UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
2001 FORM 10-K
(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
OR
|_| Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _________ to________
Commission file number 1-12935
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-2815171
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5100 Tennyson Parkway,
Suite 3000, Plano, TX 75024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 673-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ---------------------------------------------------------- ---------------------------------------------------------
Common Stock $.001 Par Value New York Stock Exchange
========================================================== =========================================================
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 15, 2002, the aggregate market value of the registrant's Common
Stock held by non-affiliates was approximately $185,463,000.
The number of shares outstanding of the registrant's Common Stock as of
March 15, 2002, was 53,008,246.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated as to
1. Notice and Proxy Statement for the Annual Meeting of 1. Part III, Items 10, 11, 12, and 13
Shareholders to be held May 22, 2002.
2. Annual Report to Shareholders for the year ended 2. Part 1, Item 1 and Part II, Items 5, 6, 7, 8
December 31, 2001.
Denbury Resources Inc.
2001 Annual Report on Form 10-K
Table of Contents
Item Page
PART I
1. Business........................................................................... 3
2. Properties......................................................................... 10
3. Legal Proceedings.................................................................. 10
4. Submission of Matters to a Vote of Security Holders................................ 11
PART II
5. Market for the Common Stock and Related Matters.................................... 11
6. Selected Financial Data............................................................ 11
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 11
7A. Quantitative and Qualitative Disclosures About Market Risk......................... 11
8. Financial Statements and Supplementary Data........................................ 11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................... 12
PART III
10. Directors and Executive Officers of the Company.................................... 12
11. Executive Compensation ............................................................ 12
12. Security Ownership of Certain Beneficial Owners and Management..................... 12
13. Certain Relationships and Related Transactions..................................... 12
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................... 13
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PART I
Item 1. Business
The Company
Denbury Resources Inc. ("Denbury" or the "Company") is a Delaware
corporation, organized under Delaware General Corporation Law, engaged in the
acquisition, development, operation and exploration of oil and gas properties in
the Gulf Coast region of the United States, primarily in Louisiana and
Mississippi. Denbury's corporate headquarters is located at 5100 Tennyson
Parkway, Suite 3000, Plano, Texas 75024, and its phone number is 972-673-2000.
At December 31, 2001, the Company had 320 employees, 211 of which were employed
in field operations or at the field offices.
Incorporation and Organization
Denbury was originally incorporated in Canada in 1951. In 1992, the Company
acquired all of the shares of a United States operating company, Denbury
Management, Inc. ("DMI"), and subsequent to the merger the Company sold all of
its Canadian assets. Since that time, all of the Company's operations have been
in the United States.
In April 1999, the stockholders approved a move of the Company's corporate
domicile from Canada to the United States as a Delaware corporation. Along with
the move, the Company's wholly owned subsidiary, DMI, was merged into the new
Delaware parent company, Denbury Resources Inc. This move of domicile did not
have any effect on the operations and assets of the Company.
The Company has three active wholly owned subsidiaries, Denbury Marine,
L.L.C., Denbury Energy Services, Inc. and Denbury Offshore, Inc.
Business Strategy
As part of our corporate strategy, we believe in the following fundamental
principles:
o remain focused in specific regions;
o acquire properties where we believe additional value can be created
through a combination of exploitation, development, exploration and
marketing;
o acquire properties that give us a majority working interest and
operational control or where we believe we can ultimately obtain it;
o maximize the value of our properties by increasing production and
reserves while reducing cost; and
o maintain a highly competitive team of experienced and incentivized
personnel.
Acquisitions
Information as to recent acquisitions by the Company is set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - 2001 Acquisitions," appearing on pages 29 through 30 of the Annual
Report and under Note 2, "Acquisitions," of the Consolidated Financial
Statements. Such information is incorporated herein by reference.
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Oil and Gas Operations
Information regarding selected operating data and a discussion of the
Company's significant operating areas and the primary properties within those
three areas are set forth under "Selected Operating Data," appearing on pages 8
through 11 of the Annual Report, and the Operations Sections appearing on pages
14 through 25 of the Annual Report. Such information is incorporated herein by
reference.
Oil and Gas Acreage, Productive Wells, Drilling Activity
Information regarding oil and gas acreage, productive wells and drilling
activity are set forth under "Selected Operating Data," appearing on page 11 of
the Annual Report.
Title to Properties
Customarily in the oil and gas industry, only a perfunctory title
examination is conducted at the time properties believed to be suitable for
drilling operations are first acquired. Prior to commencement of drilling
operations, a thorough drill site title examination is normally conducted, and
curative work is performed with respect to significant defects. During
acquisitions, title reviews are performed on all properties; however, formal
title opinions are obtained on only the higher value properties. The Company
believes that it has good title to its oil and natural gas properties, some of
which are subject to minor encumbrances, easements and restrictions.
Production
Information regarding average production rates, unit sale prices and unit
costs per BOE are set forth under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages 36 through 39
of the Annual Report.
Geographic Segments
All of the Company's operations are in the United States.
Significant Oil and Gas Purchasers and Product Marketing
Oil and gas sales are made on a day-to-day basis under short-term contracts
at the current area market price. The loss of any purchaser would not be
expected to have a material adverse effect upon the Company. For the year ended
December 31, 2001, the Company sold 10% or more of its net production of oil and
gas to the following purchasers: Conoco 14%, Hunt Refining 13%, EOTT Energy 12%
and Dynegy 12%.
The Company's ability to market oil and gas depends on many factors beyond
its control, including the extent of domestic production and imports of oil and
gas, the proximity of the Company's gas production to pipelines, the available
capacity in such pipelines, the demand for oil and gas, the effects of weather,
and the effects of state and federal regulation. Denbury's production is
primarily from developed fields close to major pipelines or refineries and
established infrastructure. As a result, Denbury has not experienced any
difficulty to date in finding a market for all of its product as it becomes
available or in transporting its product to these markets; however, the Company
cannot assure that it will always be able to market all of its production or
obtain favorable prices. The Company does not currently believe that the loss of
any of its oil or gas purchasers would have a material adverse effect on its
operations.
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Oil Marketing
Denbury markets its oil to a variety of purchasers, many of which are
large, established companies. The oil is generally sold under a short-term
contract with the sales price based on an applicable posted price, plus a
negotiated premium or the NYMEX price less a discount. This price is determined
on a well-by-well basis and the purchaser generally takes delivery at the
wellhead. Mississippi oil, which accounted for approximately 86% of the
Company's oil production in 2001, is primarily light to medium sour crude and
sells at a significant discount to the NYMEX price. This discount ranged by
field from approximately $0.22 to $9.62 per Bbl in 2001 and the average discount
for the Company's Mississippi oil production was approximately $4.78 per Bbl in
2001. The balance of the oil production, Louisiana oil, is primarily light sweet
crude, which typically sells at a small discount to NYMEX.
Natural Gas Marketing
Virtually all of Denbury's natural gas production is close to existing
pipelines and consequently, the Company generally has a variety of options to
market its natural gas. The Company sells the majority of its natural gas on one
year contracts with prices fluctuating month-to-month based on published
pipeline indices with slight premiums or discounts to the index.
Product Price Derivative Hedging Contracts
The Company enters into various financial contracts to hedge its exposure
to commodity price risk associated with anticipated future oil and natural gas
production. Information as to these activities is set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Market Risk Management," appearing on pages 44 through 48 of the Annual Report
and under Note 7, "Derivative Hedging Contracts," of the Consolidated Financial
Statements. Such information is incorporated herein by reference.
Operating Environment
Oil and Natural Gas Price Volatility
The Company's future financial condition, results of operations and the
carrying value of our oil and natural gas properties depends primarily upon the
prices the Company receives for its oil and natural gas production. Oil and
natural gas prices historically have been volatile and likely will continue to
be volatile in the future. This price volatility also affects the amount of cash
flow available to the Company for capital expenditures and the Company's ability
to borrow money or raise additional capital. The amount the Company can borrow
or have outstanding under its bank credit facility is subject to semi-annual
redeterminations based on current prices at the time of redetermination. In the
short-term, the Company's production is balanced between oil and natural gas,
but longer-term, oil prices are likely to have a greater impact on the Company
because 70% of the Company's reserves are oil.
Over the last three years oil prices have gone from near historic low
prices to higher prices not experienced for at least ten years. At the end of
1998, NYMEX oil prices were at historic lows of approximately $12.00 per Bbl,
but during 1999 and 2000 NYMEX oil prices increased to an average of
approximately $19.30 and $30.25 per Bbl, respectively. During 2001, NYMEX oil
prices declined to an average of approximately $26.00 per Bbl and were at $19.84
per Bbl at the end of 2001. Natural gas prices have experienced even more
volatility over the same three year period. During 1999 natural gas prices
averaged approximately $2.35 per Mcf and increased to an average of
approximately $3.90 per Mcf during 2000, primarily due to low storage levels. At
December 31, 2000, NYMEX natural gas prices were almost $10.00 per Mcf but
declined steadily during 2001 as supplies of natural gas increased. As of
year-end 2001, natural gas prices had declined to $2.57 per Mcf.
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The prices for oil and natural gas are subject to wide fluctuations in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond our control. These factors include:
o relatively minor changes in the supply of and demand for oil and
natural gas;
o weather conditions;
o market uncertainty;
o domestic and foreign governmental regulations and taxes;
o the availability and cost of alternative fuel sources;
o the domestic and foreign supply of oil and natural gas;
o the price of foreign oil and natural gas;
o the ability of the members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production controls;
o political conditions in oil and natural gas producing regions,
including the Middle East; and
o overall economic conditions.
These factors and the volatility of the energy markets generally make it
extremely difficult to predict future oil and natural gas price movements with
any certainty. Declines in oil and natural gas prices would not only reduce
revenue, but could reduce the amount of oil and natural gas that we can produce
economically and, as a result, could have a material adverse effect on our
financial condition, results of operations and reserves. Further, oil and
natural gas prices do not necessarily move in tandem.
Oil and Natural Gas Drilling and Producing Operations
Drilling activities are subject to many risks, including the risk that no
commercially productive reservoirs will be discovered. There can be no assurance
that new wells drilled by the Company will be productive or that the Company
will recover all or any portion of our investment in such wells. Drilling for
oil and natural gas may involve unprofitable efforts, not only from dry wells
but also from wells that are productive but do not produce sufficient net
reserves to return a profit after deducting drilling, operating and other costs.
The seismic data and other technologies used by the Company do not provide
conclusive knowledge, prior to drilling a well, that oil or natural gas is
present or may be produced economically. The cost of drilling, completing and
operating a well is often uncertain, and cost factors can adversely affect the
economics of a project. Further, the Company's drilling operations may be
curtailed, delayed or canceled as a result of numerous factors, including:
o unexpected drilling conditions;
o title problems;
o pressure or irregularities in formations;
o equipment failures or accidents;
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o adverse weather conditions;
o compliance with environmental and other governmental requirements; and
o cost of, or shortages or delays in the availability of, drilling rigs,
equipment and services.
The Company's operations are subject to all the risks normally incident to
the operation and development of oil and natural gas properties and the drilling
of oil and natural gas wells, including encountering well blowouts, cratering
and explosions, pipe failure, fires, formations with abnormal pressures,
uncontrollable flows of oil, natural gas, brine or well fluids, release of
contaminants into the environment and other environmental hazards and risks.
In accordance with industry practice, the Company maintains insurance
against some, but not all, of the risks described above in an amount the Company
believes to be adequate. However, the nature of these risks is such that some
liabilities could exceed the Company's policy limits, or, as in the case of
environmental fines and penalties, cannot be insured. The Company could incur
significant costs that could have a material adverse effect upon its financial
condition due to these risks.
Future Performance and Acquisitions
Unless the Company can successfully replace the reserves that we produce,
the Company's reserves will decline, resulting eventually in a decrease in oil
and natural gas production and lower revenues and cash flows from operations.
The Company has historically replaced reserves through both drilling and
acquisitions. In the future the Company may not be able to continue to replace
reserves at acceptable costs. The business of exploring for, developing or
acquiring reserves is capital intensive. The Company may not be able to make the
necessary capital investment to maintain or expand its oil and natural gas
reserves if cash flows from operations are reduced, due to lower oil or natural
gas prices or otherwise, or if external sources of capital become limited or
unavailable. If the Company does not continue to make significant capital
expenditures, or if outside capital resources become limited, the Company may
not be able to maintain its growth rate. In addition, the Company's drilling
activities are subject to numerous risks, including the risk that no
commercially productive oil or natural gas reserves will be encountered.
Exploratory drilling involves more risk than development drilling because
exploratory drilling is designed to test formations for which proved reserves
have not been discovered.
The Company is continually identifying and evaluating acquisition
opportunities, such as our recently completed Matrix acquisition, which
substantially increased our offshore operations. However, the magnitude of an
acquisition such as Matrix, together with the inherent difficulty in evaluating
the acquired properties and forecasting reserves, may result in the Company's
inability to achieve or maintain targeted production levels. In that case, the
Company's ability to realize the total economic benefit from the acquisition may
be reduced or eliminated. There can be no assurance that the Company will
successfully consummate any future acquisitions or that such acquisitions of oil
and natural gas properties will contain economically recoverable reserves or
that any future acquisition will be profitably integrated into the Company's
operations.
Competition and Markets
The Company faces competition from other oil and gas companies in all
aspects of its business, including acquisition of producing properties and oil
and gas leases, marketing of oil and gas, and obtaining goods, services and
labor. Many of its competitors have substantially larger financial and other
resources. Factors that affect the Company's ability to acquire producing
properties include available funds, available information about
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prospective properties and the Company's standards established for minimum
projected return on investment. Gathering systems are the only practical method
for the intermediate transportation of natural gas. Therefore, competition for
natural gas delivery is presented by other pipelines and gas gathering systems.
Competition is also presented by alternative fuel sources, including heating oil
and other fossil fuels. Because of the long-lived, high margin nature of the
Company's oil and gas reserves and management's experience and expertise in
exploiting these reserves, management believes that it is effective in competing
in the market.
Federal and State Regulations
There have been, and continue to be, numerous federal and state laws and
regulations governing the oil and gas industry that are often changed in
response to the current political or economic environment. Compliance with this
regulatory burden is often difficult and costly and may carry substantial
penalties for noncompliance. The following are some specific regulations that
may affect the Company. The Company cannot predict the impact of these or future
legislative or regulatory initiatives.
Regulation of Natural Gas and Oil Exploration and Production
The Company's operations are subject to various types of regulation at the
federal, state and local levels. Such regulation includes requiring permits for
drilling wells, maintaining bonding requirements in order to drill or operate
wells and regulating the location of wells, the method of drilling and casing
wells, the surface use and restoration of properties upon which wells are
drilled, the plugging and abandoning of wells and the disposal of fluids used in
connection with operations. The Company's operations are also subject to various
conservation laws and regulations. These include the regulation of the size of
drilling and spacing units or proration units and the density of wells which may
be drilled in and the unitization or pooling of oil and gas properties. In
addition, state conservation laws establish maximum rates of production from oil
and gas wells, generally prohibit the venting or flaring of gas and impose
certain requirements regarding the ratability of production. The effect of these
regulations may limit the amount of oil and gas the Company can produce from its
wells and may limit the number of wells or the locations at which the Company
can drill. The regulatory burden on the oil and gas industry increases the
Company's costs of doing business and, consequently, affects its profitability.
Inasmuch as such laws and regulations are frequently expanded, amended and
reinterpreted, the Company is unable to predict the future cost or impact of
complying with such regulations.
Federal Regulation of Sales Prices and Transportation
Currently, there are no federal, state or local laws that regulate the
price for sales of natural gas, NGLs, crude oil or condensate by the Company.
However, the rates charged and terms and conditions for the movement of gas in
interstate commerce through certain intrastate pipelines and production area
hubs are subject to regulation under the Natural Gas Policy Act of 1978
("NGPA"). Pipeline and hub construction activities are, to a limited extent,
also subject to regulations under the Natural Gas Act of 1938 ("NGA"). While
these controls do not apply directly to the Company, their effect on natural gas
markets can be significant in terms of competition and cost of transportation
services. Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, FERC, state regulatory
bodies and the courts. The Company cannot predict when or if any such proposals
might become effective and their effect, if any, on the Company's operations.
Historically, the natural gas industry has been heavily regulated; therefore,
there is no assurance that the less stringent regulatory approach recently
pursued by FERC, Congress and the states will continue indefinitely into the
future.
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Gathering Regulations
State regulation of gathering facilities generally includes various safety,
environmental and, in some circumstances, nondiscriminatory take requirements.
Such regulation has not generally been applied against gatherers of natural gas,
although natural gas gathering may receive greater regulatory scrutiny in the
future.
Federal, State or Indian Leases
The Company's operations on federal, state or Indian oil and gas leases are
subject to numerous restrictions, including nondiscrimination statutes. Such
operations must be conducted pursuant to certain on-site security regulations
and other permits and authorizations issued by the Bureau of Land Management,
Minerals Management Service and other agencies.
Environmental Regulations
Public interest in the protection of the environment has increased
dramatically in recent years. In addition, over the last two years the Company
has acquired significant assets offshore in the Gulf of Mexico which are
regulated by the Minerals Management Service of the U.S. Department of the
Interior. The Company's oil and natural gas production and saltwater disposal
operations and our processing, handling and disposal of hazardous materials,
such as hydrocarbons and naturally occurring radioactive materials are subject
to stringent regulation. The Company could incur significant costs, including
cleanup costs resulting from a release of hazardous material, third-party claims
for property damage and personal injuries fines and sanctions, as a result of
any violations or liabilities under environmental or other laws. Changes in or
more stringent enforcement of environmental laws could also result in additional
operating costs and capital expenditures.
Various federal, state and local laws regulating the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, directly impact oil and gas exploration, development and production
operations, and consequently may impact the Company's operations and costs.
These regulations include, among others, (i) regulations by the EPA and various
state agencies regarding approved methods of disposal for certain hazardous and
nonhazardous wastes; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, Federal Resource Conservation and Recovery Act
and analogous state laws which regulate the removal or remediation of previously
disposed wastes (including wastes disposed of or released by prior owners or
operators), property contamination (including groundwater contamination), and
remedial plugging operations to prevent future contamination; (iii) the Clean
Air Act and comparable state and local requirements which may result in the
gradual imposition of certain pollution control requirements with respect to air
emissions from the operations of the Company; (iv) the Oil Pollution Act of 1990
which contains numerous requirements relating to the prevention of and response
to oil spills into waters of the United States; (v) the Resource Conservation
and Recovery Act which is the principal federal statute governing the treatment,
storage and disposal of hazardous wastes; and (vi) state regulations and
statutes governing the handling, treatment, storage and disposal of naturally
occurring radioactive material ("NORM").
Management believes that the Company is in substantial compliance with
applicable environmental laws and regulations. To date, the Company has not
expended any material amounts to comply with such regulations, and management
does not currently anticipate that future compliance will have a materially
adverse effect on the consolidated financial position or results of operations
of the Company.
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Estimated Net Quantities of Proved Oil and Gas Reserves and Present Value of
Estimated Future Net Revenues
Estimates of net proved oil and gas reserves as of December 31, 2001 and
2000 have been prepared by DeGolyer and MacNaughton, and the estimates as of
December 31, 1999 were prepared by Netherland, Sewell and Associates, Inc., both
independent petroleum engineers located in Dallas, Texas. See Note 11,
"Supplemental Oil and Natural Gas Disclosures," of the Consolidated Financial
Statements and pages 9 and 10 of the Annual Report for disclosure of reserve
data. Such information is incorporated herein by reference.
There are numerous uncertainties inherent in estimating quantities of
proved oil and natural gas reserves and their values, including many factors
beyond our control. The reserve data included herein represents only estimates.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in an exact manner.
The accuracy of any reserve estimate is a function of the quality of available
geological, geophysical, engineering and economic data, the precision of the
engineering and judgment. As a result, estimates of different engineers often
vary. The estimates of reserves, future cash flows and present value are based
on various assumptions, including those prescribed by the SEC relating to oil
and natural gas prices, drilling and operating expenses, capital expenditures,
taxes and availability of funds, and are inherently imprecise. Actual future
production, cash flows, taxes, development expenditures, operating expenses and
quantities of recoverable oil and natural gas reserves may vary substantially
from the Company's estimates. Such variations may be significant and could
materially affect estimated quantities and the present value of the Company's
proved reserves. Also, the use of a 10% discount factor for reporting purposes
may not necessarily represent the most appropriate discount factor, given actual
interest rates and risks to which the Company or the oil and natural gas
industry in general are subject.
You should not assume that the present values referred to herein represent
the current market value of our estimated oil and natural gas reserves. In
accordance with requirements of the SEC, the estimates of present values are
based on prices and costs as of the date of the estimates. Actual future prices
and costs may be materially higher or lower than the prices and cost as of the
date of the estimate.
Quantities of proved reserves are estimated based on economic conditions,
including oil and natural gas prices in existence at the date of assessment. The
Company's reserves and future cash flows may be subject to revisions based upon
changes in economic conditions, including oil and natural gas prices, as well as
due to production results, results of future development, operating and
development costs and other factors. Downward revisions of the Company's
reserves could have an adverse affect on its financial condition and operating
results.
Item 2. Properties
See Item 1. Business - "Oil and Gas Operations." The Company also has
various operating leases for rental of office space, office equipment, and
vehicles. See Note 9, "Commitments and Contingencies," of the Consolidated
Financial Statements for the future minimum rental payments. Such information is
incorporated herein by reference.
Item 3. Legal Proceedings
In the opinion of management, there are no material pending legal
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their property is the subject. However, due to the nature of its
business, certain legal or administrative proceedings arise from time to time in
the ordinary course of its business. See Note 9, "Commitments and
Contingencies," of the Consolidated Financial Statements for further disclosure
regarding legal proceedings and contingencies. Such information is included
herein by reference.
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted for a vote of security holders during the
fourth quarter of 2001.
PART II
Item 5. Market for the Common Stock and Related Matters
Information as to the markets in which the Company's common stock is
traded, the quarterly high and low prices for such stock during the last two
years, the restriction on the payment of dividends with respect to the common
stock, and the approximate number of stockholders of record at February 1, 2002,
is set forth under "Common Stock Trading Summary" appearing on page 81 of the
Annual Report. Such information is incorporated herein by reference.
Affiliates of the Texas Pacific Group beneficially own approximately 52% of
the Company's outstanding common stock and their representatives hold four of
nine seats on the Company's board of directors. As a result of its ownership,
the Texas Pacific Group has the effective ability to elect all directors of the
Company and to control its business and affairs, including decisions with
respect to the acquisition or disposition of assets, the future issuance of our
common stock or other securities, dividend policy and decisions with respect to
the Company's drilling, operating and acquisition expenditure plans. Although
the Company's articles of incorporation require a two-thirds majority vote by
the board of directors on most significant transactions, such as significant
asset purchases and sales, issuances of equity and debt, changes in the board of
directors and other matters, there is no agreement that would prevent the Texas
Pacific Group from replacing all directors of the Company by calling a meeting
of the Company's shareholders.
Item 6. Selected Financial Data
Selected Financial Data for the Company for each of the last five years are
set forth under "Financial Highlights" appearing on page 2 of the Annual Report.
All such information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information as to the Company's financial condition, changes in financial
condition and results of operations and other matters is set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing on pages 29 through 50 of the Annual Report and is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A is set forth under "Market Risk
Management" in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing on pages 44 through 48 of the Annual Report
and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements, accounting policy
disclosures, notes to financial statements, business segment information,
unaudited quarterly information and independent auditors' report are presented
on pages 51 through 81 of the Annual Report. All such information is
incorporated herein by reference.
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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Company
Directors of the Company
Information as to the names, ages, positions and offices with Denbury,
terms of office, periods of service, business experience during the past five
years and certain other directorships held by each director or person nominated
to become a director of Denbury will be set forth in the "Election of Directors"
segment of the Proxy Statement ("Proxy Statement") for the Annual Meeting of
Shareholders to be held May 22, 2002, ("Annual Meeting") and is incorporated
herein by reference.
Executive Officers of the Company
Information concerning the executive officers of Denbury will be set forth
in the "Management" section of the Proxy Statement for the Annual Meeting and is
incorporated herein by reference.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's executive officers and directors, and persons
who beneficially own more than ten percent (10%) of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and exchanges and to
furnish the Company with copies. Based solely on its review of the copies of
such forms received by it, or written representations from such persons, the
Company is not aware of any person who failed to file any reports required by
Section 16(a) to be filed for fiscal 2001. The Company is aware of delinquent
filings on behalf of three officers and directors that will be disclosed in the
Company's Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
Information concerning remuneration received by Denbury's executive
officers and directors will be presented under the caption "Statement of
Executive Compensation" in the Proxy Statement for the Annual Meeting and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information as to the number of shares of Denbury's equity securities
beneficially owned as of March 15, 2002, by each of its directors and nominees
for director, its five most highly compensated executive officers and its
directors and executive officers as a group will be presented under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement for the Annual Meeting and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information on related transactions will be presented under the caption
"Compensation Committee Interlocks and Insider Participation" and "Interests of
Insiders in Material Transactions" in the Proxy Statement for the Annual Meeting
and is incorporated herein by reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules. Financial statements and schedules filed
as a part of this report are presented on pages 51 through 81 of the Annual
Report and are incorporated herein by reference.
Exhibits. The following exhibits are filed as a part of this report.
Exhibit No. Exhibit
3(a) Certificate of Incorporation of Denbury Resources Inc. filed with the Delaware Secretary
of State on April 20, 1999 (incorporated by reference as Exhibit 3(a) of the Registrant's
Form 10-Q for the quarter ended March 31, 1999).
3(b) Bylaws of Denbury Resources Inc., a Delaware corporation, adopted April 20, 1999
(incorporated by reference as Exhibit 3(b) of the Registrant's Form 10-Q for the quarter
ended March 31, 1999).
4(a) Form of Indenture between Denbury Management Inc. and Chase Bank of Texas, National
Association, as trustee (incorporated by reference as Exhibit 4(b) of Registrant's
Registration Statement on Form S-3 dated February 19, 1998).
4(b) First Supplemental Indenture dated as of April 21, 1999,
between Denbury Resources Inc., a Delaware corporation, and
Chase Bank of Texas, National Association, as Trustee,
relating to Denbury Management, Inc.'s 9% Senior
Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4(a) of the Registrant's Form 10-Q for the quarter
ended March 31, 1999).
4(c) Indenture dated as of August 15, 2001, among Denbury
Resources Inc., certain of its subsidiaries, and the Chase
Manhattan Bank (incorporated by reference as Exhibit 4(c) of
the Registrant's Registration Statement on Form S-4 dated
October 23, 2001).
4(d) Registration Rights Agreement dated August 8, 2001
(incorporated by reference as Exhibit 4(d) of the
Registrant's Registration Statement on Form S-4 dated
October 23, 2001).
10(a) Second Amended and Restated Credit Agreement, dated October 13, 2000, between the
Company and Bank of America, N.A., as Administrative Agent, and the financial
institutions listed on schedule 2.1 therein (incorporated by reference to Exhibit 10 of the
Registrant's Form 10-Q for the quarter ended September 30, 2000).
10(b)** Denbury Resources Inc. Stock Option Plan (incorporated by
reference as Exhibit 4(f) of the Registrant's Registration
Statement on Form S-8, No. 333-1006, dated February 2, 1996,
and as amended by the Registrant's Registration Statements
on Forms S-8, Nos. 333-27995, 333-55999, 333-70485, and
333-63198 dated May 29, 1997, June 4, 1998, July 12, 1999
and June 15, 2001, respectively).
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Exhibit No. Exhibit
10(c)** Denbury Resources Inc. Stock Purchase Plan (incorporated by reference as Exhibit 4(g) of
the Registrant's Registration Statement on Form S-8, No. 333-1006, dated February 2, 1996,
and as amended by the Registrant's Registration Statements on Forms S-8, No. 333-70485,
dated January 12, 1999 and No. 333-39172, dated June 13, 2000).
10(d) Form of indemnification agreement between Denbury Resources Inc. and its officers and
directors (incorporated by reference as Exhibit 10 of the Registrant's Form 10-Q for the
quarter ended June 30, 1999).
10(e)** Denbury Resources Inc. Directors Compensation Plan (incorporated by reference as Exhibit
4 of the Registrant's Registration Statement on Form S-8, No. 333-39172, dated June 13,
2000 and amended March 2, 2001).
10(f)** Denbury Resources Severance Protection Plan, dated December 6, 2000 (incorporated by
reference as Exhibit 10(f) of the Registrant's Form 10-K for the year ended December 31, 2001).
10(g) Stock Purchase Agreement between TPG Partners II, L.L.C. and the Company dated as of
December 16, 1998 (incorporated by reference as Exhibit 99.1 of the Registrant's Form 8-K
dated December 17, 1998).
10(h) Agreement and Plan of Merger and Reorganization, by and among Denbury Resources
Inc., Denbury Offshore, Inc., and Matrix Oil & Gas, Inc., and its shareholders, as of June
4, 2001 (incorporated by reference as Exhibit 2 of the Registrant's Current Report on
Form 8-K, dated June 15, 2001).
13* Annual Report to Shareholders.
21* List of Subsidiaries of Denbury Resources Inc.
23* Consent of Deloitte & Touche LLP.
* Filed herewith.
** Compensation arrangements.
(b) Reports on Form 8-K.
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Denbury Resources Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DENBURY RESOURCES INC.
March 20, 2002 /s/ Phil Rykhoek
-------------------------------------
Phil Rykhoek
Chief Financial Officer and Secretary
March 20, 2002 /s/ Mark C. Allen
-------------------------------------
Mark C. Allen
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Denbury
Resources Inc. and in the capacities and on the dates indicated.
March 20, 2002 /s/ Ronald G. Greene
---------------------------------------
Ronald G. Greene
Chairman of the Board and Director
March 20, 2002 /s/ Gareth Roberts
---------------------------------------
Gareth Roberts
Director, President and
Chief Executive Officer
(Principal Executive Officer)
March 20, 2002 /s/ Phil Rykhoek
---------------------------------------
Phil Rykhoek
Chief Financial Officer and Secretary
(Principal Financial Officer)
March 20, 2002 /s/ Mark C. Allen
---------------------------------------
Mark C. Allen
Chief Accounting Officer and Controller
(Principal Accounting Officer)
March 20, 2002 /s/ David I. Heather
---------------------------------------
David I. Heather
Director
March 20, 2002 /s/ Wieland F. Wettstein
---------------------------------------
Wieland F. Wettstein
Director
March 20, 2002 /s/ David B. Miller
---------------------------------------
David B. Miller
Director
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