Market Overview

Denbury Resources Reports Second Quarter 2019 Results, Achieves Record Production Volumes at Bell Creek


PLANO, Texas, Aug. 07, 2019 (GLOBE NEWSWIRE) -- Denbury Resources Inc. (NYSE:DNR) ("Denbury" or the "Company") today announced net income of $147 million, or $0.32 per diluted share, for the second quarter of 2019.  Adjusted net income(1) (a non-GAAP measure) was $59 million, or $0.13(1)(2) per diluted share, with the difference from GAAP net income primarily due to a $100 million noncash gain on debt extinguishment ($78 million after tax) and a $26 million gain from noncash fair value adjustments ($20 million after tax) on the Company's commodity derivative positions (see reconciliation of GAAP and non-GAAP measures in tables beginning on page 9 of this press release).


  • Production of 59,719 barrels of oil equivalent ("BOE") per day ("BOE/d"), up 1% from 1Q 2019
  • Strong production response from Bell Creek Phase Five CO2 flood expansion; Bell Creek production up nearly 50% from 2Q 2018 and 28% from 1Q 2019
  • Generated Adjusted EBITDAX(1) of $169 million, the highest quarterly level since 3Q 2015
  • Reduced combined lease operating expenses and general and administrative expenses by nearly $9 million from 1Q 2019
  • Generated cash flow from operations of $149 million and free cash flow(1) of $38 million after considering development capital expenditures, capitalized interest and interest treated as debt reduction
  • Significantly improved debt maturity profile through exchanges that reduced the principal balance of senior subordinated notes by $120 million and extended the maturities of an additional $348 million of those notes to 2024
  • Entered into new contracts of $38 million for Houston acreage sales, bringing total value to date of acreage closed or under contract to $52 million
  • Completed sale of Citronelle Field for $10 million on July 1, 2019


    Quarter Ended
(in millions, except per-share and per-unit data)   June 30, 2019   March 31, 2019   June 30, 2018
Net income (loss)   $ 147     $ (26 )   $ 30  
Adjusted net income(1) (non-GAAP measure)   59     45     61  
Adjusted EBITDAX(1) (non-GAAP measure)   169     138     153  
Net income (loss) per diluted share   0.32     (0.06 )   0.07  
Adjusted net income per diluted share(1)(2) (non-GAAP measure)   0.13     0.10     0.13  
Cash flows from operations   149     64     154  
Adjusted cash flows from operations less special items(1) (non-GAAP measure)   145     120     134  
Development capital expenditures   77     61     82  
Oil, natural gas, and related product sales   $ 330     $ 295     $ 376  
CO2, purchased oil sales and other   13     10     11  
Total revenues and other income   $ 343     $ 305     $ 387  
Receipt (payment) on settlements of commodity derivatives   $ (2 )   $ 8     $ (55 )
Average realized oil price per barrel (excluding derivative settlements)   $ 62.22     $ 56.50     $ 68.24  
Average realized oil price per barrel (including derivative settlements)   61.92     58.09     58.23  
Total production (BOE/d)   59,719     59,218     61,994  
Total continuing production (BOE/d)(3)   59,313     58,762     61,159  

(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 467.4 million, 455.5 million, and 457.2 million for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively.
(3)    Continuing production excludes production from Citronelle Field sold on July 1, 2019 and production from Lockhart Crossing Field sold in the third quarter of 2018.


Chris Kendall, Denbury's President and CEO, commented, "Denbury performed extremely well on our key priorities in the second quarter.  Thanks to the efforts of our team members across the business, every facet of execution was superb, and I am proud of our sustained HSE performance, disciplined capital allocation, reduced operating and G&A costs, and production outperformance led by record levels at Bell Creek.  Further, due to our robust first half 2019 production and expectations for the remainder of the year, we have decided to increase the mid-point of our previously announced production guidance.  Our well-positioned portfolio of assets and high quality, oil-levered production delivered strong price realizations, and when combined with reduced costs led to our highest quarterly EBITDAX level in nearly four years.  Denbury's sustained ability to generate free cash flow continues to be a distinguishing characteristic, giving us meaningful capacity to reduce debt.  We made significant progress on improving our balance sheet through an exchange that substantially reduced our 2021 and 2022 subordinated debt maturities, and we are nearly complete with the mainline pipe procurement for our cornerstone Cedar Creek Anticline EOR development, remaining on track with our milestone for first CO2 injection by early 2021.

"Denbury's leadership in CO2 enhanced oil recovery is significant, considering the growing movement to address CO2 emissions.  Our current operations annually utilize more than 3 million tons of industrial sourced CO2 that could otherwise have been emitted into the atmosphere, a remarkable figure that we expect will continue to grow over time.  Denbury's oil fields, pipeline infrastructure, and both surface and subsurface CO2 management expertise position us well to be the leader in the effort to capture, transport and utilize CO2.  I am excited about where the Company is today and even more excited about the opportunities for the future."


Denbury's production averaged 59,719 BOE/d during second quarter 2019, an increase of 1% on a sequential-quarter basis.  Total continuing production, which excludes Citronelle Field sold July 1, 2019, was 59,313 BOE/d, a decrease of 3% compared to continuing production in the prior-year second quarter.  Continuing production from tertiary oil production increased 4% sequentially and 1% from the prior-year second quarter, driven primarily by increased production from Bell Creek's phase five development.  Further production information is provided on page 15 of this press release.

Denbury's average realized oil price, excluding derivative contracts, was $62.22 per barrel ("Bbl") in second quarter 2019, compared to $56.50 per Bbl in the prior quarter, and $68.24 per Bbl in second quarter 2018.  Including derivative settlements, Denbury's average realized oil price was $61.92 per Bbl in second quarter 2019, compared to $58.09 per Bbl in the prior quarter, and $58.23 per Bbl in second quarter 2018.

The Company's average realized oil price during the second quarter 2019 was $2.35 per Bbl above NYMEX WTI oil prices, compared to $1.63 per Bbl above NYMEX WTI in the prior quarter, and $0.39 per Bbl above NYMEX WTI in second quarter 2018.  The differential improvement over second quarter 2018 was due primarily to strengthening in Gulf Coast premium prices, which represents approximately 60% of the Company's crude oil production.

Total lease operating expenses in second quarter 2019 were $118 million, or $21.70 per BOE, a decrease of $7 million, or 6%, on an absolute-dollar basis compared to the prior quarter, primarily impacted by lower CO2 expense, lower power and fuel costs, and reduced workover expense.  When compared to second quarter 2018, lease operating expenses decreased $2 million, or 2%, on an absolute-dollar basis, primarily impacted by lower CO2 expense, lower power and fuel costs, and the reduction in costs from Lockhart Crossing Field, which was sold in the third quarter of 2018.

General and administrative expenses were $18 million in second quarter 2019, a $1 million decrease from the prior quarter, and a $2 million decrease compared to second quarter 2018, primarily due to downward adjustments in performance-based compensation and the Company's continued focus on cost reduction.

The Company recorded a $100 million noncash gain on debt extinguishment (net of transaction costs) during second quarter 2019 as part of a series of debt exchanges, representing a net discount on the newly issued notes – see Recent Debt Transactions and Bank Credit Facility below.

Interest expense, net of capitalized interest, totaled $20 million in second quarter 2019, a $3 million increase from the prior quarter and an increase of $4 million compared to second quarter 2018.  The sequential increase was primarily due to lower capitalized interest, and the increase from the prior year was primarily due to an increase in the weighted-average interest rate associated with the issuance in August 2018 of 7½% Senior Secured Second Lien Notes due 2024.  Interest expense includes the amortization of discounts of approximately $0.5 million during second quarter 2019 and excludes approximately $21 million and $22 million in the second 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.  A schedule detailing the components of interest expense is included on page 17 of this press release.

Depletion, depreciation, and amortization ("DD&A") was $58 million during second quarter 2019, compared to $53 million in second quarter 2018 and $57 million in first quarter 2019.  The sequential-quarter and prior-year increases were due primarily to an increase in depletable costs.

Denbury's effective tax rate for the second quarter 2019 was approximately 31%, higher than the Company's estimated statutory rate of 25% due primarily to a valuation allowance applied 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%, depending in part on taxable income.


During June 2019, Denbury closed a series of debt exchanges to extend the maturities of its long-term debt and reduce the Company's debt principal.  As part of these transactions, the Company exchanged a total of $468 million aggregate principal amount of then existing senior subordinated notes for $103 million aggregate principal amount of new 7¾% Senior Secured Second Lien Notes due 2024 (the "7¾% Senior Secured Notes"), $246 million aggregate principal amount of new 6⅜% Convertible Senior Notes due 2024 (the "2024 Convertible Senior Notes") and $120 million of cash on hand.  The exchanged subordinated notes consisted of $152 million aggregate principal amount of 6⅜% Senior Subordinated Notes due 2021, $220 million aggregate principal amount of 5½% Senior Subordinated Notes due 2022 and $96 million aggregate principal amount of 4⅝% Senior Subordinated Notes due 2023.  In addition, as part of creating a more liquid series of secured second lien debt due in 2024, in June and July 2019, the Company also exchanged $429 million of 7½% Senior Secured Second Lien Notes due 2024 for roughly the same amount of 7¾% Senior Secured Notes.  The 7¾% Senior Secured Notes and 2024 Convertible Senior Notes were recorded on the Company's balance sheet at discounts to their principal amounts of $30 million and $80 million, respectively, which will be amortized as interest expense over the terms of these notes.

As of June 30, 2019, the Company had $80 million of outstanding borrowings on its $615 million senior secured bank credit facility, compared to no outstanding borrowings as of December 31, 2018 and March 31, 2019, leaving $480 million of liquidity available after consideration of $55 million of currently outstanding letters of credit.


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 investments 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 $138 million (55%) has been incurred through the second quarter 2019, which is significantly less than cash flow from operations.

Based on the Company's strong production performance during the first half of 2019 and expectations for the remainder of 2019, the Company increased the mid-point of its production guidance range to 58,250 BOE/d, from the previous mid-point of 58,000 BOE/d, and tightened its 2019 estimated production guidance range to 57,000 – 59,500 BOE/d (after adjusting approximately 400 BOE/d of estimated production for the second half of 2019 for the sale of Citronelle Field), from the previous estimate of 56,000 – 60,000 BOE/d.

On July 1, 2019, Denbury completed the sale of Citronelle Field for $10 million, while eliminating a similar amount of discounted future abandonment costs.  For the first six months of 2019, Citronelle Field produced approximately 400 BOE/d, and had one of the Company's highest per-unit operating costs.


Denbury management will host a conference call to review and discuss second quarter 2019 financial and operating results, as well as financial and operating guidance for 2019, today, Wednesday, 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  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 426564.

Chris Kendall, President and Chief Executive Officer, will present at EnerCom's The Oil & Gas Conference on Tuesday, August 13, 2019, at 8:25 A.M. (Mountain Time).  An updated corporate presentation for the conference will be posted to the Company's website the morning of Tuesday, August 13, 2019, and a link to the live webcast of the presentation will be available in the investor relations section of the Company's website at

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


Following are unaudited financial highlights for the comparative three and six-month periods ended June 30, 2019 and 2018 and the three-month period ended March 31, 2019.  All production volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.


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   2019   2018   2019   2019   2018
Revenues and other income        
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