DEN - Denbury Reports Third Quarter 2021 Results

November, 04 2021 06:30 AM Denbury Inc.

Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided results for the third quarter of 2021.

FINANCIAL AND OPERATING HIGHLIGHTS



3Q 2021


YTD 2021
(in thousands, except per-share and volume data)

Total

Per Diluted Share


Total

Per Diluted Share
Net Income (Loss)

$82,708

$1.51


$(64,629)

$(1.27)
Adjusted net income ⁽¹⁾⁽²⁾ (non-GAAP)

40,360

0.74


95,976

1.80
Adjusted EBITDAX ⁽¹⁾ (non-GAAP)

80,587




234,956


Cash flows from operations

104,019




247,557


Adjusted cash flows from operations ⁽¹⁾ (non-GAAP)

77,550




229,291


Development capital expenditures

99,640




173,821












Average daily sales volumes (BOE/d)

49,682




48,732


Blue Oil (% oil volumes using industrial-sourced CO ₂ )

25%




24%


Industrial-sourced CO ₂ injected (thousand metric tons)

862




2,430

Progressed installation of the 105-mile extension of the Greencore CO ₂ Pipeline to the Cedar Creek Anticline (“CCA”) EOR project ahead of plan, with completion expected before the end of November 2021.
Completed the Oyster Bayou A1 CO ₂ development expansion with initial production commencing late in the third quarter.
Reduced total debt by $52 million during the third quarter, exiting the quarter with no outstanding long-term debt and liquidity of $565 million.
Issued Denbury’s 2021 Corporate Responsibility Report, highlighting the Company’s net negative combined Scope 1 and 2 CO ₂ emissions for 2019 and 2020 and its target to be fully negative through Scope 3 within this decade.

(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 54.7 million and 53.4 million for the three and nine months ended September 30, 2021, respectively.

RECENT CCUS HIGHLIGHTS

Executed a term sheet with Mitsubishi Corporation for the transport and storage of CO ₂ captured from Mitsubishi’s proposed ammonia project along the U.S. Gulf Coast. The agreement covers a 20-year period, and Mitsubishi’s project is targeted to produce associated CO ₂ emissions of approximately 1.8 million metric tons per year (“MMTPA”), beginning in the latter half of the decade.
Commenced a joint evaluation with Mitsui E&P USA LLC of potential opportunities across the U.S. Gulf Coast to develop carbon-negative oil assets utilizing anthropogenic CO ₂ . As part of the evaluation, the parties seek to jointly pursue CO ₂ offtake opportunities from Mitsui’s potential projects along the U.S. Gulf Coast.
Announced joint development of a Texas Gulf Coast sequestration site with Gulf Coast Midstream Partners. Located in close proximity to Denbury’s existing CO ₂ Green Pipeline, the location has the potential to store up to 400 million metric tons of CO ₂ at a rate of up to 9 MMTPA. The EPA Class VI permitting process has been initiated and sequestration is estimated to be available by early 2025.

EXECUTIVE COMMENT

Chris Kendall, the Company’s President and CEO, commented, “Denbury’s strong operational execution and continued safety focus, combined with support from higher oil prices, delivered exceptional results for the third quarter. We advanced both near and long-term resource development projects, and I am particularly proud that the CCA CO ₂ development, the largest tertiary project in Denbury’s history, is ahead of schedule with zero recordable safety incidents incurred to date.”

“The third quarter was also a significant period for our CCUS business, as the initial term sheets we executed represent the first steps towards solidifying this substantial growth opportunity for our Company. We have advanced negotiations for additional CO ₂ transport and storage arrangements, and I remain confident in further announcements by the end of 2021. Our successes in 2021 have set the stage for a very exciting future, as we execute on our strategy to grow the CCUS opportunity while maintaining a strong EOR-focused production business.”

FINANCIAL AND OPERATING RESULTS

Total revenues and other income in the third quarter of 2021 were $344 million, a 14% increase over second quarter 2021 levels, supported predominantly by higher oil price realizations and also slightly higher oil volumes. Denbury’s third quarter 2021 average pre-hedge realized oil price was $68.88 per barrel (“Bbl”), which was $1.75 per Bbl below NYMEX WTI oil prices, consistent with the Company’s guidance. As compared to the second quarter of 2021, the Company’s average oil differential widened from the $1.32 per Bbl below NYMEX WTI last quarter, primarily as a result of Gulf Coast crudes in comparison to WTI.

Denbury’s oil and natural gas sales volumes averaged 49,682 barrels of oil equivalent per day (“BOE/d”) during the third quarter of 2021. In comparison to the second quarter 2021, third quarter sales volumes were up 1% primarily attributable to the Wind River Basin properties, Oyster Bayou performance, and non-tertiary sales at Conroe Field. Oil represented 97% of the Company’s third quarter 2021 volumes, and approximately 25% of the Company’s oil was attributable to the injection of industrial-sourced CO ₂ in its EOR operations, resulting in carbon-negative or blue oil.

Lease operating expenses (“LOE”) in the third quarter of 2021 totaled $117 million, or $25.50 per BOE, in line with expectations. On a per BOE basis, LOE expense increased approximately 3% from the second quarter of 2021 due in part to higher power and fuel, contract labor, and workover costs.

Transportation and marketing expenses for the quarter totaled $6 million, an improvement of $3 million from the second quarter of 2021, primarily as a result of a change in transportation and marketing arrangements for certain of the Company’s Rocky Mountain region oil volumes.

General and administrative expenses were $15 million in the third quarter of 2021, in line with expectations and consistent with the second quarter of 2021. Depletion, depreciation, and amortization (“DD&A”) was also in line with expectations at $38 million, or $8.25 per BOE for the quarter.

Commodity derivatives expense totaled $42 million in the third quarter of 2021. Cash payments on hedges that settled in the third quarter of 2021 totaled $78 million, offset by a $36 million noncash gain representing mark-to-market changes in the value of the Company’s hedging portfolio. No new hedges were added by the Company during the third quarter of 2021.

Other income for the third quarter of 2021 included a $7 million gain related to the sale of non-producing Houston-area surface acreage outside of the Company’s planned development area.

The Company’s effective tax rate for the third quarter of 2021 was negligible, as virtually all of the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Third quarter 2021 development capital expenditures totaled nearly $100 million, bringing year to-date capital expenditures to a total of $174 million. Approximately 60% of the third quarter total was dedicated to the CCA tertiary project, including the Greencore CO ₂ Pipeline extension, the infield CCA distribution system installation, and field work to begin converting water injection wells to CO ₂ injection. The Greencore CO ₂ Pipeline extension project is running ahead of schedule, and completion is now anticipated before the end of November 2021. Initial CO ₂ injection into CCA is expected in the first quarter of 2022, with production response estimated to commence in the second half of 2023.

Also during the quarter, the Company completed drilling and injection work at the Oyster Bayou A1 CO ₂ development expansion in the Gulf Coast. In addition, the Company drilled a horizontal infield development well at Coral Creek in the Cedar Creek Anticline area of the Rocky Mountain region. Production response from these projects commenced late in the third quarter of 2021.

GUIDANCE

Development capital expenditures for the fourth quarter of the year are expected between $75 million and $95 million, with the full year unchanged at a range of $250 million to $270 million. Planned fourth quarter capital expenditures include the completion of the Greencore CO ₂ Pipeline extension and CCA CO ₂ infield distribution system, as well as additional field development activities. For the fourth quarter of 2021, LOE per BOE is anticipated to be consistent with the unit rate in the third quarter and sales volumes are anticipated to average nearly 50,000 BOE/d.

Additional fourth quarter guidance details are available in the Company’s supplemental third quarter 2021 earnings presentation, which is available in the Investor Relations section of the Company’s website, www.denbury.com .

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury will host a conference call and webcast to review and discuss its results and outlook today, Thursday, November 4, at 11:00 a.m. Central Time. Additionally, Denbury will post presentation materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com . Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with conference number 13696090.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO ₂ in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO ₂ . The Company currently injects over three million tons of captured industrial-sourced CO ₂ annually, and its objective is to fully offset its Scope 1, 2, and 3 CO ₂ emissions within this decade, primarily through increasing the amount of captured industrial-sourced CO ₂ used in its operations. For more information about Denbury, visit www.denbury.com .

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties including estimated 2021 production, capital expenditures, and costs, the timing of completion of the Greencore pipeline extension to CCA, and results of ongoing negotiations of CCUS transport and storage arrangements, 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 financial and market, engineering, geological 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 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

References below to “Successor” refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020, and references to “Predecessor” refer to the Denbury entity prior to emergence from bankruptcy. The following tables include selected unaudited financial and operational information for the Successor three and nine-month periods ended September 30, 2021, Successor period from September 19, 2020 through September 30, 2020, Predecessor periods from July 1, 2020 through September 18, 2020 and January 1, 2020 through September 18, 2020, and certain Combined information for the three and nine months ended September 30, 2020, in order to assist investors in understanding the comparability of the Company’s financial and operational results for the applicable periods. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The following information is based on GAAP reporting earnings (along with additional required disclosures) included or to be included in the Company’s periodic reports:



Quarter Ended Sept. 30, 2021

Quarter Ended Sept. 30, 2020

Period from Sept. 19, 2020 through Sept. 30, 2020

Period from July 1, 2020 through Sept. 18, 2020
In thousands, except per-share data

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Predecessor
Revenues and other income








Oil sales

$
305,093

$
174,447


$
22,311


$
152,136

Natural gas sales

3,361

964


10


954

CO ₂ sales and transportation fees

12,237

7,484


967


6,517

Oil marketing revenues

12,593

3,483


151


3,332

Other income

10,451

7,191


94


7,097

Total revenues and other income

343,735

193,569


23,533


170,036

Expenses








Lease operating expenses

116,536

71,192


11,484


59,708

Transportation and marketing expenses

5,985

9,499


1,344


8,155

CO ₂ operating and discovery expenses

1,963

1,197


242


955

Taxes other than income

24,154

15,546


2,073


13,473

Oil marketing purchases

11,940

3,427


139


3,288

General and administrative expenses

15,388

16,748


1,735


15,013

Interest, net of amounts capitalized of $1,249, $4,887, $183 and $4,704, respectively

669

8,038


334


7,704

Depletion, depreciation, and amortization

37,691

41,600


5,283


36,317

Commodity derivatives expense (income)

41,745

574


(4,035
)

4,609

Write-down of oil and natural gas properties

—

261,677


—


261,677

Restructuring items, net

—

849,980


—


849,980

Other expenses

4,553

24,248


2,164


22,084

Total expenses

260,624

1,303,726


20,763


1,282,963

Income (loss) before income taxes

83,111

(1,110,157
)

2,770


(1,112,927
)
Income tax provision (benefit)








Current income taxes

350

(1,445
)

6


(1,451
)
Deferred income taxes

53

(302,350
)

6


(302,356
)
Net income (loss)

$
82,708

$
(806,362
)

$
2,758


$
(809,120
)









Net income (loss) per common share








Basic

$
1.62



$
0.06


$
(1.63
)
Diluted

$
1.51



$
0.06


$
(1.63
)









Weighted average common shares outstanding








Basic

51,094



50,000


497,398

Diluted

54,714



50,000


497,398

⁽¹⁾

Combined results for the quarter ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the quarter reported in accordance with GAAP.



Nine Months Ended Sept. 30, 2021

Nine Months Ended Sept. 30, 2020

Period from Sept. 19, 2020 through Sept. 30, 2020

Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands, except per-share data

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Predecessor
Revenues and other income








Oil sales

$
818,714


$
511,562


$
22,311


$
489,251

Natural gas sales

7,893


2,860


10


2,850

CO ₂ sales and transportation fees

31,599


22,016


967


21,049

Oil marketing revenues

26,538


8,694


151


8,543

Other income

11,518


8,513


94


8,419

Total revenues and other income

896,262


553,645


23,533


530,112

Expenses








Lease operating expenses

308,731


261,755


11,484


250,271

Transportation and marketing expenses

22,304


28,508


1,344


27,164

CO ₂ operating and discovery expenses

4,487


2,834


242


2,592

Taxes other than income

65,499


45,604


2,073


43,531

Oil marketing purchases

25,763


8,538


139


8,399

General and administrative expenses

62,821


50,257


1,735


48,522

Interest, net of amounts capitalized of $3,500, $23,068, $183 and $22,885, respectively

3,457


48,601


334


48,267

Depletion, depreciation, and amortization

113,522


193,876


5,283


188,593

Commodity derivatives expense (income)

330,152


(106,067
)

(4,035
)

(102,032
)
Gain on debt extinguishment

—


(18,994
)

—


(18,994
)
Write-down of oil and natural gas properties

14,377


996,658


—


996,658

Restructuring items, net

—


849,980


—


849,980

Other expenses

9,913


38,032


2,164


35,868

Total expenses

961,026


2,399,582


20,763


2,378,819

Income (loss) before income taxes

(64,764
)

(1,845,937
)

2,770


(1,848,707
)
Income tax provision (benefit)








Current income taxes

(101
)

(7,254
)

6


(7,260
)
Deferred income taxes

(34
)

(408,863
)

6


(408,869
)
Net income (loss)

$
(64,629
)

$
(1,429,820
)

$
2,758


$
(1,432,578
)









Net income (loss) per common share








Basic

$
(1.27
)



$
0.06


$
(2.89
)
Diluted

$
(1.27
)



$
0.06


$
(2.89
)









Weighted average common shares outstanding








Basic

50,807




50,000


495,560

Diluted

50,807




50,000


495,560

⁽¹⁾

Combined results for the nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the nine months ended September 30, 2020 reported in accordance with GAAP.

DENBURY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)











Quarter Ended Sept. 30, 2021

Quarter Ended Sept. 30, 2020

Period from Sept. 19, 2020 through Sept. 30, 2020

Period from July 1, 2020 through Sept. 18, 2020
In thousands

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Predecessor
Cash flows from operating activities








Net income (loss)

$
82,708


$
(806,362
)

$
2,758


$
(809,120
)
Adjustments to reconcile net income (loss) to cash flows from operating activities








Noncash reorganization items, net

—


810,909


—


810,909

Depletion, depreciation, and amortization

37,691


41,600


5,283


36,317

Write-down of oil and natural gas properties

—


261,677


—


261,677

Deferred income taxes

53


(302,350
)

6


(302,356
)
Stock-based compensation

2,556


571


—


571

Commodity derivatives expense (income)

41,745


574


(4,035
)

4,609

Receipt (payment) on settlements of commodity derivatives

(77,670
)

17,789


6,660


11,129

Debt issuance costs and discounts

685


1,764


114


1,650

Gain from asset sales and other

(7,055
)

(6,404
)

—


(6,404
)
Other, net

(3,163
)

9,074


589


8,485

Changes in assets and liabilities, net of effects from acquisitions








Accrued production receivable

(4,067
)

3,049


38,537


(35,488
)
Trade and other receivables

3,769


(4,815
)

1,366


(6,181
)
Other current and long-term assets

6,043


6,000


705


5,295

Accounts payable and accrued liabilities

20,192


36,213


(7,980
)

44,193

Oil and natural gas production payable

2,944


4,361


(11,064
)

15,425

Other liabilities

(2,412
)

(143
)

(29
)

(114
)
Net cash provided by operating activities

104,019


73,507


32,910


40,597










Cash flows from investing activities








Oil and natural gas capital expenditures

(59,630
)

(21,810
)

(2,125
)

(19,685
)
Acquisitions of oil and natural gas properties

(116
)

(1
)

(1
)

—

Pipelines and plants capital expenditures

(14,272
)

(645
)

(6
)

(639
)
Net proceeds from sales of oil and natural gas properties and equipment

597


1,231


880


351

Other

9,956


12,544


(308
)

12,852

Net cash used in investing activities

(63,465
)

(8,681
)

(1,560
)

(7,121
)









Cash flows from financing activities








Bank repayments

(212,000
)

(380,000
)

(55,000
)

(325,000
)
Bank borrowings

177,000


200,000


—


200,000

Interest payments treated as a reduction of debt

—


(3,911
)

—


(3,911
)
Cash paid in conjunction with debt repurchases

—


—


—


—

Costs of debt financing

—


(12,183
)

—


(12,183
)
Pipeline financing repayments

(17,166
)

(44,831
)

(54
)

(44,777
)
Other

309


(133
)

—


(133
)
Net cash provided by (used in) financing activities

(51,857
)

(241,058
)

(55,054
)

(186,004
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

(11,303
)

(176,232
)

(23,704
)

(152,528
)
Cash, cash equivalents, and restricted cash at beginning of period

59,765


247,642


95,114


247,642

Cash, cash equivalents, and restricted cash at end of period

$
48,462


$
71,410


$
71,410


$
95,114

⁽¹⁾



Nine Months Ended Sept. 30, 2021

Nine Months Ended Sept. 30, 2020

Period from Sept. 19, 2020 through Sept. 30, 2020

Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Predecessor
Cash flows from operating activities








Net income (loss)

$
(64,629
)

$
(1,429,820
)

$
2,758


$
(1,432,578
)
Adjustments to reconcile net income (loss) to cash flows from operating activities








Noncash reorganization items, net

—


810,909


—


810,909

Depletion, depreciation, and amortization

113,522


193,876


5,283


188,593

Write-down of oil and natural gas properties

14,377


996,658


—


996,658

Deferred income taxes

(34
)

(408,863
)

6


(408,869
)
Stock-based compensation

22,788


4,111


—


4,111

Commodity derivatives expense (income)

330,152


(106,067
)

(4,035
)

(102,032
)
Receipt (payment) on settlements of commodity derivatives

(179,466
)

88,056


6,660


81,396

Gain on debt extinguishment

—


(18,994
)

—


(18,994
)
Debt issuance costs and discounts

2,055


11,685


114


11,571

Gain from asset sales and other

(7,026
)

(6,723
)

—


(6,723
)
Other, net

(2,448
)

7,751


589


7,162

Changes in assets and liabilities, net of effects from acquisitions








Accrued production receivable

(52,948
)

65,112


38,537


26,575

Trade and other receivables

(1,809
)

(20,977
)

1,366


(22,343
)
Other current and long-term assets

7,337


1,448


705


743

Accounts payable and accrued liabilities

47,484


(24,082
)

(7,980
)

(16,102
)
Oil and natural gas production payable

23,168


(17,856
)

(11,064
)

(6,792
)
Other liabilities

(4,966
)

94


(29
)

123

Net cash provided by operating activities

247,557


146,318


32,910


113,408










Cash flows from investing activities








Oil and natural gas capital expenditures

(113,041
)

(101,707
)

(2,125
)

(99,582
)
Acquisitions of oil and natural gas properties

(10,927
)

(1
)

(1
)

—

Pipelines and plants capital expenditures

(19,123
)

(11,607
)

(6
)

(11,601
)
Net proceeds from sales of oil and natural gas properties and equipment

19,053


42,202


880


41,322

Other

5,797


12,439


(308
)

12,747

Net cash used in investing activities

(118,241
)

(58,674
)

(1,560
)

(57,114
)









Cash flows from financing activities








Bank repayments

(697,000
)

(606,000
)

(55,000
)

(551,000
)
Bank borrowings

627,000


691,000


—


691,000

Interest payments treated as a reduction of debt

—


(46,417
)

—


(46,417
)
Cash paid in conjunction with debt repurchases

—


(14,171
)

—


(14,171
)
Costs of debt financing

—


(12,482
)

—


(12,482
)
Pipeline financing repayments

(50,676
)

(51,846
)

(54
)

(51,792
)
Other

(2,426
)

(9,363
)

—


(9,363
)
Net cash provided by (used in) financing activities

(123,102
)

(49,279
)

(55,054
)

5,775

Net increase (decrease) in cash, cash equivalents, and restricted cash

6,214


38,365


(23,704
)

62,069

Cash, cash equivalents, and restricted cash at beginning of period

42,248


33,045


95,114


33,045

Cash, cash equivalents, and restricted cash at end of period

$
48,462


$
71,410


$
71,410


$
95,114

⁽¹⁾

DENBURY INC.




CONSOLIDATED BALANCE SHEETS (UNAUDITED)









In thousands, except par value and share data

Sept. 30, 2021

Dec. 31, 2020
Assets




Current assets




Cash and cash equivalents

$
1,783


$
518

Restricted cash

—


1,000

Accrued production receivable

144,370


91,421

Trade and other receivables, net

20,867


19,682

Derivative assets

—


187

Prepaids

10,872


14,038

Total current assets

177,892


126,846

Property and equipment




Oil and natural gas properties (using full cost accounting)




Proved properties

1,011,545


851,208

Unevaluated properties

108,258


85,304

CO ₂ properties

188,752


188,288

Pipelines

193,669


133,485

Other property and equipment

94,763


86,610

Less accumulated depletion, depreciation, amortization and impairment

(151,844
)

(41,095
)
Net property and equipment

1,445,143


1,303,800

Operating lease right-of-use assets

18,253


20,342

Intangible assets, net

90,533


97,362

Other assets

80,444


86,408

Total assets

$
1,812,265


$
1,634,758

Liabilities and Stockholders’ Equity




Current liabilities




Accounts payable and accrued liabilities

$
211,894


$
112,671

Oil and gas production payable

69,717


49,165

Derivative liabilities

193,015


53,865

Current maturities of long-term debt

17,332


68,008

Operating lease liabilities

3,338


1,350

Total current liabilities

495,296


285,059

Long-term liabilities




Long-term debt, net of current portion

—


70,000

Asset retirement obligations

243,184


179,338

Derivative liabilities

16,435


5,087

Deferred tax liabilities, net

1,241


1,274

Operating lease liabilities

17,362


19,460

Other liabilities

25,954


20,872

Total long-term liabilities

304,176


296,031

Commitments and contingencies




Stockholders’ equity




Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding

—


—

Common stock, $.001 par value, 250,000,000 shares authorized; 50,120,895 and 49,999,999 shares issued, respectively

50


50

Paid-in capital in excess of par

1,128,030


1,104,276

Accumulated deficit

(115,287
)

(50,658
)
Total stockholders ’ equity

1,012,793


1,053,668

Total liabilities and stockholders’ equity

$
1,812,265


$
1,634,758

DENBURY INC.
OPERATING HIGHLIGHTS (UNAUDITED)

All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.



Quarter Ended

Nine Months Ended


September 30,

September 30,


2021

2020

2021

2020
Average daily sales (BOE/d)








Tertiary








Gulf Coast region

24,336

25,776

24,432

26,971
Rocky Mountain region

9,033

7,718

8,337

7,586
Total tertiary sales

33,369

33,494

32,769

34,557









Non-tertiary








Gulf Coast region

3,763

3,728

3,600

4,161
Rocky Mountain region

12,550

12,464

12,363

13,221
Total non-tertiary sales

16,313

16,192

15,963

17,382









Total Company








Oil (Bbls/d)

48,145

48,334

47,276

50,619
Natural gas (Mcf/d)

9,222

8,110

8,739

7,916
BOE/d (6:1)

49,682

49,686

48,732

51,939









Unit sales price (excluding derivative settlements)








Gulf Coast region








Oil (per Bbl)

$
68.86

$
39.49

$
63.47

$
37.70
Natural gas (per mcf)

4.45

2.07

3.59

1.85









Rocky Mountain region








Oil (per Bbl)

$
68.91

$
38.85

$
63.39

$
35.66
Natural gas (per mcf)

3.64

0.38

3.11

0.67









Total Company








Oil (per Bbl) ⁽¹⁾

$
68.88

$
39.23

$
63.44

$
36.88
Natural gas (per mcf)

3.96

1.29

3.31

1.32
BOE (6:1)

67.48

38.37

62.13

36.15

⁽¹⁾

Total company realized oil prices including derivative settlements were $51.35 per Bbl and $43.23 per Bbl during the three months ended September 30, 2021 and 2020, respectively, and $49.53 per Bbl and $43.23 per Bbl during the nine months ended September 30, 2021 and 2020, respectively.

DENBURY 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 (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 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 (loss) 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.



Quarter Ended

Quarter Ended


September 30, 2021

September 30, 2020


Successor

Combined (Non-GAAP) ⁽¹⁾
In thousands, except per-share data

Amount

Per Diluted Share

Amount
Net income (loss) (GAAP measure) ⁽²⁾

$
82,708


$
1.51


$
(806,362
)
Adjustments to reconcile to adjusted net income (non-GAAP measure)






Noncash fair value losses (gains) on commodity derivatives ⁽³⁾

(35,925
)

(0.66
)

18,363

Reorganization items, net ⁽⁴⁾

—


—


849,980

Write-down of oil and natural gas properties ⁽⁵⁾

—


—


261,677

Accelerated depreciation charge ⁽⁶⁾

—


—


1,791

Expense associated with restructuring ⁽⁹⁾

—


—


16,232

Delhi Field insurance reimbursements ⁽¹⁰⁾

—


—


(15,402
)
Noncash fair value adjustment - contingent consideration ⁽¹¹⁾

436


0.01


—

Other ⁽¹²⁾

(6,859
)

(0.12
)

1,013

Estimated income taxes on above adjustments to net loss and other discrete tax items ⁽¹⁴⁾

—


—


(307,344
)
Adjusted net income (non-GAAP measure)

$
40,360


$
0.74


$
19,948








Nine Months Ended

Nine Months Ended


September 30, 2021

September 30, 2020


Successor

Combined (Non-GAAP) ⁽¹⁾
In thousands, except per-share data

Amount

Per Diluted Share

Amount
Net loss (GAAP measure) ⁽²⁾

$
(64,629
)

$
(1.27
)

$
(1,429,820
)
Adjustments to reconcile to adjusted net income (non-GAAP measure)






Noncash fair value losses (gains) on commodity derivatives ⁽³⁾

150,686


2.82


(18,011
)
Reorganization items, net ⁽⁴⁾

—


—


849,980

Write-down of oil and natural gas properties ⁽⁵⁾

14,377


0.27


996,658

Accelerated depreciation charge ⁽⁶⁾

—


—


39,159

Gain on debt extinguishment ⁽⁷⁾

—


—


(18,994
)
Severance-related expense included in general and administrative expenses ⁽⁸⁾

—


—


2,361

Expense associated with restructuring ⁽⁹⁾

—


—


24,107

Delhi Field insurance reimbursements ⁽¹⁰⁾

—


—


(15,402
)
Noncash fair value adjustment - contingent consideration ⁽¹¹⁾

2,076


0.04


—

Other ⁽¹²⁾

(6,534
)

(0.12
)

3,623

Adjustments to reconcile effect of dilutive securities ⁽¹³⁾

—


0.06


—

Estimated income taxes on above adjustments to net loss and other discrete tax items ⁽¹⁴⁾

—


—


(418,655
)
Adjusted net income (non-GAAP measure)

$
95,976


$
1.80


$
15,006

⁽¹⁾

Combined results for the three and nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations of the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide more meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or meaningful than, independent results of the Predecessor and Successor periods for the quarter and nine months ended September 30, 2020 reported in accordance with GAAP.

⁽²⁾

Diluted net income (loss) per common share includes the impact of potentially dilutive securities including nonvested restricted stock units and warrants during the Successor period and includes nonvested restricted stock, nonvested performance-based equity awards, and shares into which the Predecessor’s previous convertible senior notes were convertible.

⁽³⁾

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.

⁽⁴⁾

Reorganization items, net represent (a) expenses incurred subsequent to the filing petition for Chapter 11 as a direct result of the prepackaged joint plan of reorganization, (b) gains or losses from liabilities settled, and (c) fresh start accounting adjustments.

⁽⁵⁾

Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.

⁽⁶⁾

Accelerated depreciation related to impaired unevaluated properties that were transferred to the full cost pool.

⁽⁷⁾

Gain on debt extinguishment related to the Company’s 2020 open market repurchases.

⁽⁸⁾

Severance-related expense associated with the Company’s May-2020 involuntary workforce reduction.

⁽⁹⁾

Expenses related to advisor and professional fees associated with review of strategic alternatives and comprehensive restructuring of the Company’s indebtedness.

⁽¹⁰⁾

Insurance reimbursements associated with a 2013 incident at Delhi Field.

⁽¹¹⁾

Expense related to the change in fair value of the contingent consideration payments related to our March 2021 Wind River Basin CO ₂ EOR field acquisition.

⁽¹²⁾

Other adjustments primarily include: (a) for the three months ended September 30, 2021, $7.0 million gain on land sales, (b) for the three months ended September 30, 2020, $5.9 million gain on land sales, $4.2 million write-off of trade receivables, $2.2 million of expense associated with the Delta-Tinsley CO ₂ pipeline incident and $0.5 million of expense associated with the helium supply contract ruling. The nine months ended September 30, 2021 were impacted by a $0.3 million write-off of trade receivables during the three months ended March 31, 2021, and the nine months ended September 30, 2020 were further impacted by $1.6 million of expense associated with the Delta-Tinsley CO ₂ pipeline incident and $1.0 million of expense associated with the helium supply contract ruling.

⁽¹³⁾

Represents the impact to the per-share calculation using weighted average dilutive shares of 53.4 million during the nine months ended September 30, 2021 as a result of the adjustments to the Company’s net loss (GAAP measure) to derive adjusted net income (non-GAAP measure).

⁽¹⁴⁾

The estimated income tax impacts on adjustments to net income for the nine months ended September 30, 2020 are computed based upon a rate of 25% applied to income before tax, which incorporates discrete tax adjustments primarily comprised of the tax effect of the ceiling test and accelerated depreciation, impacts of the CARES Act, valuation allowances, and the periodic tax impacts of a shortfall (benefit) on the stock-based compensation deduction.

DENBURY 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 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 nonrecurring. 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.

In thousands

Quarter Ended Sept. 30, 2021

Quarter Ended Sept. 30, 2020

Nine Months Ended Sept. 30, 2021

Nine Months Ended Sept. 30, 2020

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Combined (Non-GAAP) ⁽¹⁾
Net income (loss) (GAAP measure)

$
82,708


$
(806,362
)

$
(64,629
)

$
(1,429,820
)
Adjustments to reconcile to Adjusted EBITDAX








Interest expense

669


8,038


3,457


48,601

Income tax expense (benefit)

403


(303,795
)

(135
)

(416,117
)
Depletion, depreciation, and amortization

37,691


41,600


113,522


193,876

Noncash fair value losses (gains) on commodity derivatives

(35,925
)

18,363


150,686


(18,011
)
Stock-based compensation

2,556


571


22,788


4,111

Gain on debt extinguishment

—


—


—


(18,994
)
Write-down of oil and natural gas properties

—


261,677


14,377


996,658

Reorganization items, net

—


849,980


—


849,980

Severance-related expense

—


954


476


3,315

Noncash, non-recurring and other

(7,515
)

22,419


(5,586
)

35,014

Adjusted EBITDAX (non-GAAP measure) ⁽²⁾

$
80,587


$
93,445


$
234,956


$
248,613

⁽¹⁾

⁽²⁾

Excludes pro forma adjustments related to qualified acquisitions or dispositions under the Company’s senior secured bank credit facility.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure) and free cash flow (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. Free cash flow is a non-GAAP measure that represents adjusted cash flows from operations less reorganization items settled in cash, interest treated as debt reduction, development capital expenditures and capitalized interest, but before acquisitions. 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 sales volumes, prices, operating costs and related factors, without regard to whether the earned or incurred item was collected or paid during that period. Adjusted cash flows from operations and free cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to cash flows from operations, investing, or financing activities, nor as a liquidity measure or indicator of cash flows.

In thousands

Quarter Ended Sept. 30, 2021

Quarter Ended Sept. 30, 2020

Nine Months Ended Sept. 30, 2021

Nine Months Ended Sept. 30, 2020

Successor

Combined (Non-GAAP) ⁽¹⁾

Successor

Combined (Non-GAAP) ⁽¹⁾
Cash flows from operations (GAAP measure)

$
104,019


$
73,507


$
247,557


$
146,318

Net change in assets and liabilities relating to operations

(26,469
)

(44,665
)

(18,266
)

(3,739
)
Adjusted cash flows from operations (non-GAAP measure) ⁽²⁾

77,550


28,842


229,291


142,579

Reorganization items settled in cash

—


39,071


—


39,071

Interest on notes treated as debt reduction

—


(3,911
)

—


(46,417
)
Development capital expenditures

(99,640
)

(17,522
)

(173,821
)

(77,566
)
Capitalized interest

(1,249
)

(4,887
)

(3,500
)

(23,068
)
Free cash flow (deficit) (non-GAAP measure)

$
(23,339
)

$
41,593


$
51,970


$
34,599

⁽¹⁾

⁽²⁾

Adjusted cash flow from operations for the three and nine months ended September 30, 2021 includes $2.5 million of nonrecurring accrued litigation. If these amounts were removed, adjusted cash flow from operations would have been $80.1 million and $231.8 million for the three and nine months ended September 30, 2021, respectively.

DENBURY INC.

CAPITAL EXPENDITURE SUMMARY (UNAUDITED) ⁽¹⁾








Quarter Ended

Nine Months Ended


September 30,

September 30,
In thousands

2021

2020

2021

2020
Capital expenditure summary








Tertiary and non-tertiary fields

$
52,083

$
8,511

$
102,640

$
41,679
Capitalized internal costs ⁽²⁾

7,854

8,351

22,639

26,695
Oil and natural gas capital expenditures

59,937

16,862

125,279

68,374
CCA CO ₂ pipeline

39,703

660

48,542

9,192
Development capital expenditures

99,640

17,522

173,821

77,566
Acquisitions of oil and natural gas properties ⁽³⁾

116

15

10,927

95
Capital expenditures, before capitalized interest

99,756

17,537

184,748

77,661
Capitalized interest

1,249

4,887

3,500

23,068
Capital expenditures, total

$
101,005

$
22,424

$
188,248

$
100,729

⁽¹⁾

Capital expenditure amounts include accrued capital.

⁽²⁾

Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.

⁽³⁾

Primarily consists of working interest positions in the Wind River Basin enhanced oil recovery fields acquired on March 3, 2021.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104005321/en/

Brad Whitmarsh, Executive Director, Investor Relations, 972.673.2020, brad.whitmarsh@denbury.com
Susan James, Manager, Investor Relations, 972.673.2593, susan.james@denbury.com

Company Name:	Denbury Inc.
Stock Symbol:	DEN
Market:	NYSE
Website:	denbury.com

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