipment
—
137
—
237
Equity investments
(11,926
)
—
(19,034
)
—
Other
(7,752
)
(4,127
)
(13,631
)
(5,623
)
Net cash used in investing
activities
(160,633
)
(93,097
)
(293,705
)
(183,304
)
Cash flows from financing
activities
Bank repayments
(546,000
)
(250,000
)
(865,000
)
(524,000
)
Bank borrowings
563,000
215,000
921,000
489,000
Common stock repurchase program
—
(23,374
)
—
(23,374
)
Other
2,129
1,680
7,748
(1,388
)
Net cash provided by (used in)
financing activities
19,129
(56,694
)
63,748
(59,762
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
987
174
1,056
(2,958
)
Cash, cash equivalents, and restricted
cash at beginning of period
47,949
47,212
47,880
50,344
Cash, cash equivalents, and restricted
cash at end of period
$
48,936
$
47,386
$
48,936
$
47,386
Denbury Inc. Consolidated Balance
Sheets (Unaudited)
In thousands, except par value and share
data
June 30, 2023
Dec. 31, 2022
Assets
Current assets
Cash and cash equivalents
$
531
$
521
Accrued production receivable
131,422
144,277
Trade and other receivables, net
21,800
27,343
Derivative assets
36,809
15,517
Prepaids
20,117
18,572
Total current assets
210,679
206,230
Property and equipment
Oil and natural gas properties (using full
cost accounting)
Proved properties
1,751,158
1,414,779
Unevaluated properties
114,320
240,435
CO2 properties
193,432
190,985
Pipelines
219,748
220,125
CCUS storage sites and related assets
114,190
64,971
Other property and equipment
115,086
107,133
Less: accumulated depletion, depreciation,
amortization and impairment
(382,591
)
(306,743
)
Net property and equipment
2,125,343
1,931,685
Operating lease right-of-use assets
19,425
18,017
Derivative assets
1,269
—
Intangible assets, net
74,571
79,128
Restricted cash for future asset
retirement obligations
48,405
47,359
Other assets
61,927
45,080
Total assets
$
2,541,619
$
2,327,499
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable and accrued
liabilities
$
221,173
$
248,800
Oil and gas production payable
70,455
80,368
Derivative liabilities
—
13,018
Operating lease liabilities
5,098
4,676
Total current liabilities
296,726
346,862
Long-term liabilities
Long-term debt, net of current portion
85,153
29,000
Asset retirement obligations
312,372
315,942
Deferred tax liabilities, net
118,171
71,120
Operating lease liabilities
16,075
15,431
Other liabilities
12,969
16,527
Total long-term liabilities
544,740
448,020
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.001 par value,
50,000,000 shares authorized, none issued and outstanding
—
—
Common stock, $0.001 par value,
250,000,000 shares authorized; 50,473,001 and 49,814,874 shares
issued, respectively
50
50
Paid-in capital in excess of par
1,058,119
1,047,063
Retained earnings
641,984
485,504
Total stockholders’ equity
1,700,153
1,532,617
Total liabilities and stockholders’
equity
$
2,541,619
$
2,327,499
Denbury Inc. Operating Highlights
(Unaudited)
All sales volumes and dollars are
expressed on a net revenue interest basis with gas volumes
converted to equivalent barrels at 6:1.
Quarter Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Average daily sales (BOE/d)
Tertiary
Gulf Coast region
22,041
22,205
22,580
22,608
Rocky Mountain region
10,241
9,186
10,332
9,203
Total tertiary sales
32,282
31,391
32,912
31,811
Non-tertiary
Gulf Coast region
3,506
3,566
3,453
3,598
Rocky Mountain region
11,194
11,604
10,952
11,333
Total non-tertiary sales
14,700
15,170
14,405
14,931
Total Company
Oil (Bbls/d)
45,648
45,104
46,016
45,284
Natural gas (Mcf/d)
8,004
8,741
7,803
8,747
BOE/d (6:1)
46,982
46,561
47,317
46,742
Unit sales price (excluding derivative
settlements)
Gulf Coast region
Oil (per Bbl)
$
72.81
$
108.87
$
73.85
$
100.94
Natural gas (per mcf)
2.01
7.49
2.40
6.03
Rocky Mountain region
Oil (per Bbl)
$
72.32
$
108.72
$
73.58
$
101.07
Natural gas (per mcf)
1.90
6.36
2.33
5.53
Total Company
Oil (per Bbl)(1)
$
72.59
$
108.81
$
73.73
$
101.00
Natural gas (per mcf)
1.93
6.76
2.35
5.71
BOE (6:1)
70.86
106.67
72.09
98.92
Average NYMEX differentials
Gulf Coast region
Oil (per Bbl)
$
(0.92
)
$
0.16
$
(1.08
)
$
(0.72
)
Natural gas (per mcf)
(0.30
)
0.02
(0.15
)
0.01
Rocky Mountain region
Oil (per Bbl)
$
(1.41
)
$
0.01
$
(1.35
)
$
(0.59
)
Natural gas (per mcf)
(0.42
)
(1.12
)
(0.22
)
(0.49
)
Total Company
Oil (per Bbl)
$
(1.14
)
$
0.09
$
(1.20
)
$
(0.67
)
Natural gas (per mcf)
(0.39
)
(0.71
)
(0.20
)
(0.31
)
(1)
Total Company realized oil prices
including derivative settlements were $73.83 per Bbl and $77.63 per
Bbl during the three months ended June 30, 2023 and 2022,
respectively, and $74.60 per Bbl and $74.03 per Bbl during the six
months ended June 30, 2023 and 2022, respectively.
Denbury 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
Quarter Ended
June 30, 2023
June 30, 2022
In thousands, except per-share data
Amount
Per Diluted Share(1)
Amount
Per Diluted Share(1)
Net income (GAAP measure)
$
67,281
$
1.25
$
155,494
$
2.83
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value gains on commodity
derivatives(2)
(14,520
)
(0.27
)
(71,105
)
(1.30
)
Merger expense
1,138
0.02
—
—
Insurance reimbursements
—
—
(6,692
)
(0.12
)
Delta pipeline incident costs (included in
other expenses)(3)
—
—
3,867
0.07
Litigation expense
—
—
1,444
0.03
Noncash fair value adjustment - contingent
consideration(4)
—
—
(12
)
—
Estimated income taxes on above
adjustments to net income and other discrete tax items(5)
3,292
0.06
10,005
0.18
Adjusted net income (non-GAAP
measure)
$
57,191
$
1.06
$
93,001
$
1.69
Six Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
In thousands, except per-share data
Amount
Per Diluted Share(1)
Amount
Per Diluted Share(1)
Net income (GAAP measure)
$
156,480
$
2.90
$
154,622
$
2.81
Adjustments to reconcile to adjusted net
income (non-GAAP measure)
Noncash fair value losses (gains) on
commodity derivatives(2)
(35,578
)
(0.66
)
28,557
0.52
Merger expense
1,138
0.02
—
—
Delhi Field insurance reimbursements
—
—
(6,692
)
(0.12
)
Delta pipeline incident costs (included in
other expenses)(3)
(999
)
(0.02
)
3,867
0.07
Litigation expense
—
—
1,444
0.03
Accelerated depreciation
1,117
0.02
—
—
Noncash fair value adjustment - contingent
consideration(4)
—
—
173
—
Estimated income taxes on above
adjustments to net income and other discrete tax items(5)
8,339
0.16
4,152
0.08
Adjusted net income (non-GAAP
measure)
$
130,497
$
2.42
$
186,123
$
3.39
(1)
Includes the impact of potentially
dilutive securities including nonvested restricted stock,
restricted stock units, performance stock units, shares to be
issued under the employee stock purchase plan and warrants.
(2)
The net change between periods of the fair
market values of open commodity derivative positions, excluding the
impact of settlements on commodity derivatives during the
period.
(3)
Represents an accrual in 2022 of a
preliminarily assessed civil penalty proposed in May 2022 by the
U.S. Department of Transportation’s Pipeline and Hazardous
Materials Safety Administration related to the Company’s February
2020 Delta-Tinsley pipeline incident and in 2023, represents a
true-up to actual adjustment based on finalization of the assessed
penalty.
(4)
Expense related to the change in fair
value of the contingent consideration payments related to the
Company’s March 2021 Wind River Basin CO2 EOR field
acquisition.
(5)
Represents the estimated income tax
impacts on pre-tax adjustments to net income, which rate
incorporates discrete tax adjustments. During the three and six
months ended June 30, 2022, discrete tax adjustments primarily
represented the release of the valuation allowance on certain of
the Company’s federal and state deferred tax assets totaling $18.8
million and $24.7 million, respectively.
Denbury 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 measure
which management uses and 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
nonrecurring. Management believes Adjusted EBITDAX may be helpful
to investors in order to assess the Company’s operating performance
as compared to that of other companies in the industry, without
regard to financing methods, capital structure or historical costs
basis. It is also commonly used by third parties to assess leverage
and the Company’s ability to incur and service debt and fund
capital expenditures. Adjusted EBITDAX should not be considered in
isolation, as a substitute for, or more meaningful than, net
income, cash flow from operations, or any other measure reported in
accordance with GAAP. The Company’s Adjusted EBITDAX may not be
comparable to similarly titled measures of another company because
all companies may not calculate Adjusted EBITDAX, EBITDAX or EBITDA
in the same manner. The following table presents a reconciliation
of the Company’s net income to Adjusted EBITDAX.
In thousands
Quarter Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net income (GAAP measure)
$
67,281
$
155,494
$
156,480
$
154,622
Adjustments to reconcile to Adjusted
EBITDAX
Interest expense
825
1,526
1,752
2,183
Income tax expense
21,996
24,848
50,246
18,343
Depletion, depreciation, and
amortization
49,767
35,400
91,799
70,745
Noncash fair value losses (gains) on
commodity derivatives
(14,520
)
(71,105
)
(35,578
)
28,557
Stock-based compensation
6,548
4,104
11,486
7,075
Noncash, non-recurring and other
292
4,137
(1,664
)
3,726
Adjusted EBITDAX (non-GAAP
measure)
$
132,189
$
154,404
$
274,521
$
285,251
Denbury Inc. Supplemental Non-GAAP
Financial Measures (Unaudited)
Reconciliation of cash flows from
operations (GAAP measure) to adjusted cash flows from operations
(non-GAAP measure) and free cash flow (non-GAAP measure)
Adjusted cash flows from operations is a
non-GAAP measure that represents cash flows provided by operations
before changes in assets and liabilities, as summarized from the
Company’s Unaudited Condensed Consolidated Statements of Cash
Flows. Adjusted cash flows from operations measures the cash flows
earned or incurred from operating activities without regard to the
collection or payment of associated receivables or payables. Free
cash flow is a non-GAAP measure that represents adjusted cash flows
from operations less oil and gas development expenditures, CCUS
storage sites and related capital expenditures and capitalized
interest, but before acquisitions, ARO and equity method
investments. Management believes that it is important to consider
these additional measures, along with cash flows from operations,
as it believes the non-GAAP measures can often be a better way to
discuss changes in operating trends in its business caused by
changes in sales volumes, prices, operating costs and related
factors, without regard to whether the earned or incurred item was
collected or paid during that period. Adjusted cash flows from
operations and free cash flow are not measures of financial
performance under GAAP and should not be considered as alternatives
to cash flows from operations, investing, or financing activities,
nor as a liquidity measure or indicator of cash flows.
In thousands
Quarter Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Cash flows from operations (GAAP
measure)
$
142,491
$
149,965
$
231,013
$
240,108
Net change in assets and liabilities
relating to operations
(13,962
)
(4,775
)
37,112
35,662
Adjusted cash flows from operations
(non-GAAP measure)
128,529
145,190
268,125
275,770
Oil & gas development capital
expenditures
(103,395
)
(86,290
)
(203,186
)
(143,896
)
CCUS storage sites and related capital
expenditures
(28,390
)
(2,951
)
(48,078
)
(23,900
)
Capitalized interest
(2,259
)
(975
)
(3,952
)
(2,133
)
Free cash flow (deficit) (non-GAAP
measure)
$
(5,515
)
$
54,974
$
12,909
$
105,841
Denbury Inc. Capital Expenditure
Summary (Unaudited)(1)
Quarter Ended
Six Months Ended
June 30,
June 30,
In thousands
2023
2022
2023
2022
Capital expenditure summary(1)
CCA EOR field expenditures(2)
$
47,737
$
21,483
$
87,775
$
39,205
CCA CO2 pipelines
442
(950
)
965
1,241
CCA tertiary development
48,179
20,533
88,740
40,446
Non-CCA tertiary and non-tertiary
fields
43,895
57,074
92,988
86,437
CO2 sources and other CO2 pipelines
1,743
1,380
3,306
2,110
Capitalized internal costs(3)
9,578
7,303
18,152
14,903
Oil & gas development capital
expenditures
103,395
86,290
203,186
143,896
CCUS storage sites and related capital
expenditures
28,390
2,951
48,078
23,900
Oil and gas and CCUS development
capital expenditures
131,785
89,241
251,264
167,796
Capitalized interest
2,259
975
3,952
2,133
Acquisitions of oil and natural gas
properties
7
3
42
374
Equity investments(4)
11,926
—
19,034
—
Total capital expenditures
$
145,977
$
90,219
$
274,292
$
170,303
(1)
Capital expenditures in this summary are
presented on an as-incurred basis (including accruals) and are
$10.4 million and $9.3 million lower than the capital expenditures
in the Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2023 and June 30, 2022,
respectively, and are $9.5 million lower and $0.6 million higher
for the three months ended June 20, 2023 and June 30, 2022,
respectively, which are presented on a cash basis.
(2)
Includes pre-production CO2 costs
associated with the CCA EOR development project totaling $4.1
million and $9.3 million during the three and six months ended June
30, 2023, respectively, and $8.0 million and $10.8 million during
the three and six months ended June 30, 2022.
(3)
Includes capitalized internal acquisition,
exploration and development costs and pre-production tertiary
startup costs, excluding CCA.
(4)
Mainly represents investments made in
carbon capture technology companies during the second quarter of
2023 including a $10 million equity investment in Clean Hydrogen
Works and $1.5 million equity investment in Libra CO2 Storage
Solutions, LLC, and investments made during the first quarter of
2023 of $2 million in Aqualung Carbon Capture AS, as well as a $5
million investment in ION Clean Energy, Inc.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803627719/en/
Brad Whitmarsh, 972.673.2020, brad.whitmarsh@denbury.com
Beth Palmer, 972.673.2554, beth.palmer@denbury.com
Grafico Azioni Denbury (NYSE:DEN)
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Grafico Azioni Denbury (NYSE:DEN)
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