Denbury Resources Inc. (NYSE: DNR) (“Denbury” or the “Company”)
today announced net income of $30 million, or $0.07 per diluted
share, for the second quarter of 2018. Adjusted net income(1)
(a non-GAAP measure) was $61 million, or $0.13(1)(2) per diluted
share, with the difference from GAAP net income primarily due to
the exclusion of $41 million ($31 million after tax) of expense
from noncash fair value adjustments on commodity derivatives(1) (a
non-GAAP measure), with the GAAP and non-GAAP measures reconciled
in tables beginning on page 7.
2018 SECOND QUARTER
HIGHLIGHTS
- Production of 61,994 barrels of oil equivalent (“BOE”) per day
in Q2 2018, up 3% from Q1 2018 and 4% from Q2 2017
- Adjusted cash flow from operations(1) (a non-GAAP measure) of
$134 million for Q2 2018, up 7% from Q1 2018 and 106% from Q2
2017
- Adjusted EBITDAX(1) (a non-GAAP measure) of $153 million for Q2
2018, up from $142 million in Q1 2018 and $86 million in Q2
2017
- Reduced debt principal by $189 million in Q2 2018, and over $1
billion since Q4 2014
- Continued improvement in leverage metrics, debt to annualized
Q2 2018 Adjusted EBITDAX of 4.1x (including hedge settlements) and
3.0x (excluding hedge settlements)
- Sanctioned the enhanced oil recovery (“EOR”) development
project at Cedar Creek Anticline, with total recoverable oil
potential estimated to be in excess of 400 million barrels
SELECTED QUARTERLY COMPARATIVE
DATA
|
|
Quarter Ended |
(in
millions, except per-share data) |
|
June 30, 2018 |
|
March 31, 2018 |
|
June 30, 2017 |
Net income |
|
$ |
30 |
|
|
$ |
40 |
|
|
$ |
14 |
|
Adjusted net income(1)
(non-GAAP measure) |
|
61 |
|
|
54 |
|
|
1 |
|
Net income per diluted
share |
|
0.07 |
|
|
0.09 |
|
|
0.04 |
|
Adjusted net income per
diluted share(1)(2) (non-GAAP measure) |
|
0.13 |
|
|
0.12 |
|
|
0.00 |
|
Cash flows from
operations |
|
154 |
|
|
92 |
|
|
53 |
|
Adjusted cash flows
from operations(1) (non-GAAP measure) |
|
134 |
|
|
125 |
|
|
65 |
|
Adjusted EBITDAX(1)
(non-GAAP measure) |
|
153 |
|
|
142 |
|
|
86 |
|
(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 457.2 million, 451.5 million,
and 391.8 million for the three months ended June 30, 2018, March
31, 2018 and June 30, 2017, respectively.
SELECTED QUARTERLY COMPARATIVE DATA
(CONTINUED)
|
|
Quarter Ended |
(in
millions, except per-unit data) |
|
June 30, 2018 |
|
March 31, 2018 |
|
June 30, 2017 |
Revenues |
|
$ |
382 |
|
|
$ |
348 |
|
|
$ |
257 |
|
Payment on settlements
of commodity derivatives |
|
(55 |
) |
|
(33 |
) |
|
(12 |
) |
Revenues
and commodity derivative settlements combined |
|
$ |
327 |
|
|
$ |
315 |
|
|
$ |
245 |
|
|
|
|
|
|
|
|
Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
68.24 |
|
|
$ |
64.25 |
|
|
$ |
47.16 |
|
Average realized oil
price per barrel (including derivative settlements) |
|
58.23 |
|
|
57.89 |
|
|
44.92 |
|
|
|
|
|
|
|
|
Total production
(BOE/d) |
|
61,994 |
|
|
60,338 |
|
|
59,774 |
|
MANAGEMENT COMMENT
Chris Kendall, Denbury’s President and CEO,
commented, “Denbury’s performance in the second quarter improved
across the board from what was already an outstanding first
quarter. Enhanced by further reductions in our cost
structure, solid operational performance, and stronger oil prices,
our operating margin increased to nearly $40 per BOE. We
continued to rapidly strengthen our balance sheet, reducing debt by
nearly $200 million and our leverage ratio by another full turn,
with total debt principal reduction exceeding $1 billion since the
end of 2014. The sanction of EOR development at Cedar Creek
Anticline provides a clear line of sight to the near-term
development of this significant, low-risk, long-lived oil
asset.
“We are committed to retaining the focus and
discipline put in place while oil was at $50, even with today’s oil
prices well above that point. That focus and discipline will
make us even more profitable in today’s environment, and well
prepared to succeed for the long term.”
REVIEW OF OPERATING AND FINANCIAL
RESULTS
Denbury’s production averaged 61,994 BOE/d
during second quarter 2018, up 4% from second quarter 2017 due
principally to higher production from the redevelopment project at
Hastings Field in mid-2017, production response from continued
expansion at Bell Creek Field, and a full quarter of production
from the mid-2017 acquisition at Salt Creek Field.
Sequentially, production increased 3% from first quarter 2018, due
primarily to production increases at Cedar Creek Anticline, which
benefited from the strong performance of two new Mission Canyon
wells completed during March and April of 2018, and also due in
part to higher production in the Gulf Coast region due to
non-recurring weather downtime which lowered first quarter 2018’s
production. Further production information is provided on
page 12 of this press release.
The Company’s average realized oil price during
second quarter 2018 was $0.39 per Bbl above NYMEX oil prices,
compared to $1.29 per Bbl above NYMEX in the prior quarter, and
$1.16 per Bbl below NYMEX in second quarter 2017. The
sequential decrease was primarily attributable to a lower LLS to
NYMEX index premium in the second quarter of 2018, with the
year-over-year improvement driven both by improvement in LLS index
prices relative to NYMEX and continued improvement in Rocky
Mountain region differentials.
The Company’s total lease operating expenses in
second quarter 2018 were $120 million or $21.34 per BOE, an
increase of $2 million, or 2%, on an absolute-dollar basis and a
decrease of nearly $0.50, or 2%, on a per-BOE basis compared to the
prior quarter, and an increase of $9 million, or 8%, on an
absolute-dollar basis and $0.88, or 4%, on a per-BOE basis,
compared to second quarter 2017. The sequential per-BOE basis
decrease was driven by an increase in quarterly production.
The year-over-year increase was primarily impacted by operating
expenses related to the Company’s non-operated working interest in
Salt Creek Field, which was acquired in June 2017, as well as
higher CO2 expense due to increases in oil prices and an increase
in power and fuel costs, partially offset by lower workover expense
during the current-year period.
Taxes other than income, which include ad
valorem, production and franchise taxes, were consistent with the
first quarter of 2018 and increased $7 million from the prior-year
second quarter, generally due to the impact of higher oil prices on
production taxes.
General and administrative expenses were $19
million in second quarter 2018, a 4% decrease from the prior
quarter and a 25% decrease compared to second quarter 2017, with
the year-over-year decrease attributable to lower employee-related
costs as a result of the August 2017 workforce reduction and other
cost savings initiatives.
Interest expense, net of capitalized interest,
was $16 million in second quarter 2018, a decrease of $1 million
from first quarter 2018 and a decrease of $8 million from the
prior-year second quarter. Interest expense excludes
approximately $22 million and $13 million in the second quarters of
2018 and 2017, respectively, of interest recorded as a reduction of
debt for financial reporting purposes instead of as interest
expense, due to the accounting associated with debt exchange
transactions completed in 2016, 2017, and 2018. A schedule
detailing the components of interest expense is included on page 14
of this press release.
Depletion, depreciation, and amortization
(“DD&A”) increased slightly to $53 million in second quarter
2018, compared to $51 million in second quarter 2017. The
slight increase was primarily driven by an increase in depletable
costs.
Denbury’s effective tax rate for the second
quarter of 2018 was approximately 24%, consistent with the
Company’s estimated statutory rate of 25%. The Company’s
statutory rate decreased from the prior year rate of 38% due to
reduction of the federal income tax rate from 35% to 21% as enacted
by the Tax Cut and Jobs Act in December 2017.
BANK CREDIT FACILITY AND OTHER RECENT
DEBT REDUCTION
The Company had $415 million outstanding under
its $1.05 billion senior secured bank credit facility as of June
30, 2018, a decrease of $35 million from the level outstanding as
of March 31, 2018 and a decrease of $60 million from December 31,
2017. At June 30, 2018, the Company had $573 million of
liquidity available under its bank credit facility after
consideration of $62 million of outstanding letters of
credit. In addition to reductions of senior secured bank
credit facility debt outstanding, the Company has reduced the
outstanding principal of its long-term notes by $329 million over
the last 7 months through a series of exchange transactions
completed in December 2017 and January 2018 and related conversions
of all of its convertible notes into equity in April and May
2018.
2018 CAPITAL BUDGET AND ESTIMATED
PRODUCTION
The Company’s 2018 capital budget, excluding
acquisitions and capitalized interest, remains unchanged from the
previously estimated range of approximately $300 million to $325
million, which, based on current projections, is expected to be
significantly less than the Company’s estimated 2018 cash flow from
operations. The capital budget consists of approximately $270
million for tertiary and non-tertiary field costs and CO2 supply,
plus approximately $45 million of estimated capitalized costs
(including capitalized internal acquisition, exploration and
development costs and pre-production tertiary startup costs).
Of this combined capital expenditure amount, approximately $129
million (41%) has been incurred through the second quarter of 2018,
which was fully funded with $246 million of cash flow from
operations. Denbury’s estimated 2018 production is also
unchanged from the previously disclosed range of 60,000 to 64,000
BOE/d.
CONFERENCE CALL
Denbury management will host a conference call
to review and discuss second quarter 2018 financial and operating
results, as well as financial and operating guidance for 2018,
today, Tuesday, August 7, at 10:00 A.M. (Central).
Additionally, Denbury will post presentation materials on its
website which will be referenced during the conference call.
Individuals who would like to participate should dial 800.230.1093
or 612.332.0226 ten minutes before the scheduled start time.
To access a live webcast of the conference call and accompanying
slide presentation, please visit the investor relations section of
the Company’s website at www.denbury.com. The webcast will be
archived on the website, and a telephonic replay will be accessible
for at least one month after the call by dialing 800.475.6701 or
320.365.3844 and entering confirmation number 426560.
Denbury is an independent oil and natural gas
company with operations focused in two key operating areas: the
Gulf Coast and Rocky Mountain regions. The Company’s goal is
to increase the value of its properties through a combination of
exploitation, drilling and proven engineering extraction practices,
with the most significant emphasis relating to CO2 enhanced oil
recovery operations. For more information about Denbury,
please visit www.denbury.com.
This press release, other than historical
financial information, contains forward-looking statements that
involve risks and uncertainties including estimated 2018
production, capital expenditures, along with potential recoverable
reserves of Cedar Creek Anticline and other risks and uncertainties
detailed in the Company’s filings with the Securities and Exchange
Commission, including Denbury’s most recent report on Form
10-K. These risks and uncertainties are incorporated by this
reference as though fully set forth herein. These statements
are based on engineering, geological, financial and operating
assumptions that management believes are reasonable based on
currently available information; however, management’s assumptions
and the Company’s future performance are both subject to a wide
range of business risks, and there is no assurance that these goals
and projections can or will be met. Actual results may vary
materially. In addition, any forward-looking statements
represent the Company’s estimates only as of today and should not
be relied upon as representing its estimates as of any future
date. Denbury assumes no obligation to update its
forward-looking statements.
FINANCIAL AND STATISTICAL DATA TABLES
AND RECONCILIATION SCHEDULES
Following are unaudited financial highlights for
the comparative three and six month periods ended June 30, 2018 and
2017 and the three month period ended March 31, 2018. All
production volumes and dollars are expressed on a net revenue
interest basis with gas volumes converted to equivalent barrels at
6:1.
DENBURY RESOURCES
INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following information is based on GAAP
reported earnings (along with additional required disclosures)
included or to be included in the Company’s periodic reports:
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
In
thousands, except per-share data |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Revenues and
other income |
|
|
|
|
|
|
|
|
|
|
Oil
sales |
|
$ |
373,286 |
|
|
$ |
248,317 |
|
|
$ |
337,406 |
|
|
$ |
710,692 |
|
|
$ |
512,291 |
|
Natural
gas sales |
|
2,279 |
|
|
2,563 |
|
|
2,615 |
|
|
4,894 |
|
|
4,767 |
|
CO2 sales
and transportation fees |
|
6,715 |
|
|
6,555 |
|
|
7,552 |
|
|
14,267 |
|
|
11,943 |
|
Other
income |
|
4,783 |
|
|
3,749 |
|
|
5,661 |
|
|
10,444 |
|
|
7,637 |
|
Total
revenues and other income |
|
387,063 |
|
|
261,184 |
|
|
353,234 |
|
|
740,297 |
|
|
536,638 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses |
|
120,384 |
|
|
111,318 |
|
|
118,356 |
|
|
238,740 |
|
|
225,158 |
|
Marketing
and plant operating expenses |
|
11,549 |
|
|
13,877 |
|
|
12,424 |
|
|
23,973 |
|
|
27,942 |
|
CO2
discovery and operating expenses |
|
500 |
|
|
513 |
|
|
462 |
|
|
962 |
|
|
1,106 |
|
Taxes
other than income |
|
27,234 |
|
|
20,175 |
|
|
27,319 |
|
|
54,553 |
|
|
42,615 |
|
General
and administrative expenses |
|
19,412 |
|
|
25,789 |
|
|
20,232 |
|
|
39,644 |
|
|
54,030 |
|
Interest,
net of amounts capitalized of $8,851, $8,147, $8,452, $17,303 and
$12,801, respectively |
|
16,208 |
|
|
24,061 |
|
|
17,239 |
|
|
33,447 |
|
|
51,239 |
|
Depletion, depreciation, and amortization |
|
52,944 |
|
|
51,152 |
|
|
52,451 |
|
|
105,395 |
|
|
102,347 |
|
Commodity
derivatives expense (income) |
|
96,199 |
|
|
(10,373 |
) |
|
48,825 |
|
|
145,024 |
|
|
(34,975 |
) |
Other
expenses |
|
2,980 |
|
|
— |
|
|
2,328 |
|
|
5,308 |
|
|
— |
|
Total
expenses |
|
347,410 |
|
|
236,512 |
|
|
299,636 |
|
|
647,046 |
|
|
469,462 |
|
Income before
income taxes |
|
39,653 |
|
|
24,672 |
|
|
53,598 |
|
|
93,251 |
|
|
67,176 |
|
Income tax provision
(benefit) |
|
|
|
|
|
|
|
|
|
|
Current
income taxes |
|
(754 |
) |
|
(5,965 |
) |
|
(1,032 |
) |
|
(1,786 |
) |
|
(19,900 |
) |
Deferred
income taxes |
|
10,185 |
|
|
16,238 |
|
|
15,052 |
|
|
25,237 |
|
|
51,147 |
|
Net
income |
|
$ |
30,222 |
|
|
$ |
14,399 |
|
|
$ |
39,578 |
|
|
$ |
69,800 |
|
|
$ |
35,929 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.10 |
|
|
$ |
0.17 |
|
|
$ |
0.09 |
|
Diluted |
|
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
Basic |
|
433,467 |
|
|
389,904 |
|
|
392,742 |
|
|
413,217 |
|
|
389,652 |
|
Diluted |
|
457,165 |
|
|
391,827 |
|
|
451,543 |
|
|
454,466 |
|
|
392,414 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (GAAP measure) to
adjusted net income (loss) (non-GAAP measure)
Adjusted net income (loss) is a non-GAAP measure
provided as a supplement to present an alternative net income
(loss) measure which excludes expense and income items (and their
related tax effects) not directly related to the Company’s ongoing
operations. Management believes that adjusted net income
(loss) may be helpful to investors by eliminating the impact of
noncash and/or special or unusual items not indicative of the
Company’s performance from period to period, and is widely used by
the investment community, while also being used by management, in
evaluating the comparability of the Company’s ongoing operational
results and trends. Adjusted net income (loss) 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.
|
|
Three Months Ended |
|
|
June 30, |
|
March 31, |
|
|
2018 |
|
2017 |
|
2018 |
In
thousands, except per-share data |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income
(GAAP measure) |
|
$ |
30,222 |
|
|
$ |
0.07 |
|
|
$ |
14,399 |
|
|
$ |
0.04 |
|
|
$ |
39,578 |
|
|
$ |
0.09 |
|
Adjustments to
reconcile to adjusted net income (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
fair value adjustments on commodity derivatives(1) |
|
41,429 |
|
|
0.09 |
|
|
(22,140 |
) |
|
(0.06 |
) |
|
15,468 |
|
|
0.03 |
|
Other
adjustments(2) |
|
(26 |
) |
|
0.00 |
|
|
— |
|
|
— |
|
|
2,075 |
|
|
0.00 |
|
Estimated
income taxes on above adjustments to net income and other discrete
tax items(3) |
|
(10,654 |
) |
|
(0.03 |
) |
|
8,609 |
|
|
0.02 |
|
|
(3,140 |
) |
|
0.00 |
|
Adjusted net
income (non-GAAP measure) |
|
$ |
60,971 |
|
|
$ |
0.13 |
|
|
$ |
868 |
|
|
$ |
0.00 |
|
|
$ |
53,981 |
|
|
$ |
0.12 |
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2018 |
|
2017 |
In
thousands, except per-share data |
|
Amount |
|
Per Diluted Share |
|
Amount |
|
Per Diluted Share |
Net income
(GAAP measure) |
|
$ |
69,800 |
|
|
$ |
0.15 |
|
|
$ |
35,929 |
|
|
$ |
0.09 |
|
Adjustments to
reconcile to adjusted net income (loss) (non-GAAP measure) |
|
|
|
|
|
|
|
|
Noncash
fair value adjustments on commodity derivatives(1) |
|
56,897 |
|
|
0.13 |
|
|
(73,682 |
) |
|
(0.19 |
) |
Other
adjustments(2) |
|
2,049 |
|
|
0.00 |
|
|
— |
|
|
— |
|
Estimated
income taxes on above adjustments to net income (loss) and other
discrete tax items(3) |
|
(13,794 |
) |
|
(0.03 |
) |
|
31,768 |
|
|
0.08 |
|
Adjusted net
income (loss) (non-GAAP measure) |
|
$ |
114,952 |
|
|
$ |
0.25 |
|
|
$ |
(5,985 |
) |
|
$ |
(0.02 |
) |
(1) The net change between periods of the fair
market values of open commodity derivative positions, excluding the
impact of settlements on commodity derivatives during the
period.(2) Other adjustments include a $3 million gain on land
sales, offset by a similar amount of other expense accrued for
litigation matters during the three months ended June 30, 2018 and
$2 million of transaction costs related to the Company’s privately
negotiated debt exchanges during the three months ended March 31,
2018.(3) The estimated income tax impacts on adjustments to net
income are generally computed based upon a statutory rate of 25%
and 38% for 2018 and 2017, respectively, with the exception of the
tax impact of a shortfall (benefit) on the stock-based compensation
deduction which totaled <($1) million, <$1 million, and $1
million during the three months ended June 30, 2018, June 30, 2017,
and March 31, 2018, respectively, and $1 million and $4 million for
the six months ended June 30, 2018 and 2017, respectively.
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of cash flows from operations
(GAAP measure) to adjusted cash flows from operations (non-GAAP
measure) to adjusted cash flows from operations less interest
treated as debt reduction (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. Adjusted cash flows from operations less interest
treated as debt reduction is an additional non-GAAP measure that
removes interest associated with the Company’s senior secured
second lien notes and convertible senior notes not reflected as
interest expense for financial reporting purposes. Management
believes that it is important to consider these additional
measures, along with cash flows from operations, as it believes the
non-GAAP measures can often be a better way to discuss changes in
operating trends in its business caused by changes in production,
prices, operating costs and related factors, without regard to
whether the earned or incurred item was collected or paid during
that period.
|
|
Three Months Ended |
|
Six Months Ended |
In thousands |
|
June 30, |
|
March 31, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Net income
(GAAP measure) |
|
$ |
30,222 |
|
|
$ |
14,399 |
|
|
$ |
39,578 |
|
|
$ |
69,800 |
|
|
$ |
35,929 |
|
Adjustments to
reconcile to adjusted cash flows from operations |
|
|
|
|
|
|
|
|
|
|
Depletion, depreciation, and amortization |
|
52,944 |
|
|
51,152 |
|
|
52,451 |
|
|
105,395 |
|
|
102,347 |
|
Deferred
income taxes |
|
10,185 |
|
|
16,238 |
|
|
15,052 |
|
|
25,237 |
|
|
51,147 |
|
Stock-based compensation |
|
2,560 |
|
|
4,835 |
|
|
2,592 |
|
|
5,152 |
|
|
8,941 |
|
Noncash
fair value adjustments on commodity derivatives |
|
41,429 |
|
|
(22,140 |
) |
|
15,468 |
|
|
56,897 |
|
|
(73,682 |
) |
Other |
|
(3,138 |
) |
|
781 |
|
|
299 |
|
|
(2,839 |
) |
|
2,338 |
|
Adjusted cash
flows from operations (non-GAAP measure) |
|
134,202 |
|
|
65,265 |
|
|
125,440 |
|
|
259,642 |
|
|
127,020 |
|
Net
change in assets and liabilities relating to operations |
|
19,797 |
|
|
(12,319 |
) |
|
(33,813 |
) |
|
(14,016 |
) |
|
(49,812 |
) |
Cash flows from
operations (GAAP measure) |
|
$ |
153,999 |
|
|
$ |
52,946 |
|
|
$ |
91,627 |
|
|
$ |
245,626 |
|
|
$ |
77,208 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted cash
flows from operations (non-GAAP measure) |
|
$ |
134,202 |
|
|
$ |
65,265 |
|
|
$ |
125,440 |
|
|
$ |
259,642 |
|
|
$ |
127,020 |
|
Interest
payments treated as debt reduction |
|
(21,614 |
) |
|
(12,588 |
) |
|
(22,049 |
) |
|
(43,663 |
) |
|
(25,157 |
) |
Adjusted cash
flows from operations less interest treated as debt reduction
(non-GAAP measure) |
|
$ |
112,588 |
|
|
$ |
52,677 |
|
|
$ |
103,391 |
|
|
$ |
215,979 |
|
|
$ |
101,863 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of commodity derivatives income
(expense) (GAAP measure) to noncash fair value adjustments on
commodity derivatives (non-GAAP measure)
Noncash fair value adjustments on commodity
derivatives is a non-GAAP measure and is different from “Commodity
derivatives expense (income)” in the Unaudited Condensed
Consolidated Statements of Operations in that the noncash fair
value adjustments on commodity derivatives represents only the net
change between periods of the fair market values of open commodity
derivative positions, and excludes the impact of settlements on
commodity derivatives during the period. Management believes
that noncash fair value adjustments on commodity derivatives is a
useful supplemental disclosure to “Commodity derivatives expense
(income)” because the GAAP measure also includes settlements on
commodity derivatives during the period; the non-GAAP measure is
widely used within the industry and by securities analysts, banks
and credit rating agencies in calculating EBITDA and in adjusting
net income (loss) to present those measures on a comparative basis
across companies, as well as to assess compliance with certain debt
covenants.
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Payment on settlements
of commodity derivatives |
|
$ |
(54,770 |
) |
|
$ |
(11,767 |
) |
|
$ |
(33,357 |
) |
|
$ |
(88,127 |
) |
|
$ |
(38,707 |
) |
Noncash fair value
adjustments on commodity derivatives (non-GAAP measure) |
|
(41,429 |
) |
|
22,140 |
|
|
(15,468 |
) |
|
(56,897 |
) |
|
73,682 |
|
Commodity
derivatives income (expense) (GAAP measure) |
|
$ |
(96,199 |
) |
|
$ |
10,373 |
|
|
$ |
(48,825 |
) |
|
$ |
(145,024 |
) |
|
$ |
34,975 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (GAAP measure) to
Adjusted EBITDAX (non-GAAP measure)
Adjusted EBITDAX is a non-GAAP financial measure
which management uses and is calculated based upon (but not
identical to) a financial covenant related to “Consolidated
EBITDAX” in the Company’s senior secured bank credit facility,
which excludes certain items that are included in net income, the
most directly comparable GAAP financial measure. Items
excluded include interest, income taxes, depletion, depreciation
and amortization, impairments, and items that the Company believes
affect the comparability of operating results such as items whose
timing and/or amount cannot be reasonably estimated or are
non-recurring. Management believes Adjusted EBITDAX may be
helpful to investors in order to assess our operating performance
as compared to that of other companies in our industry, without
regard to financing methods, capital structure or historical costs
basis. It is also commonly used by third parties to assess
our leverage and our 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. Our Adjusted EBITDAX may
not be comparable to similarly titled measures of another company
because all companies may not calculate Adjusted EBITDAX, EBITDAX
or EBITDA in the same manner. The following table presents a
reconciliation of our net income to Adjusted EBITDAX.
|
|
Three Months Ended |
|
Six Months Ended |
In thousands |
|
June 30, |
|
March 31, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Net income (GAAP
measure) |
|
$ |
30,222 |
|
|
$ |
14,399 |
|
|
$ |
39,578 |
|
|
$ |
69,800 |
|
|
$ |
35,929 |
|
Adjustments to
reconcile to Adjusted EBITDAX |
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
16,208 |
|
|
24,061 |
|
|
17,239 |
|
|
33,447 |
|
|
51,239 |
|
Income
tax expense |
|
9,431 |
|
|
10,273 |
|
|
14,020 |
|
|
23,451 |
|
|
31,247 |
|
Depletion, depreciation, and amortization |
|
52,944 |
|
|
51,152 |
|
|
52,451 |
|
|
105,395 |
|
|
102,347 |
|
Noncash
fair value adjustments on commodity derivatives |
|
41,429 |
|
|
(22,140 |
) |
|
15,468 |
|
|
56,897 |
|
|
(73,682 |
) |
Stock-based compensation |
|
2,560 |
|
|
4,835 |
|
|
2,592 |
|
|
5,152 |
|
|
8,941 |
|
Noncash,
non-recurring and other(1) |
|
226 |
|
|
3,817 |
|
|
790 |
|
|
1,016 |
|
|
6,275 |
|
Adjusted EBITDAX
(non-GAAP measure) |
|
$ |
153,020 |
|
|
$ |
86,397 |
|
|
$ |
142,138 |
|
|
$ |
295,158 |
|
|
$ |
162,296 |
|
(1) Excludes proforma adjustments related to qualified
acquisitions or dispositions under the Company’s senior secured
bank credit facility.
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS (UNAUDITED)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Production
(daily – net of royalties) |
|
|
|
|
|
|
|
|
|
|
Oil
(barrels) |
|
60,109 |
|
|
57,867 |
|
|
58,354 |
|
|
59,236 |
|
|
58,084 |
|
Gas
(mcf) |
|
11,314 |
|
|
11,444 |
|
|
11,904 |
|
|
11,607 |
|
|
10,616 |
|
BOE
(6:1) |
|
61,994 |
|
|
59,774 |
|
|
60,338 |
|
|
61,171 |
|
|
59,853 |
|
Unit sales
price (excluding derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
68.24 |
|
|
$ |
47.16 |
|
|
$ |
64.25 |
|
|
$ |
66.29 |
|
|
$ |
48.73 |
|
Gas (per
mcf) |
|
2.21 |
|
|
2.46 |
|
|
2.44 |
|
|
2.33 |
|
|
2.48 |
|
BOE
(6:1) |
|
66.57 |
|
|
46.12 |
|
|
62.61 |
|
|
64.63 |
|
|
47.73 |
|
Unit sales
price (including derivative settlements) |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
58.23 |
|
|
$ |
44.92 |
|
|
$ |
57.89 |
|
|
$ |
58.07 |
|
|
$ |
45.05 |
|
Gas (per
mcf) |
|
2.21 |
|
|
2.46 |
|
|
2.44 |
|
|
2.33 |
|
|
2.48 |
|
BOE
(6:1) |
|
56.86 |
|
|
43.96 |
|
|
56.47 |
|
|
56.67 |
|
|
44.16 |
|
NYMEX
differentials |
|
|
|
|
|
|
|
|
|
|
Gulf
Coast region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
1.12 |
|
|
$ |
(0.78 |
) |
|
$ |
2.05 |
|
|
$ |
1.59 |
|
|
$ |
(1.09 |
) |
Gas (per
mcf) |
|
0.04 |
|
|
(0.03 |
) |
|
0.10 |
|
|
0.07 |
|
|
0.03 |
|
Rocky
Mountain region |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
(0.84 |
) |
|
$ |
(1.96 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.39 |
) |
|
$ |
(2.02 |
) |
Gas (per
mcf) |
|
(1.25 |
) |
|
(1.42 |
) |
|
(0.92 |
) |
|
(1.08 |
) |
|
(1.19 |
) |
Total
company |
|
|
|
|
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
0.39 |
|
|
$ |
(1.16 |
) |
|
$ |
1.29 |
|
|
$ |
0.87 |
|
|
$ |
(1.39 |
) |
Gas (per
mcf) |
|
(0.62 |
) |
|
(0.69 |
) |
|
(0.40 |
) |
|
(0.51 |
) |
|
(0.63 |
) |
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS (UNAUDITED)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
Average Daily Volumes (BOE/d) (6:1) |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Tertiary oil
production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Delhi |
|
4,391 |
|
|
4,965 |
|
|
4,169 |
|
|
4,281 |
|
|
4,978 |
|
Hastings |
|
5,716 |
|
|
4,400 |
|
|
5,704 |
|
|
5,710 |
|
|
4,344 |
|
Heidelberg |
|
4,330 |
|
|
4,996 |
|
|
4,445 |
|
|
4,387 |
|
|
4,864 |
|
Oyster
Bayou |
|
4,961 |
|
|
5,217 |
|
|
5,056 |
|
|
5,008 |
|
|
5,146 |
|
Tinsley |
|
5,755 |
|
|
6,311 |
|
|
6,053 |
|
|
5,903 |
|
|
6,487 |
|
Other |
|
142 |
|
|
10 |
|
|
57 |
|
|
100 |
|
|
12 |
|
Mature
properties(1) |
|
7,160 |
|
|
7,727 |
|
|
7,174 |
|
|
7,167 |
|
|
7,912 |
|
Total
Gulf Coast region |
|
32,455 |
|
|
33,626 |
|
|
32,658 |
|
|
32,556 |
|
|
33,743 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Bell
Creek |
|
4,010 |
|
|
3,060 |
|
|
4,050 |
|
|
4,030 |
|
|
3,134 |
|
Salt
Creek(2) |
|
2,049 |
|
|
23 |
|
|
2,002 |
|
|
2,026 |
|
|
12 |
|
Total
Rocky Mountain region |
|
6,059 |
|
|
3,083 |
|
|
6,052 |
|
|
6,056 |
|
|
3,146 |
|
Total tertiary oil
production |
|
38,514 |
|
|
36,709 |
|
|
38,710 |
|
|
38,612 |
|
|
36,889 |
|
Non-tertiary
oil and gas production |
|
|
|
|
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
|
|
|
|
Mississippi |
|
901 |
|
|
1,004 |
|
|
875 |
|
|
888 |
|
|
1,172 |
|
Texas |
|
4,947 |
|
|
5,002 |
|
|
4,386 |
|
|
4,668 |
|
|
4,669 |
|
Other |
|
400 |
|
|
460 |
|
|
445 |
|
|
422 |
|
|
477 |
|
Total
Gulf Coast region |
|
6,248 |
|
|
6,466 |
|
|
5,706 |
|
|
5,978 |
|
|
6,318 |
|
Rocky Mountain
region |
|
|
|
|
|
|
|
|
|
|
Cedar
Creek Anticline |
|
15,742 |
|
|
15,124 |
|
|
14,437 |
|
|
15,093 |
|
|
15,096 |
|
Other |
|
1,490 |
|
|
1,475 |
|
|
1,485 |
|
|
1,488 |
|
|
1,550 |
|
Total
Rocky Mountain region |
|
17,232 |
|
|
16,599 |
|
|
15,922 |
|
|
16,581 |
|
|
16,646 |
|
Total non-tertiary
production |
|
23,480 |
|
|
23,065 |
|
|
21,628 |
|
|
22,559 |
|
|
22,964 |
|
Total
production |
|
61,994 |
|
|
59,774 |
|
|
60,338 |
|
|
61,171 |
|
|
59,853 |
|
(1) Mature properties include Brookhaven, Cranfield, Eucutta,
Little Creek, Lockhart Crossing, Mallalieu, Martinville, McComb and
Soso fields.
(2) Includes production related to the acquisition of a 23%
non-operated working interest in Salt Creek Field in Wyoming, which
closed on June 30, 2017.
DENBURY RESOURCES
INC.PER-BOE DATA (UNAUDITED)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Oil and natural gas
revenues |
|
$ |
66.57 |
|
|
$ |
46.12 |
|
|
$ |
62.61 |
|
|
$ |
64.63 |
|
|
$ |
47.73 |
|
Payment on settlements
of commodity derivatives |
|
(9.71 |
) |
|
(2.16 |
) |
|
(6.14 |
) |
|
(7.96 |
) |
|
(3.57 |
) |
Lease operating
expenses |
|
(21.34 |
) |
|
(20.46 |
) |
|
(21.80 |
) |
|
(21.56 |
) |
|
(20.78 |
) |
Production and ad
valorem taxes |
|
(4.50 |
) |
|
(3.36 |
) |
|
(4.61 |
) |
|
(4.55 |
) |
|
(3.61 |
) |
Marketing expenses, net
of third-party purchases, and plant operating expenses |
|
(1.69 |
) |
|
(1.83 |
) |
|
(1.75 |
) |
|
(1.72 |
) |
|
(1.85 |
) |
Production netback |
|
29.33 |
|
|
18.31 |
|
|
28.31 |
|
|
28.84 |
|
|
17.92 |
|
CO2 sales, net of
operating and exploration expenses |
|
1.10 |
|
|
1.12 |
|
|
1.30 |
|
|
1.20 |
|
|
1.00 |
|
General and
administrative expenses |
|
(3.44 |
) |
|
(4.74 |
) |
|
(3.73 |
) |
|
(3.58 |
) |
|
(4.99 |
) |
Interest expense,
net |
|
(2.87 |
) |
|
(4.42 |
) |
|
(3.17 |
) |
|
(3.02 |
) |
|
(4.73 |
) |
Other |
|
(0.33 |
) |
|
1.72 |
|
|
0.39 |
|
|
0.01 |
|
|
2.53 |
|
Changes in assets and
liabilities relating to operations |
|
3.51 |
|
|
(2.26 |
) |
|
(6.23 |
) |
|
(1.27 |
) |
|
(4.60 |
) |
Cash
flows from operations |
|
27.30 |
|
|
9.73 |
|
|
16.87 |
|
|
22.18 |
|
|
7.13 |
|
DD&A |
|
(9.38 |
) |
|
(9.40 |
) |
|
(9.66 |
) |
|
(9.52 |
) |
|
(9.45 |
) |
Deferred income
taxes |
|
(1.81 |
) |
|
(2.99 |
) |
|
(2.77 |
) |
|
(2.28 |
) |
|
(4.72 |
) |
Noncash fair value
adjustments on commodity derivatives |
|
(7.34 |
) |
|
4.07 |
|
|
(2.85 |
) |
|
(5.14 |
) |
|
6.80 |
|
Other noncash
items |
|
(3.41 |
) |
|
1.24 |
|
|
5.70 |
|
|
1.06 |
|
|
3.56 |
|
Net
income |
|
$ |
5.36 |
|
|
$ |
2.65 |
|
|
$ |
7.29 |
|
|
$ |
6.30 |
|
|
$ |
3.32 |
|
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED)(1)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Capital expenditures by
project |
|
|
|
|
|
|
|
|
|
|
Tertiary
oil fields |
|
$ |
45,813 |
|
|
$ |
43,561 |
|
|
$ |
18,273 |
|
|
$ |
64,086 |
|
|
$ |
64,768 |
|
Non-tertiary fields |
|
17,817 |
|
|
14,332 |
|
|
14,922 |
|
|
32,739 |
|
|
32,772 |
|
Capitalized internal costs(2) |
|
8,662 |
|
|
13,071 |
|
|
14,085 |
|
|
22,747 |
|
|
26,717 |
|
Oil and
natural gas capital expenditures |
|
72,292 |
|
|
70,964 |
|
|
47,280 |
|
|
119,572 |
|
|
124,257 |
|
CO2
pipelines, sources and other |
|
9,301 |
|
|
518 |
|
|
347 |
|
|
9,648 |
|
|
528 |
|
Capital expenditures, before acquisitions and capitalized
interest |
|
81,593 |
|
|
71,482 |
|
|
47,627 |
|
|
129,220 |
|
|
124,785 |
|
Acquisitions of oil and
natural gas properties |
|
(14 |
) |
|
73,001 |
|
|
35 |
|
|
21 |
|
|
89,099 |
|
Capital expenditures, before capitalized
interest |
|
81,579 |
|
|
144,483 |
|
|
47,662 |
|
|
129,241 |
|
|
213,884 |
|
Capitalized
interest |
|
8,851 |
|
|
8,147 |
|
|
8,452 |
|
|
17,303 |
|
|
12,801 |
|
Capital expenditures, total |
|
$ |
90,430 |
|
|
$ |
152,630 |
|
|
$ |
56,114 |
|
|
$ |
146,544 |
|
|
$ |
226,685 |
|
(1) Capital expenditure amounts include accrued capital.
(2) Includes capitalized internal acquisition, exploration and
development costs and pre-production tertiary startup costs.
DENBURY RESOURCES
INC.INTEREST AND FINANCING EXPENSES
(UNAUDITED)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
In
thousands |
|
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
Cash interest(1) |
|
$ |
45,542 |
|
|
$ |
43,352 |
|
|
$ |
46,603 |
|
|
$ |
92,145 |
|
|
$ |
85,852 |
|
Interest on Senior
Secured Notes and Convertible Senior Notes not reflected as
interest for financial reporting purposes(1) |
|
(21,614 |
) |
|
(12,588 |
) |
|
(22,049 |
) |
|
(43,663 |
) |
|
(25,157 |
) |
Noncash interest
expense |
|
1,131 |
|
|
1,444 |
|
|
1,137 |
|
|
2,268 |
|
|
3,345 |
|
Less: capitalized
interest |
|
(8,851 |
) |
|
(8,147 |
) |
|
(8,452 |
) |
|
(17,303 |
) |
|
(12,801 |
) |
Interest
expense, net |
|
$ |
16,208 |
|
|
$ |
24,061 |
|
|
$ |
17,239 |
|
|
$ |
33,447 |
|
|
$ |
51,239 |
|
(1) Cash interest is presented on an accrual basis and includes
interest which is paid semiannually on the Company’s 9% Senior
Secured Second Lien Notes due 2021, 9¼% Senior Secured Second Lien
Notes due 2022, 5% Convertible Senior Notes due 2023, and 3½%
Convertible Senior Notes due 2024, most of which is accounted for
as debt and therefore not reflected as interest for financial
reporting purposes.
SELECTED BALANCE SHEET AND CASH FLOW
DATA (UNAUDITED)
|
|
June 30, |
|
December 31, |
In
thousands |
|
2018 |
|
2017 |
Cash and cash
equivalents |
|
$ |
116 |
|
|
$ |
58 |
|
Total assets |
|
4,534,235 |
|
|
4,471,299 |
|
|
|
|
|
|
Borrowings under senior
secured bank credit facility |
|
$ |
415,000 |
|
|
$ |
475,000 |
|
Borrowings under senior
secured second lien notes (principal only)(1) |
|
1,070,587 |
|
|
996,487 |
|
Borrowings under
convertible senior notes (principal only)(1)(2) |
|
— |
|
|
84,650 |
|
Borrowings under senior
subordinated notes (principal only) |
|
826,185 |
|
|
1,000,527 |
|
Financing and capital
leases |
|
202,431 |
|
|
218,727 |
|
Total
debt (principal only) |
|
$ |
2,514,203 |
|
|
$ |
2,775,391 |
|
|
|
|
|
|
Total stockholders’
equity |
|
$ |
885,645 |
|
|
$ |
648,165 |
|
(1) Excludes $293 million and $317 million of future interest
payable on the notes as of June 30, 2018 and December 31, 2017,
respectively, accounted for as debt for financial reporting
purposes.
(2) During the second quarter of 2018, all $85 million principal
balance outstanding of the Company’s 3½% Convertible Senior Notes
due 2024 and $59 million principal balance outstanding of the
Company’s 5% Convertible Senior Notes due 2023 were converted into
approximately 55 million shares of the Company’s common
stock.
|
|
Six Months Ended |
|
|
June 30, |
In
thousands |
|
2018 |
|
2017 |
Cash provided by (used
in) |
|
|
|
|
Operating
activities |
|
$ |
245,626 |
|
|
$ |
77,208 |
|
Investing
activities |
|
(134,132 |
) |
|
(220,295 |
) |
Financing
activities |
|
(110,486 |
) |
|
145,844 |
|
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
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