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8-K - FORM 8-K - DENBURY INC | d79421e8vk.htm |
EX-99.2 - EX-99.2 - DENBURY INC | d79421exv99w2.htm |
Exhibit 99.1
DENBURY RESOURCES INC.
PRESS RELEASE
PRESS RELEASE
Denbury Reports Year-End Proved Oil and Gas Reserve
Quantities Increase 92% to 397.9 MMBOE
CO2 Reserves Increase 27% to 8.0 Tcf
5% Sequential Increase in Quarterly Tertiary Oil Production
Quantities Increase 92% to 397.9 MMBOE
CO2 Reserves Increase 27% to 8.0 Tcf
5% Sequential Increase in Quarterly Tertiary Oil Production
News Release
Released at 5:00 A.M. CT
Released at 5:00 A.M. CT
DALLAS February 3, 2011 Denbury Resources Inc. (NYSE symbol: DNR) (Denbury or the
Company) today announced that its total proved oil and natural gas reserves as of December 31,
2010 were 397.9 million barrels of oil equivalent (MMBOE), consisting of 338.3 million barrels
(MMBbls) of crude oil, condensate and natural gas liquids and 357.9 billion cubic feet (Bcf)
(59.6 MMBOE) of natural gas. The Companys reserve quantities increased approximately 92% (190.4
MMBOE) from year-end 2009 levels, primarily attributable to reserves added in connection with the
acquisition of Encore Acquisition Company (Encore) in March 2010, and reserves added from
continued development and expansion of the Companys tertiary floods and from Bakken drilling. The
Company also announced that its year-end 2010 proved carbon dioxide (CO2) reserves
were 7.1 trillion cubic feet (Tcf) at Jackson Dome in its Gulf Coast Region and 0.9 Tcf at Riley
Ridge in its Rocky Mountain Region, a 27% increase over Denburys year-end 2009 CO2
reserves of 6.3 Tcf. The independent reservoir engineering firm of DeGolyer and MacNaughton
prepared Denburys year-end reserve report, including its proved CO2 reserve quantities,
for the tenth consecutive year. Denburys year-end 2010 proved reserves are 85% oil, 60% are
proved developed, and 41% of the year-end reserves are proved tertiary oil reserves.
Proved Reserves and Analysis
Denbury added 344.5 MMBOE of proved reserves during 2010 (before netting out 2010 production
and reserves disposed of as part of property sales) replacing approximately 1,294% of its 2010
production. Net of property sales, the Company added 217.0 MMBOE of proved reserves, replacing
approximately 815% of its 2010 production. The most significant additions to reserves during 2010
were approximately 217.4 MMBOE from the acquisition of Encore (including approximately 43.0 MMBOE
associated with Encore Energy Partners (ENP)), 39.4 MMBbls added in the Companys tertiary oil
operations, 33.4 MMBOE from the development of its Bakken properties, 32.3 MMBOE of natural gas
reserves added through the acquisition of Riley Ridge, and 2.9 MMBOE related to commodity price
revisions. The Companys tertiary oil reserves added during the year were primarily at Delhi Field
(29.5 MMBbls), resulting in 164.4 MMBbls of proved tertiary reserves at December 31, 2010. Based
on estimated fourth quarter 2010 production levels, the Companys tertiary oil reserves have a 14.5
R/P ratio (reserves divided by estimated fourth quarter production levels annualized to be
expressed in years). Year-end proved reserves of the Companys Bakken properties are 46.7 MMBOE.
The Company sold approximately 127.5 MMBOE of proved reserves during 2010, all related to
non-strategic properties which were part of the Encore acquisition (including reserves associated
with ENP).
The Company added CO2 reserves of 2.0 Tcf during 2010 resulting in total proved
CO2 reserves
of 8.0 Tcf at December 31, 2010 after deducting estimated 2010 CO2 production of
311.1 Bcf. The additional reserves resulted from the drilling of three CO2 source wells
at Jackson Dome and the fourth quarter acquisition of 920.3 Bcf of proved CO2 reserves
at Riley Ridge. During 2011, the Company plans to drill four additional CO2 wells in
the Jackson Dome area.
Preliminary estimates of 2010 capital expenditures total approximately $965 million, including
approximately $675 million spent for oil and natural gas development and exploration activities
(before proceeds from equipment sale/leasebacks of $37 million in 2010) and approximately $290
million (including acquisition costs of $21.5 million) spent on Denburys CO2 pipelines,
producing wells and facilities. These capital spending estimates include capitalized interest
related to oil and natural gas capital expenditures of approximately $33 million and capitalized
interest related to CO2 expenditures of $34 million. In addition, the Company allocated
approximately $4.6 billion to oil and gas property acquisition costs during 2010 related to its
acquisitions of Encore and the Riley Ridge properties. These amounts do not include approximately
$1.1 billion of goodwill recorded in the acquisition of Encore. The Company received approximately
$1.5 billion in net proceeds from the sale of oil and natural gas properties during 2010, all from
the sale of non-strategic properties acquired in the Encore merger, including the sale of its
ownership interests in ENP, which ENP sale consideration included the receipt of $93 million of
value attributable to the Vanguard Natural Resources common units received in the sale.
Based on these preliminary 2010 estimates, 2010 finding costs, including the net change in
future development cost for proved reserves, are currently estimated to be $14.24 per BOE (see
reconciliation below).
In accordance with Securities and Exchange Commission (SEC) requirements, Denburys proved
reserves at December 31, 2010 were computed using first-day-of-the-month 12-month average 2010
commodity prices of $79.43 per Bbl of oil (based on NYMEX prices) and a Henry Hub cash price of
$4.40 per MMBtu of natural gas, with necessary adjustments applied to each field to arrive at the
net prices received by the Company. Denburys net average prices contained in the reserve report
were approximately $74.36 per Bbl of oil, and $4.29 per Mcf
of natural gas. Using these prices, the estimated discounted net present value of Denburys proved
reserves, before projected income taxes, using a 10% per annum discount rate (PV-10 Value) was
$7.3 billion at December 31, 2010, as compared to a PV-10 Value of $3.1 billion a year earlier.
This increase is primarily due to the 2010 additions to reserves discussed above and a 27% increase
between the average net oil prices in the 2009 reserve report and those in the 2010 reserve report.
Denburys proved reserves at December 31, 2009 were computed using commodity prices of $61.18 per
Bbl of oil and a Henry Hub cash price of $3.87 per MMBtu of natural gas. PV-10 Value is a non-GAAP
measure and is different than the Standardized Measure of Discounted Future Net Cash Flows
(Standardized Measure) in that PV-10 Value is a pre-tax number, while the Standardized Measure
includes the effect of estimated future income taxes. The Company estimates that the PV-10 Value
at December 31, 2010 would change by approximately $146.5 million for each dollar change in the oil
price per Bbl and approximately $10.8 million for each $0.10 change in the natural gas price per
MMBtu, if oil and natural gas prices were to change by relatively minor amounts. If oil and/or
natural gas prices were to change significantly, it is likely that the price differentials and cost
assumptions used in estimating the proved reserves would also need to be adjusted.
A PV-10 value of the Companys December 31, 2010 proved reserves calculated using alternative
prices based on the futures market forward strips as of December 31, 2010 would be $9.4 billion.
Denburys net average prices used in preparing this alternative PV-10 presentation were
approximately $87.31 per Bbl of oil and $5.46 per Mcf of natural gas.
Following is a preliminary reconciliation of the changes in the Companys proved oil and
natural gas reserve quantities between December 31, 2009 and December 31, 2010:
MMBOE | ||||
Balance at December 31, 2009 |
207.5 | |||
Extensions, discoveries, improved
recoveries, and other
revisions |
91.9 | |||
Acquisitions |
249.7 | |||
Estimated revisions due to price changes |
2.9 | |||
Estimated 2010 production |
(26.6 | ) | ||
Sale of proved reserves |
(127.5 | ) | ||
Balance at December 31, 2010 |
397.9 | |||
Estimated 2010 Production
Based on preliminary data, the Companys estimated average daily production rate for its
tertiary oil production during the fourth quarter of 2010 is approximately 31,139 Bbls/d, a 5%
sequential increase over its third quarter 2010 average tertiary production of 29,531 Bbls/d.
Estimated average tertiary oil production for the full year 2010 is approximately 29,062 Bbls/d.
Estimated Bakken production for the fourth quarter of 2010 is 5,193 BOE/d, a 12% increase over
Bakken production in the third quarter of 2010. The Companys preliminary fourth quarter total
production is approximately 76,435 BOE/d. Excluding production of Encore Energy Partners and for
the East Texas and Haynesville assets, all of which were sold in the fourth quarter of 2010, the
Companys continuing production in the fourth quarter was approximately 63,712 BOE/d, a slight
increase over the third quarter of 2010 continuing production average of 63,194 BOE/d, also
adjusted to remove production from properties sold during 2010. The Companys estimated average
annual production rate for 2010 was approximately 72,927 BOE/d, including Encores production from
the March 9, 2010 acquisition date through December 31, 2010. On a pro forma basis, including
Encores production for the full year of 2010 and subtracting production associated with the assets
sold during 2010, the Companys 2010 annual production is estimated to have been 62,558 BOE/d. The
Company anticipates that it will have an approximately $130 million non-cash fair value pre-tax loss on the
Companys oil and natural gas derivative commodity contracts during the fourth quarter.
Management Comments
Phil Rykhoek, Chief Executive Officer, said The 2010 year-end proved reserves and production
levels disclosed herein exemplify the great year we had in 2010. Our proved reserve quantities
nearly doubled since last year, in spite of $1.5 billion of asset sales during the year, and we
were able to acquire and add these reserves at a respectable all-in finding cost of $14.24 per BOE.
Our proved reserve value
using the alternative year-end strip prices was approximately $9.4
billion and this proved value obviously excludes our significant inventory of probable reserves
related to our EOR and Bakken assets. In addition, our production for the fourth quarter remained
on or ahead of schedule, we have a strong
balance sheet with significant liquidity, as evidenced by our cash on hand and an unused $1.6
billion bank credit line, and our integration of Encore is virtually complete, which included a
move of our corporate headquarters to a larger building. This all adds up to an impressive 2010
performance for Denbury and we look forward to more positive results in 2011 as we continue to
build on our profitable, low-risk oil platform.
Conference Presentation
The Company will be presenting at the Credit Suisse Energy Summit on February 10,
2011 at 9:25 A.M. MT. Prior to this presentation, the Company plans to update its slide
presentation which will be available on Denburys website, www.denbury.com by Tuesday evening,
February 8th. The Credit Suisse presentation will be webcast, and will be available
from Denburys website for approximately 30 days thereafter.
2010 Earnings Announcement
The Company has scheduled its annual and fourth quarter 2010 results for Wednesday, February
23, 2011. You are invited to listen to our conference call broadcast live over the Internet on
Wednesday, February 23, 2011 at 9:00 A.M. CT. Phil Rykhoek, Chief Executive Officer, Tracy Evans,
President and Chief Operating Officer, Mark Allen, Senior Vice President and Chief Financial
Officer, and Bob Cornelius, Senior Vice President Operations, will lead the call. The call may
be accessed on our website at www.denbury.com.
About the Company
Denbury Resources Inc. (www.denbury.com) is a growing independent oil and natural gas company.
The Company is the largest oil and natural gas operator in both Mississippi and Montana, owns the
largest reserves of CO2 used for tertiary oil recovery east of the Mississippi River,
and holds significant operating acreage in the Rocky Mountain and Gulf Coast regions. The Companys
goal is to increase the value of acquired properties through a combination of exploitation,
drilling and proven engineering extraction practices, with its most significant emphasis relating
to tertiary recovery operations.
Finding Cost Supporting Schedule (based on preliminary estimates):
All expenditure amounts below are preliminary estimates
(Amounts in millions)
(Amounts in millions)
Total oil and natural gas exploration and development expenditures |
$ | 675 | ||
Net increase in proved future development costs |
1,055 | |||
Acquisition costs allocated to oil and gas properties (a) |
4,636 | |||
Less additions to unevaluated properties |
(1,416 | ) | ||
Less sales proceeds from sale/leaseback of facilities |
(37 | ) | ||
Net expenditures |
$ | 4,913 | ||
Total reserves added, excluding production (MMBOE) |
345 | |||
Estimated finding cost per BOE |
$ | 14.24 |
(a) | Excludes value assigned to goodwill associated with the acquisition of oil and natural gas properties during 2010. |
This press release, other than historical financial information, contains forward looking
statements that involve risks and uncertainties including commodity prices, expected proved,
probable or potential reserve quantities and values relating to the Companys oil, natural gas, and
carbon dioxide reserves, estimated capital expenditures and production for 2010, 2011 and future
years, completion of projects which are underway and other risks and uncertainties detailed in the
Companys filings with the SEC, including Denburys most recent
reports on Form 10-K and Form 10-Q. 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, managements assumptions and the Companys 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.
For further information contact:
Phil Rykhoek, CEO, 972-673-2000
Mark Allen, Sr. VP and Chief Financial Officer, 972-673-2000
www.denbury.com
Mark Allen, Sr. VP and Chief Financial Officer, 972-673-2000
www.denbury.com