Denbury Resources Inc. (NYSE: DNR) (“Denbury” or the “Company”)
today announced a net loss of $26 million, or $0.06 per diluted
share, for the first quarter of 2019. Adjusted net income(1)
(a non-GAAP measure) was $45 million, or $0.10(1)(2) per diluted
share, with the difference from the GAAP net loss primarily due to
$92 million ($69 million after tax) of noncash expense related to
fair value changes in the Company’s commodity derivative positions
(see reconciliation of GAAP and non-GAAP measures in tables
beginning on page 7 of this press release).
FIRST QUARTER AND RECENT
HIGHLIGHTS
- Production of 59,218 barrels of oil equivalent (“BOE”) per day
(“BOE/d”), essentially flat with both 4Q 2018 and 1Q 2018
continuing production
- Strong production response from Bell Creek Phase Five CO2 flood
expansion; Bell Creek production up 5% from 4Q 2018 and up 15% from
1Q 2018
- Generated operating cash flow of $119 million before giving
effect to $55 million of cash outflows for working capital changes,
resulting in GAAP cash flow from operations of $64
million
- Generated free cash flow(1) (a non-GAAP measure) of $27 million
after considering development capital expenditures, capitalized
interest and interest treated as debt reduction (see reconciliation
on page 8 of this press release)
- Expect to generate free cash flow for full-year 2019 well in
excess of $150 million based on current projections and oil futures
prices
- Reaffirmed bank credit facility at $615 million; no amounts
were outstanding as of March 31, 2019
SELECTED QUARTERLY COMPARATIVE
DATA
|
|
Quarter Ended |
(in
millions, except per-share and per-unit data) |
|
March 31, 2019 |
|
Dec. 31, 2018 |
|
March 31, 2018 |
Net income (loss) |
|
$ |
(26 |
) |
|
$ |
174 |
|
|
$ |
40 |
|
Adjusted
net income(1) (non-GAAP measure) |
|
45 |
|
|
46 |
|
|
54 |
|
Adjusted
EBITDAX(1) (non-GAAP measure) |
|
138 |
|
|
141 |
|
|
142 |
|
Net income (loss) per
diluted share |
|
(0.06 |
) |
|
0.38 |
|
|
0.09 |
|
Adjusted
net income per diluted share(1)(2) (non-GAAP measure) |
|
0.10 |
|
|
0.10 |
|
|
0.12 |
|
Cash flows from
operations |
|
64 |
|
|
136 |
|
|
92 |
|
Adjusted
cash flows from operations less special items(1) (non-GAAP
measure) |
|
120 |
|
|
133 |
|
|
125 |
|
Development capital
expenditures |
|
61 |
|
|
107 |
|
|
48 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
303 |
|
|
$ |
336 |
|
|
$ |
348 |
|
Receipt (payment) on
settlements of commodity derivatives |
|
8 |
|
|
(26 |
) |
|
(33 |
) |
Revenues
and commodity derivative settlements combined |
|
$ |
311 |
|
|
$ |
310 |
|
|
$ |
315 |
|
|
|
|
|
|
|
|
Average realized oil
price per barrel (excluding derivative settlements) |
|
$ |
56.50 |
|
|
$ |
60.50 |
|
|
$ |
64.25 |
|
Average realized oil
price per barrel (including derivative settlements) |
|
58.09 |
|
|
55.75 |
|
|
57.89 |
|
|
|
|
|
|
|
|
Total continuing
production (BOE/d) |
|
59,218 |
|
|
59,867 |
|
|
59,876 |
|
(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
455.5 million, 456.7 million, and 451.5 million for the three
months ended March 31, 2019, December 31, 2018 and March 31, 2018,
respectively. |
MANAGEMENT COMMENT
Chris Kendall, Denbury’s President and CEO,
commented, “The first quarter highlighted the compelling advantages
of Denbury’s low-decline, high margin business. Our operating
teams delivered another solid quarter, holding production flat with
both the prior quarter and the first quarter of 2018 with limited
capital spend. Our investments in Bell Creek continued to
deliver great results, with net production reaching a record 4,650
barrels per day in the first quarter, up over 50% in the past two
years. Our exploitation program continued to highlight even
greater potential across our assets, with positive initial results
in both our Conroe 2A sand horizontal test as well as our Tinsley
Cotton Valley test.
“We maintained strong spending discipline, with
G&A remaining at decade-low levels, unit LOE flat with the
prior quarter, and capital within our guided range. Our
peer-leading 97% oil weighting delivered yet another quarter of
strong operating margins, well above $25 per BOE, supported by our
overall differential to NYMEX WTI pricing, which remained positive
for a sixth consecutive quarter.
“Combining this performance with a strengthening
oil market, our outlook for the year has improved nicely.
While we originally set our budget for the year based on generating
$50 – $100 million in free cash at $50 WTI, our current performance
and price expectations have significantly increased that
anticipated free cash number, which we now believe could be well
above $150 million for the full year. This additional cash
would provide great flexibility, giving us more capacity to reduce
leverage and to continue to build on the great success we have had
in improving our balance sheet over the past several years.
“As I consider the rest of 2019, I am looking
forward to sharing more of what this great Company can
deliver. We will maintain our priority of strengthening our
balance sheet; the results of our high-return capital investments
will continue to shine; we will continue to drive our highly
impactful Cedar Creek Anticline enhanced oil recovery project
toward first oil; and we will have results from exciting new
exploitation tests. I see all of this combining to pave the
way to a strong and sustainable future for Denbury.”
REVIEW OF OPERATING AND FINANCIAL
RESULTS
Denbury’s production averaged 59,218 BOE/d
during first quarter 2019, including 37,073 barrels of oil per day
from tertiary properties and 22,145 BOE/d from non-tertiary
properties, essentially flat with total continuing production
levels in the first and fourth quarters of 2018. Further
production information is provided on page 12 of this press
release.
Denbury’s average realized oil price, excluding
derivative contracts, was $56.50 per barrel (“Bbl”) in first
quarter 2019, compared to $60.50 per Bbl in the prior quarter, and
$64.25 per Bbl in first quarter 2018. Including derivative
settlements, Denbury’s average realized oil price was $58.09 per
Bbl in first quarter 2019, compared to $55.75 per Bbl in the prior
quarter, and $57.89 per Bbl in first quarter 2018.
The Company’s average realized oil price during
first quarter 2019 was $1.63 per Bbl above NYMEX WTI oil prices,
compared to $1.69 per Bbl above NYMEX WTI in the prior quarter, and
$1.29 per Bbl above NYMEX WTI in first quarter 2018. The
differential improvement over first quarter 2018 was due primarily
to strengthening in Gulf Coast premium prices, which represents
approximately 60% of the Company’s crude oil production.
The Company’s total lease operating expenses in
first quarter 2019 were $125 million, or $23.53 per BOE, a decrease
of $3 million, or 2%, on an absolute-dollar basis compared to the
prior quarter, and an increase of $7 million, or 6%, compared to
first quarter 2018. The sequential-quarter decrease was
primarily impacted by lower workover activity, with the
year-over-year increase impacted by higher CO2 expense due to an
increase in injection volumes and new floods and expansion areas
moving into the production stage, resulting in costs being expensed
versus capitalized.
Taxes other than income, which include ad
valorem, production and franchise taxes, increased $1 million from
the fourth quarter 2018, and decreased $4 million from the
prior-year first quarter. The year-over-year decrease is
generally due to a decrease in production taxes resulting from a
decrease in oil and natural gas revenues.
General and administrative expenses were $19
million in first quarter 2019, a $9 million increase from the prior
quarter, and a $1 million decrease compared to first quarter
2018. The sequential-quarter increase was primarily the
result of the prior quarter including downward adjustments in
performance-based compensation.
Interest expense, net of capitalized interest,
totaled $17 million in first quarter 2019, consistent with the
fourth quarter 2018 and first quarter 2018. Interest expense
excludes approximately $21 million and $22 million in the first
quarters of 2019 and 2018, respectively, of interest recorded as a
reduction of debt for financial reporting purposes and not as
interest expense, due to the accounting associated with debt
exchange transactions completed in previous years. A schedule
detailing the components of interest expense is included on page 14
of this press release.
Depletion, depreciation, and amortization
(“DD&A”) was $57 million during first quarter 2019, compared to
$52 million in first quarter 2018 and $60 million in fourth quarter
2018. The increase from first quarter 2018 was due primarily
to an increase in depletable costs, whereas the decrease from
fourth quarter 2018 was due primarily to accelerated depreciation
of office leasehold improvement costs in that quarter.
Denbury’s effective tax rate for the first
quarter 2019 was approximately 30%, higher than the Company’s
estimated statutory rate of 25% due primarily to establishment of a
valuation allowance against a portion of the Company’s business
interest expense deduction that it estimates will be disallowed in
the current year as a result of limitations enacted under the Tax
Cuts and Jobs Act. As a result of this, the Company currently
expects that its effective tax rate for the remainder of 2019 will
be approximately 30%, but could move higher or lower depending in
part on taxable income.
BANK CREDIT FACILITY, CASH FLOW AND
LIQUIDITY
The Company’s borrowing base and commitment
level under its senior secured bank credit facility (the
“Facility”) was reaffirmed at the previously existing amount of
$615 million pursuant to the May 2019 semiannual borrowing base
redetermination. The Company had no outstanding borrowings
under the Facility as of March 31, 2019, leaving $560 million of
liquidity available after consideration of $55 million of currently
outstanding letters of credit.
In first quarter 2019, the Company generated
operating cash flow of $119 million, before giving effect to $55
million of cash outflows for working capital changes, which
resulted in net GAAP cash flow from operations of $64
million. The Company generally experiences its highest level
of working capital outflows in the first quarter of each year due
to payments associated with accrued compensation and accrued ad
valorem taxes. In first quarter 2019 the Company also
incurred a $22 million working capital outflow associated with an
increase in accrued revenues due primarily to the change in
realized oil price in March 2019 compared to December 2018.
These working capital outflows in the first quarter were the
primary reason for the reduction in the Company’s cash balance from
$39 million at December 31, 2018 to $6 million at March 31,
2019.
2019 CAPITAL BUDGET AND ESTIMATED
PRODUCTION
The Company’s 2019 capital budget, excluding
acquisitions and capitalized interest, remains unchanged from the
previously estimated range of approximately $240 million to $260
million. The capital budget consists of approximately $200
million for tertiary and non-tertiary field costs and CO2 supply,
plus approximately $50 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 $61
million (24%) has been incurred through the first quarter
2019. Denbury’s estimated 2019 production is also unchanged
from the previously disclosed range of 56,000 to 60,000 BOE/d.
CONFERENCE CALL AND ANNUAL MEETING
INFORMATION
Denbury management will host a conference call
to review and discuss first quarter 2019 financial and operating
results, as well as financial and operating guidance for 2019,
today, Tuesday, May 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 426563.
Denbury’s 2019 Annual Meeting of Stockholders
will be held on Wednesday, May 22, 2019, at 8:00 A.M. (Central), at
Denbury’s corporate offices located at 5320 Legacy Drive, Plano,
Texas.
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.
FINANCIAL AND STATISTICAL DATA TABLES
AND RECONCILIATION SCHEDULES
Following are unaudited financial highlights for
the comparative three-month periods ended March 31, 2019 and 2018
and the three-month period ended December 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 |
|
|
March 31, |
|
Dec. 31, |
In
thousands, except per-share data |
|
2019 |
|
2018 |
|
2018 |
Revenues and
other income |
|
|
|
|
|
|
Oil sales |
|
$ |
291,965 |
|
|
$ |
337,406 |
|
|
$ |
324,337 |
|
Natural
gas sales |
|
2,612 |
|
|
2,615 |
|
|
3,038 |
|
CO2 sales
and transportation fees |
|
8,570 |
|
|
7,552 |
|
|
8,729 |
|
Other
income |
|
2,305 |
|
|
5,661 |
|
|
2,251 |
|
Total
revenues and other income |
|
305,452 |
|
|
353,234 |
|
|
338,355 |
|
Expenses |
|
|
|
|
|
|
Lease
operating expenses |
|
125,423 |
|
|
118,356 |
|
|
128,453 |
|
Marketing
and plant operating expenses |
|
12,045 |
|
|
12,424 |
|
|
13,602 |
|
CO2
discovery and operating expenses |
|
556 |
|
|
462 |
|
|
1,146 |
|
Taxes
other than income |
|
23,785 |
|
|
27,319 |
|
|
22,773 |
|
General
and administrative expenses |
|
18,925 |
|
|
20,232 |
|
|
10,272 |
|
Interest,
net of amounts capitalized of $10,534, $8,452 and $10,262,
respectively |
|
17,398 |
|
|
17,239 |
|
|
17,714 |
|
Depletion, depreciation, and amortization |
|
57,297 |
|
|
52,451 |
|
|
59,738 |
|
Commodity
derivatives expense (income) |
|
83,377 |
|
|
48,825 |
|
|
(210,688 |
) |
Other
expenses |
|
3,079 |
|
|
2,328 |
|
|
72,700 |
|
Total
expenses |
|
341,885 |
|
|
299,636 |
|
|
115,710 |
|
Income (loss)
before income taxes |
|
(36,433 |
) |
|
53,598 |
|
|
222,645 |
|
Income tax provision
(benefit) |
|
|
|
|
|
|
Current
income taxes |
|
(1,281 |
) |
|
(1,032 |
) |
|
(12,327 |
) |
Deferred
income taxes |
|
(9,478 |
) |
|
15,052 |
|
|
60,493 |
|
Net income
(loss) |
|
$ |
(25,674 |
) |
|
$ |
39,578 |
|
|
$ |
174,479 |
|
|
|
|
|
|
|
|
Net income
(loss) per common share |
|
|
|
|
|
|
Basic |
|
$ |
(0.06 |
) |
|
$ |
0.10 |
|
|
$ |
0.39 |
|
Diluted |
|
$ |
(0.06 |
) |
|
$ |
0.09 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
Basic |
|
451,720 |
|
|
392,742 |
|
|
451,613 |
|
Diluted |
|
451,720 |
|
|
451,543 |
|
|
456,665 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (loss) (GAAP
measure) to adjusted net income (non-GAAP measure)
Adjusted net income is a non-GAAP measure
provided as a supplement to present an alternative net income
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 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 |
|
|
March 31, |
|
Dec. 31, |
|
|
2019 |
|
2018 |
|
2018 |
In thousands, except
per-share data |
|
Amount |
|
Per DilutedShare |
|
Amount |
|
Per DilutedShare |
|
Amount |
|
Per DilutedShare |
Net income
(loss) (GAAP measure) |
|
$ |
(25,674 |
) |
|
$ |
(0.06 |
) |
|
$ |
39,578 |
|
|
$ |
0.09 |
|
|
$ |
174,479 |
|
|
$ |
0.38 |
|
Adjustments to
reconcile to adjusted net income (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
fair value losses (gains) on commodity derivatives(1) |
|
91,583 |
|
|
0.20 |
|
|
15,468 |
|
|
0.03 |
|
|
(236,198 |
) |
|
(0.52 |
) |
Accrued
expense related to litigation over a helium supply contract
(included in other expenses)(2) |
|
409 |
|
|
0.00 |
|
|
— |
|
|
— |
|
|
49,373 |
|
|
0.11 |
|
Impairment of loan receivable and related assets (included in other
expenses)(3) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17,805 |
|
|
0.04 |
|
Acquisition transaction costs related to previous Penn Virginia
transaction (included in other expenses) |
|
1,336 |
|
|
0.00 |
|
|
— |
|
|
— |
|
|
4,373 |
|
|
0.01 |
|
Other
adjustments(4) |
|
1,310 |
|
|
0.00 |
|
|
2,075 |
|
|
0.00 |
|
|
1,300 |
|
|
0.00 |
|
Estimated
income taxes on above adjustments to net income (loss) and other
discrete tax items(5) |
|
(23,708 |
) |
|
(0.04 |
) |
|
(3,140 |
) |
|
0.00 |
|
|
35,282 |
|
|
0.08 |
|
Adjusted net
income (non-GAAP measure) |
|
$ |
45,256 |
|
|
$ |
0.10 |
|
|
$ |
53,981 |
|
|
$ |
0.12 |
|
|
$ |
46,414 |
|
|
$ |
0.10 |
|
(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) |
|
Expense
associated with a trial court’s unfavorable ruling related to the
non-delivery of helium volumes from the Company’s Riley Ridge Unit
under a helium supply contract. The accrual represents the
aggregate cap of contractual liquidated damages the Company would
be required to pay of $46 million, plus other costs associated with
the settlement of approximately $3 million through December 31,
2018, and <$1 million during the first quarter of 2019 for the
period subsequent to year-end 2018. |
(3) |
|
Impairment of an outstanding loan receivable and related assets
related to the development of a proposed plant in the Gulf Coast
that would potentially supply CO2 to Denbury, due to uncertainty
that the project will achieve financial close. |
(4) |
|
Other
adjustments include (a) $1 million of expense related to an
impairment of assets during the three months ended March 31, 2019,
(b) $2 million of transaction costs related to the Company’s
privately negotiated debt exchanges during the three months ended
March 31, 2018, and (c) $1 million of costs related to the
Company’s land sales during the three months ended December 31,
2018. |
(5) |
|
The
estimated income tax impacts on adjustments to net income (loss)
are generally computed based upon a statutory rate of 25% with the
exception of the tax impact of a shortfall (benefit) on the
stock-based compensation deduction which totaled $1 million and
($0.1) million during the three months ended March 31, 2018 and
December 31, 2018, respectively, and a tax benefit for enhanced oil
recovery income tax credits of $5 million during the three months
ended December 31, 2018. |
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 special items
(non-GAAP measure) to adjusted cash flows from operations less
special items and interest treated as debt reduction (non-GAAP
measure) and free cash flow (deficit) (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 special
items and adjusted cash flows from operations less special items
and interest treated as debt reduction are additional non-GAAP
measures that remove interest associated with the Company’s senior
secured second lien notes and convertible senior notes not
reflected as interest expense for financial reporting purposes and
other special items. Free cash flow (deficit) is a non-GAAP
measure that represents adjusted cash flows from operations less
special items and interest treated as debt reduction less
development capital expenditures before acquisitions and
capitalized interest. 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 |
In thousands |
|
March 31, |
|
Dec. 31, |
|
2019 |
|
2018 |
|
2018 |
Net income
(loss) (GAAP measure) |
|
$ |
(25,674 |
) |
|
$ |
39,578 |
|
|
$ |
174,479 |
|
Adjustments to
reconcile to adjusted cash flows from operations |
|
|
|
|
|
|
Depletion, depreciation, and amortization |
|
57,297 |
|
|
52,451 |
|
|
59,738 |
|
Deferred
income taxes |
|
(9,478 |
) |
|
15,052 |
|
|
60,493 |
|
Stock-based compensation |
|
3,263 |
|
|
2,592 |
|
|
3,240 |
|
Noncash
fair value losses (gains) on commodity derivatives |
|
91,583 |
|
|
15,468 |
|
|
(236,198 |
) |
Other |
|
2,171 |
|
|
299 |
|
|
3,607 |
|
Adjusted cash
flows from operations (non-GAAP measure) |
|
119,162 |
|
|
125,440 |
|
|
65,359 |
|
Net
change in assets and liabilities relating to operations |
|
(54,796 |
) |
|
(33,813 |
) |
|
70,796 |
|
Cash flows from
operations (GAAP measure) |
|
$ |
64,366 |
|
|
$ |
91,627 |
|
|
$ |
136,155 |
|
|
|
|
|
|
|
|
Adjusted cash
flows from operations (non-GAAP measure) |
|
$ |
119,162 |
|
|
$ |
125,440 |
|
|
$ |
65,359 |
|
Accrued
expense related to ligation over a helium supply contract |
|
409 |
|
|
— |
|
|
49,373 |
|
Impairment of loan receivable and related assets |
|
— |
|
|
— |
|
|
17,805 |
|
Adjusted cash
flows from operations less special items (non-GAAP
measure) |
|
119,571 |
|
|
125,440 |
|
|
132,537 |
|
Interest
on notes treated as debt reduction |
|
(21,279 |
) |
|
(22,049 |
) |
|
(21,262 |
) |
Adjusted cash
flows from operations less special items and interest treated as
debt reduction (non-GAAP measure) |
|
98,292 |
|
|
103,391 |
|
|
111,275 |
|
Development capital expenditures |
|
(61,163 |
) |
|
(47,627 |
) |
|
(107,451 |
) |
Capitalized interest |
|
(10,534 |
) |
|
(8,452 |
) |
|
(10,262 |
) |
Free cash flow
(deficit) (non-GAAP measure) |
|
$ |
26,595 |
|
|
$ |
47,312 |
|
|
$ |
(6,438 |
) |
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of commodity derivatives income
(expense) (GAAP measure) to noncash fair value gains (losses) 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 gains (losses) 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 gains (losses) 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 |
|
|
March 31, |
|
Dec. 31, |
In
thousands |
|
2019 |
|
2018 |
|
2018 |
Receipt (payment) on
settlements of commodity derivatives |
|
$ |
8,206 |
|
|
$ |
(33,357 |
) |
|
$ |
(25,510 |
) |
Noncash fair value
gains (losses) on commodity derivatives (non-GAAP measure) |
|
(91,583 |
) |
|
(15,468 |
) |
|
236,198 |
|
Commodity
derivatives income (expense) (GAAP measure) |
|
$ |
(83,377 |
) |
|
$ |
(48,825 |
) |
|
$ |
210,688 |
|
DENBURY RESOURCES
INC.SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Reconciliation of net income (loss) (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
(loss), the most directly comparable GAAP financial measure.
Items excluded include interest, income taxes, depletion,
depreciation, and amortization, and items that the Company believes
affect the comparability of operating results such as items whose
timing and/or amount cannot be reasonably estimated or are
non-recurring. Management believes Adjusted EBITDAX may be
helpful to investors in order to assess the Company’s operating
performance as compared to that of other companies in the industry,
without regard to financing methods, capital structure or
historical costs basis. It is also commonly used by third
parties to assess leverage and the Company’s ability to incur and
service debt and fund capital expenditures. Adjusted EBITDAX
should not be considered in isolation, as a substitute for, or more
meaningful than, net income (loss), cash flow from operations, or
any other measure reported in accordance with GAAP. The
Company’s Adjusted EBITDAX may not be comparable to similarly
titled measures of another company because all companies may not
calculate Adjusted EBITDAX, EBITDAX or EBITDA in the same
manner. The following table presents a reconciliation of the
Company’s net income (loss) to Adjusted EBITDAX.
|
|
Three Months Ended |
In thousands |
|
March 31, |
|
Dec. 31, |
|
2019 |
|
2018 |
|
2018 |
Net income (loss) (GAAP
measure) |
|
$ |
(25,674 |
) |
|
$ |
39,578 |
|
|
$ |
174,479 |
|
Adjustments to
reconcile to Adjusted EBITDAX |
|
|
|
|
|
|
Interest
expense |
|
17,398 |
|
|
17,239 |
|
|
17,714 |
|
Income
tax expense (benefit) |
|
(10,759 |
) |
|
14,020 |
|
|
48,166 |
|
Depletion, depreciation, and amortization |
|
57,297 |
|
|
52,451 |
|
|
59,738 |
|
Noncash
fair value losses (gains) on commodity derivatives |
|
91,583 |
|
|
15,468 |
|
|
(236,198 |
) |
Stock-based compensation |
|
3,263 |
|
|
2,592 |
|
|
3,240 |
|
Accrued
expense related to litigation over a helium supply contract |
|
409 |
|
|
— |
|
|
49,373 |
|
Impairment of loan receivable and related assets |
|
— |
|
|
— |
|
|
17,805 |
|
Noncash,
non-recurring and other(1) |
|
4,377 |
|
|
790 |
|
|
6,643 |
|
Adjusted EBITDAX
(non-GAAP measure) |
|
$ |
137,894 |
|
|
$ |
142,138 |
|
|
$ |
140,960 |
|
(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 |
|
|
March 31, |
|
Dec. 31, |
|
|
2019 |
|
2018 |
|
2018 |
Production
(daily – net of royalties) |
|
|
|
|
|
|
Oil
(barrels) |
|
57,414 |
|
|
58,354 |
|
|
58,266 |
|
Gas
(mcf) |
|
10,827 |
|
|
11,904 |
|
|
9,603 |
|
BOE
(6:1) |
|
59,218 |
|
|
60,338 |
|
|
59,867 |
|
Unit sales
price (excluding derivative settlements) |
|
|
|
|
|
|
Oil (per barrel) |
|
$ |
56.50 |
|
|
$ |
64.25 |
|
|
$ |
60.50 |
|
Gas (per
mcf) |
|
2.68 |
|
|
2.44 |
|
|
3.44 |
|
BOE
(6:1) |
|
55.27 |
|
|
62.61 |
|
|
59.44 |
|
Unit sales
price (including derivative settlements) |
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
58.09 |
|
|
$ |
57.89 |
|
|
$ |
55.75 |
|
Gas (per
mcf) |
|
2.68 |
|
|
2.44 |
|
|
3.44 |
|
BOE
(6:1) |
|
56.81 |
|
|
56.47 |
|
|
54.81 |
|
NYMEX
differentials |
|
|
|
|
|
|
Gulf
Coast region |
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
4.26 |
|
|
$ |
2.05 |
|
|
$ |
5.34 |
|
Gas (per
mcf) |
|
(0.10 |
) |
|
0.10 |
|
|
0.24 |
|
Rocky
Mountain region |
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
(2.56 |
) |
|
$ |
(0.06 |
) |
|
$ |
(4.31 |
) |
Gas (per
mcf) |
|
(0.28 |
) |
|
(0.92 |
) |
|
(0.85 |
) |
Total
company |
|
|
|
|
|
|
Oil (per
barrel) |
|
$ |
1.63 |
|
|
$ |
1.29 |
|
|
$ |
1.69 |
|
Gas (per
mcf) |
|
(0.20 |
) |
|
(0.40 |
) |
|
(0.29 |
) |
DENBURY RESOURCES
INC.OPERATING HIGHLIGHTS (UNAUDITED)
|
|
Three Months Ended |
|
|
March 31, |
|
Dec. 31, |
Average Daily Volumes (BOE/d) (6:1) |
|
2019 |
|
2018 |
|
2018 |
Tertiary oil
production |
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
Delhi |
|
4,474 |
|
|
4,169 |
|
|
4,526 |
|
Hastings |
|
5,539 |
|
|
5,704 |
|
|
5,480 |
|
Heidelberg |
|
3,987 |
|
|
4,445 |
|
|
4,269 |
|
Oyster
Bayou |
|
4,740 |
|
|
5,056 |
|
|
4,785 |
|
Tinsley |
|
4,659 |
|
|
6,053 |
|
|
5,033 |
|
West
Yellow Creek |
|
436 |
|
|
57 |
|
|
375 |
|
Mature
properties(1) |
|
6,479 |
|
|
6,726 |
|
|
6,748 |
|
Total
Gulf Coast region |
|
30,314 |
|
|
32,210 |
|
|
31,216 |
|
Rocky Mountain
region |
|
|
|
|
|
|
Bell
Creek |
|
4,650 |
|
|
4,050 |
|
|
4,421 |
|
Salt
Creek |
|
2,057 |
|
|
2,002 |
|
|
2,107 |
|
Other |
|
52 |
|
|
— |
|
|
20 |
|
Total
Rocky Mountain region |
|
6,759 |
|
|
6,052 |
|
|
6,548 |
|
Total tertiary oil
production |
|
37,073 |
|
|
38,262 |
|
|
37,764 |
|
Non-tertiary
oil and gas production |
|
|
|
|
|
|
Gulf Coast
region |
|
|
|
|
|
|
Mississippi |
|
1,034 |
|
|
875 |
|
|
1,023 |
|
Texas |
|
4,345 |
|
|
4,386 |
|
|
4,319 |
|
Other |
|
466 |
|
|
431 |
|
|
457 |
|
Total
Gulf Coast region |
|
5,845 |
|
|
5,692 |
|
|
5,799 |
|
Rocky Mountain
region |
|
|
|
|
|
|
Cedar
Creek Anticline |
|
14,987 |
|
|
14,437 |
|
|
14,961 |
|
Other |
|
1,313 |
|
|
1,485 |
|
|
1,343 |
|
Total
Rocky Mountain region |
|
16,300 |
|
|
15,922 |
|
|
16,304 |
|
Total non-tertiary
production |
|
22,145 |
|
|
21,614 |
|
|
22,103 |
|
Total
continuing production |
|
59,218 |
|
|
59,876 |
|
|
59,867 |
|
Property
sales |
|
|
|
|
|
|
Lockhart
Crossing(2) |
|
— |
|
|
462 |
|
|
— |
|
Total
production |
|
59,218 |
|
|
60,338 |
|
|
59,867 |
|
- Mature properties include Brookhaven, Cranfield, Eucutta,
Little Creek, Mallalieu, Martinville, McComb and Soso fields.
- Includes production from Lockhart Crossing Field sold in the
third quarter of 2018.
DENBURY RESOURCES
INC.PER-BOE DATA (UNAUDITED)
|
|
Three Months Ended |
|
|
March 31, |
|
Dec. 31, |
|
|
2019 |
|
2018 |
|
2018 |
Oil and natural gas
revenues |
|
$ |
55.27 |
|
|
$ |
62.61 |
|
|
$ |
59.44 |
|
Receipt (payment) on
settlements of commodity derivatives |
|
1.54 |
|
|
(6.14 |
) |
|
(4.63 |
) |
Lease operating
expenses |
|
(23.53 |
) |
|
(21.80 |
) |
|
(23.32 |
) |
Production and ad
valorem taxes |
|
(4.13 |
) |
|
(4.61 |
) |
|
(3.78 |
) |
Marketing expenses, net
of third-party purchases, and plant operating expenses |
|
(1.88 |
) |
|
(1.75 |
) |
|
(1.86 |
) |
Production netback |
|
27.27 |
|
|
28.31 |
|
|
25.85 |
|
CO2 sales, net of
operating and exploration expenses |
|
1.51 |
|
|
1.30 |
|
|
1.37 |
|
General and
administrative expenses |
|
(3.55 |
) |
|
(3.73 |
) |
|
(1.87 |
) |
Interest expense,
net |
|
(3.26 |
) |
|
(3.17 |
) |
|
(3.22 |
) |
Other |
|
0.39 |
|
|
0.39 |
|
|
(10.26 |
) |
Changes in assets and
liabilities relating to operations |
|
(10.28 |
) |
|
(6.23 |
) |
|
12.85 |
|
Cash
flows from operations |
|
12.08 |
|
|
16.87 |
|
|
24.72 |
|
DD&A |
|
(10.75 |
) |
|
(9.66 |
) |
|
(10.85 |
) |
Deferred income
taxes |
|
1.78 |
|
|
(2.77 |
) |
|
(10.98 |
) |
Noncash fair value
gains (losses) on commodity derivatives |
|
(17.18 |
) |
|
(2.85 |
) |
|
42.88 |
|
Other noncash
items |
|
9.25 |
|
|
5.70 |
|
|
(14.09 |
) |
Net
income (loss) |
|
$ |
(4.82 |
) |
|
$ |
7.29 |
|
|
$ |
31.68 |
|
CAPITAL EXPENDITURE SUMMARY
(UNAUDITED)(1)
|
|
Three Months Ended |
|
|
March 31, |
|
Dec. 31, |
In
thousands |
|
2019 |
|
2018 |
|
2018 |
Capital expenditure
summary |
|
|
|
|
|
|
Tertiary oil fields |
|
$ |
26,028 |
|
|
$ |
18,273 |
|
|
$ |
35,427 |
|
Non-tertiary fields |
|
21,674 |
|
|
14,922 |
|
|
53,097 |
|
Capitalized internal costs(2) |
|
11,890 |
|
|
14,085 |
|
|
12,572 |
|
Oil and
natural gas capital expenditures |
|
59,592 |
|
|
47,280 |
|
|
101,096 |
|
CO2
pipelines, sources and other |
|
1,571 |
|
|
347 |
|
|
6,355 |
|
Capital expenditures, before acquisitions and capitalized
interest |
|
61,163 |
|
|
47,627 |
|
|
107,451 |
|
Acquisitions of oil and
natural gas properties |
|
29 |
|
|
35 |
|
|
391 |
|
Capital expenditures, before capitalized
interest |
|
61,192 |
|
|
47,662 |
|
|
107,842 |
|
Capitalized
interest |
|
10,534 |
|
|
8,452 |
|
|
10,262 |
|
Capital expenditures, total |
|
$ |
71,726 |
|
|
$ |
56,114 |
|
|
$ |
118,104 |
|
- Capital expenditure amounts include accrued capital.
- 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 |
|
|
March 31, |
|
Dec. 31, |
In
thousands |
|
2019 |
|
2018 |
|
2018 |
Cash interest(1) |
|
$ |
47,948 |
|
|
$ |
46,603 |
|
|
$ |
47,972 |
|
Interest not reflected
as expense for financial reporting purposes(1) |
|
(21,279 |
) |
|
(22,049 |
) |
|
(21,262 |
) |
Noncash interest
expense |
|
1,263 |
|
|
1,137 |
|
|
1,266 |
|
Less: capitalized
interest |
|
(10,534 |
) |
|
(8,452 |
) |
|
(10,262 |
) |
Interest
expense, net |
|
$ |
17,398 |
|
|
$ |
17,239 |
|
|
$ |
17,714 |
|
- Cash interest 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, and the Company’s previously outstanding 5% Convertible
Senior Notes due 2023 and 3½% Convertible Senior Notes due
2024. As a result of the accounting for certain exchange
transactions in previous years, most of the future interest related
to these notes was recorded as debt as of the transaction date,
which is reduced as semiannual interest payments are made, and
therefore not reflected as interest for financial reporting
purposes.
SELECTED BALANCE SHEET DATA
(UNAUDITED)
|
|
March 31, |
|
December 31, |
In
thousands |
|
2019 |
|
2018 |
Cash and cash
equivalents |
|
$ |
5,749 |
|
|
$ |
38,560 |
|
Total assets |
|
4,691,162 |
|
|
4,723,222 |
|
|
|
|
|
|
Borrowings under senior
secured bank credit facility |
|
$ |
— |
|
|
$ |
— |
|
Borrowings under senior
secured second lien notes (principal only)(1) |
|
1,520,587 |
|
|
1,520,587 |
|
Borrowings under senior
subordinated notes (principal only) |
|
826,185 |
|
|
826,185 |
|
Financing and capital
leases |
|
178,919 |
|
|
185,435 |
|
Total
debt (principal only) |
|
$ |
2,525,691 |
|
|
$ |
2,532,207 |
|
|
|
|
|
|
Total stockholders’
equity |
|
$ |
1,119,320 |
|
|
$ |
1,141,777 |
|
- Excludes $250 million of future
interest payable on the notes as of March 31, 2019 and December 31,
2018 accounted for as debt for financial reporting purposes.
DENBURY RESOURCES
INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three Months Ended |
|
|
March 31, |
In
thousands |
|
2019 |
|
2018 |
Cash flows from
operating activities |
|
|
|
|
Net income (loss) |
|
$ |
(25,674 |
) |
|
$ |
39,578 |
|
Adjustments to reconcile net income (loss) to cash flows from
operating activities |
|
|
|
|
Depletion, depreciation, and amortization |
|
57,297 |
|
|
52,451 |
|
Deferred
income taxes |
|
(9,478 |
) |
|
15,052 |
|
Stock-based compensation |
|
3,263 |
|
|
2,592 |
|
Commodity
derivatives expense |
|
83,377 |
|
|
48,825 |
|
Receipt
(payment) on settlements of commodity derivatives |
|
8,206 |
|
|
(33,357 |
) |
Debt
issuance costs and discounts |
|
1,263 |
|
|
1,137 |
|
Other,
net |
|
908 |
|
|
(838 |
) |
Changes
in assets and liabilities, net of effects from acquisitions |
|
|
|
|
Accrued
production receivable |
|
(21,591 |
) |
|
(11,510 |
) |
Trade and
other receivables |
|
1,024 |
|
|
348 |
|
Other
current and long-term assets |
|
(387 |
) |
|
(1,886 |
) |
Accounts
payable and accrued liabilities |
|
(35,966 |
) |
|
(19,817 |
) |
Oil and
natural gas production payable |
|
4,605 |
|
|
(673 |
) |
Other
liabilities |
|
(2,481 |
) |
|
(275 |
) |
Net cash
provided by operating activities |
|
64,366 |
|
|
91,627 |
|
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
Oil and
natural gas capital expenditures |
|
(86,986 |
) |
|
(56,669 |
) |
Pipelines
and plants capital expenditures |
|
(1,682 |
) |
|
(156 |
) |
Net
proceeds from sales of oil and natural gas properties and
equipment |
|
104 |
|
|
1,522 |
|
Other |
|
(3,237 |
) |
|
3,927 |
|
Net cash used
in investing activities |
|
(91,801 |
) |
|
(51,376 |
) |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Bank
repayments |
|
(103,000 |
) |
|
(571,653 |
) |
Bank
borrowings |
|
103,000 |
|
|
546,653 |
|
Pipeline
financing and capital lease debt repayments |
|
(4,108 |
) |
|
(6,287 |
) |
Other |
|
(1,099 |
) |
|
(9,291 |
) |
Net cash used
in financing activities |
|
(5,207 |
) |
|
(40,578 |
) |
Net decrease in
cash, cash equivalents, and restricted cash |
|
(32,642 |
) |
|
(327 |
) |
Cash, cash equivalents,
and restricted cash at beginning of period |
|
54,949 |
|
|
15,992 |
|
Cash, cash
equivalents, and restricted cash at end of period |
|
$ |
22,307 |
|
|
$ |
15,665 |
|
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
Denbury Resources (NYSE:DNR)
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