EXHIBIT 99.1
DENBURY RESOURCES INC.
P R E S S R E L E A S E
Denbury Resources Announces 2003 Results
News Release
Released at 7:30 AM CDT
DALLAS - February 19, 2004 - Denbury Resources Inc. (NYSE symbol: DNR)
("Denbury" or the "Company") today announced its fourth quarter and 2003
financial and operating results. The Company posted earnings for the full year
2003 of $56.6 million or $1.05 per share, a 21% increase over 2002 net income of
$46.8 million or $0.88 per share, the increase primarily due to higher commodity
prices. Fourth quarter 2003 net income was $15.2 million, or $0.28 per share,
about the same as fourth quarter 2002 net income of $15.3 million or $0.29 per
share.
Adjusted cash flow from operations for the fourth quarter of 2003 was $47.8
million, close to fourth quarter 2002 adjusted cash flow of $48.4 million. Net
cash flow provided by operations, the GAAP measure, totaled $51.8 million during
the fourth quarter of 2003, as compared to $56.6 million during the fourth
quarter of 2002. (Please see the accompanying schedules for a reconciliation of
net cash flow provided by operations, as defined by generally accepted
accounting principles (GAAP), which is the GAAP measure, as opposed to adjusted
cash flow, which is the non-GAAP measure).
Review of Financial Results
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Denbury's fourth quarter production averaged 19,020 Bbls/d and 93.4 MMcf/d,
or 34,590 BOE/d, a 4% increase over third quarter 2003 levels, and a 1% increase
from fourth quarter 2002 production levels, after adjusting for the sale of
Laurel Field in January 2003, which was producing approximately 1,700 BOE/d at
the time of the sale. Production from the Company's tertiary recovery operations
set a quarterly record in the fourth quarter of 2003, averaging 5,579 BOE/d, a
44% increase over the fourth quarter of 2002 average of 3,869 BOE/d. During the
month of January 2004, production from these tertiary operations continued to
increase, averaging over 6,000 BOE/d. The Company made 15 well completions
offshore during the fourth quarter of 2003. Since most were not completed until
the latter half of the quarter, the incremental production only arrested the
overall production decline in this area, with average offshore production rates
approximately the same in the third and fourth quarters of 2003.
Despite the relatively flat production, oil and natural gas revenues
increased $1.8 million (2%) in the fourth quarter of 2003, as compared to the
comparable quarter of 2002, as a result of higher commodity prices, partially
offset by higher hedging payments. In the fourth quarter of 2003, NYMEX oil
prices averaged over $31.00 per Bbl, and natural gas prices averaged
approximately $5.40 per Mcf, as compared to NYMEX averages of approximately
$28.25 per Bbl and $4.30 per Mcf in the fourth quarter of 2002. Denbury's
weighted average price per BOE was $3.90 higher per BOE (excluding hedges) in
the fourth quarter of 2003 than in the comparable period of 2002. However, the
Company paid $2.42 more per BOE on hedges during the 2003 period than a year
earlier, reducing the net realized per BOE price increase between the respective
fourth quarters to $1.48 per BOE.
Increases in certain expenses offset these higher revenues. Lease operating
expenses increased from $6.34 per BOE in the fourth quarter of 2002 to $6.78 per
BOE in the fourth quarter of 2003. The primary reasons for the increase were
continued expansion of CO2 tertiary projects, which typically have a higher than
average operating cost per BOE, and higher lease fuel costs due to high natural
gas prices. Although the Company's cost structure is increasing as a result of
additional tertiary operations, this increase is offset by the improvement in
oil price differentials (as compared to NYMEX) related to this production, as
the oil production from these operations is light, sweet crude oil that commands
a premium price. The Company's average NYMEX differential decreased from $4.00
per Bbl during the fourth quarter of 2002 to $3.54 per Bbl during the fourth
quarter of 2003, a $0.46 per Bbl improvement.
General and administrative expenses increased to an average of $1.44 per
BOE in the fourth quarter of 2003, up from $0.87 per BOE in the comparable
quarter of 2002. The biggest portion of the increase was approximately $630,000
($0.20 per BOE) of legal, accounting, bank and other fees associated with the
conversion to a holding company organizational structure during December 2003.
The modified corporate structure is expected to save the Company approximately
$750,000 per year in taxes and expenses, plus provide other potential
operational benefits. The Company's administrative expenses during the fourth
quarter of 2003 were also burdened by incremental expenses associated with the
requirements of the Sarbanes-Oxley Act and expenses related to the December sale
of common stock by the Texas Pacific Group.
Interest expense decreased 24% in the fourth quarter of 2003 as compared to
the fourth quarter of the prior year, as a result of savings from the
subordinated debt refinancing in March and April of 2003, and due to lower
overall debt in the fourth quarter of 2003, as a result of the Company's $50
million debt reduction during 2003.
Depreciation and amortization ("DD&A") expenses increased $1.4 million (6%)
in the fourth quarter of 2003 as compared to the prior year fourth quarter. The
DD&A rate in the fourth quarter of 2003 was $8.00 per BOE, up from $7.29 per BOE
in the prior year fourth quarter. The majority of the increase in DD&A expense
on a per BOE basis is related to higher finding costs in 2003 and higher DD&A
expense associated with the Company's CO2 properties as a result of the 74%
increase in CO2 production between the respective quarters and $22.7 million of
incremental capital costs related to the Company's CO2 properties during 2003.
2004 Outlook
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Denbury's 2004 development and exploration budget (excluding acquisitions)
is currently set at $172 million. Approximately 47% of the Company's current
2004 capital budget is related to its tertiary operations, as compared to
approximately 28% of its 2003 capital expenditures. Most of the offsetting
budget reductions are in the offshore Gulf of Mexico where the 2004 capital
budget has been reduced from a 34% level in the 2003 capital budget to
approximately 17% of the current year program. This shift in spending from
shorter-life natural gas properties to longer-life oil properties (the tertiary
operations) that have lower initial production rates and a longer lead time
before production commences is expected to result in about the same average
production levels during 2004 as in 2003. While production from the tertiary
operations is expected to increase from a 2003 average of 4,671 BOE/d to a
projected 2004 average of 7,000 to 7,500 BOE/d, a 50+% increase, this increase
is essentially offset by projected production declines in the Company's other
areas, primarily its shorter-life natural gas properties in Louisiana and the
Gulf of Mexico.
Gareth Roberts, Chief Executive Officer, said: "We continue to execute our
plan to expand our operations in our primary focus area, our tertiary recovery
operations in Mississippi. We continue to increase our overall production in
this area, as evidenced by the record high fourth quarter rate, and continue to
add reserves, as evidenced by the realization of an additional 9.5 MMBbls of
proved reserves from tertiary operations during 2003. We expect these trends to
continue into 2004 and beyond as we continue to expand this play. Last month, we
released a very preliminary evaluation of the oil potential from tertiary
operations in East Mississippi, which outlined an estimated 80 MMBbls of
potential reserves in the eastern part of the state from an initial phase of
tertiary operations. This same plan also outlines the potential to increase our
tertiary oil production from its current levels of about 6,000 Bbls/d to about
32,000 Bbls/d in 2013 from the combined first two phases, the existing phase of
tertiary operations in Southwest Mississippi and the planned expansion into East
Mississippi. We continue to be optimistic about these assets and the growth
opportunities they provide us in the future.
During 2003 we accomplished our goal of reducing our leverage, reducing
debt by approximately $50 million during the year. We do not expect to have any
significant reductions or additions in our overall debt level during 2004,
unless we were to make a significant acquisition, although there will likely be
minor borrowings and repayments to manage working capital and fund minor
acquisitions. We are also considering the possibility of selling certain lower
priority properties during 2004, the proceeds from which, in the short-term,
would likely reduce debt. Ideally, rather than paying down debt, we would like
to re-invest any sales proceeds in other properties that could be future
potential tertiary flood candidates.
We are bullish on oil prices and believe we have ideally positioned
Denbury, as any price increase enhances the value of both our current proven
reserves and our future potential reserves. We have access to future potential
reserves that can be acquired at very low risk and low finding cost because of
our strategic ownership of CO2 and the exclusive franchise this gives us in our
areas of operation."
Conference Call
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The public is invited to listen to the Company's conference call set for
today, February 19, 2004, at 10:00 A.M. CDT. The call will be broadcast live
over the Internet at our web site: www.denbury.com. If you are unable to
participate during the live broadcast, the call will be archived on our Web site
for approximately 30 days and will also be available for playback for one month
after the call by dialing (888) 203-1112 or (719) 457-0820.
Annual Meeting
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The Company today announced its 2004 Annual Meeting of Shareholders will be
held on Wednesday, May 12th at 3:00 P.M., local time, at the offices of the
Company located at 5100 Tennyson Parkway, Plano, Texas. The record date for
determination of shareholders entitled to vote at the annual meeting will be the
close of business on March 31, 2004.
Financial and Statistical Data Tables
- -------------------------------------
Following are financial highlights for the comparative fourth quarters and
annual periods ended December 31, 2003 and December 31, 2002. All production
volumes and dollars are expressed on a net revenue interest basis with gas
volumes converted to equivalent barrels at 6:1.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars, except per
share and unit data)
Three Months Ended
December 31,
----------------------------------- Percentage
2003 2002 Change
---------------- ---------------- ----------------
Revenues:
Oil sales 48,444 46,097 + 5%
Gas sales 41,747 34,620 + 21%
CO2 sales and transportation fees 1,316 2,012 - 35%
Loss on settlements of derivative contracts (9,138) (1,498) + >100%
Interest and other income 840 550 + 53%
---------------- ----------------
Total revenues 83,209 81,781 + 2%
---------------- ----------------
Expenses:
Lease operating costs 21,589 20,922 + 3%
Production taxes and marketing expense 3,695 3,022 + 22%
CO2 operating costs 257 440 - 42%
General and administrative 4,577 2,882 + 59%
Interest 5,155 6,747 - 24%
Depletion and depreciation 25,459 24,074 + 6%
Amortization of derivative contracts and
other non-cash hedging adjustments 124 133 - 7%
---------------- ----------------
Total expenses 60,856 58,220 + 5%
---------------- ----------------
Income before income taxes 22,353 23,561 - 5%
Income tax provision
Current income taxes (214) 22 N/A
Deferred income taxes 7,357 8,247 - 11%
---------------- ----------------
NET INCOME 15,210 15,292 - 1%
================ ================
Net income per common share:
Basic 0.28 0.29 - 3%
Diluted 0.27 0.28 - 4%
Weighted average common shares:
Basic 54,051 53,460 + 1%
Diluted 55,714 54,925 + 1%
Three Months Ended
December 31,
----------------------------------- Percentage
2003 2002 Change
---------------- ---------------- ----------------
Production (daily - net of royalties)
Oil (barrels) 19,020 20,706 - 8%
Gas (mcf) 93,424 91,131 + 3%
BOE (6:1) 34,590 35,894 - 4%
Unit sales price (including hedges)
Oil (per barrel) 24.85 23.78 + 4%
Gas (per mcf) 4.37 4.05 + 8%
Unit sales price (excluding hedges)
Oil (per barrel) 27.69 24.20 + 14%
Gas (per mcf) 4.86 4.13 + 18%
Non-GAAP Financial Measure: (1)
Adjusted or discretionary cash flow from
operations (non-GAAP measure) 47,836 48,441 - 1%
Net change in assets and liabilities relating to
operations 3,939 8,176 - 52%
---------------- ----------------
Net cash flow from operations (GAAP measure) 51,775 56,617 - 9%
================ ================
Oil & gas capital investments 38,860 26,301 + 48%
CO2 capital investments 6,666 5,053 + 32%
Proceeds from sales of oil and gas properties 81 3,136 - 97%
BOE data (6:1)
Revenue 28.34 24.44 + 16%
Loss on settlements of derivative contracts (2.87) (0.45) + >100%
Lease operating costs (6.78) (6.34) + 7%
Production taxes and marketing expense (1.16) (0.91) + 27%
---------------- ----------------
Production netback 17.53 16.74 + 5%
CO2 operating cash flow 0.33 0.48 - 31%
General and administrative (1.44) (0.87) + 66%
Net cash interest expense (1.36) (1.68) - 19%
Current income taxes and other (0.03) (0.01) + >100%
Changes in assets and liabilities 1.24 2.48 - 50%
---------------- ----------------
Net cash flow from operations 16.27 17.14 - 5%
================ ================
(1) See "Non-GAAP Measures" at the end of this report.
TWELVE MONTH FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars, except per
share and unit data)
Year Ended
December 31,
----------------------------------- Percentage
2003 2002 Change
---------------- ---------------- ----------------
Revenues:
Oil sales 189,442 153,705 + 23%
Gas sales 196,021 121,189 + 62%
CO2 sales and transportation fees 8,188 7,580 + 8%
Gain (loss) on settlements of derivative contracts (62,210) 932 N/A
Interest and other income 1,829 1,801 + 2%
---------------- ----------------
Total revenues 333,270 285,207 + 17%
---------------- ----------------
Expenses:
Lease operating costs 89,439 71,188 + 26%
Production taxes and marketing expense 14,819 11,902 + 25%
CO2 operating costs 1,710 1,400 + 22%
General and administrative 15,189 12,426 + 22%
Interest 23,201 26,833 - 14%
Loss on early retirement of debt 17,629 - N/A
Depletion and depreciation 94,708 94,236 + 1%
Amortization of derivative contracts and
other non-cash hedging adjustments (3,578) (3,093) + 16%
---------------- ----------------
Total expenses 253,117 214,892 + 18%
---------------- ----------------
Income before income taxes 80,153 70,315 + 14%
Income tax provision (benefit)
Current income taxes (91) (406) - 78%
Deferred income taxes 26,303 23,926 + 10%
---------------- ----------------
Income before cumulative effect of change
in accounting principle 53,941 46,795 + 15%
Cumulative effect of change in accounting
principle, net of income taxes of $1,600 2,612 - N/A
---------------- ----------------
NET INCOME 56,553 46,795 + 21%
================ ================
Net income per common share - basic:
Income before cumulative effect of change
in accounting principle 1.00 0.88 + 14%
Cumulative effect of change in accounting principle 0.05 - N/A
---------------- ----------------
Net income per common share - basic 1.05 0.88 + 19%
================ ================
Year Ended
December 31,
----------------------------------- Percentage
2003 2002 Change
---------------- ---------------- ----------------
Net income per common share - diluted:
Income before cumulative effect of change
in accounting principle 0.97 0.86 + 13%
Cumulative effect of change in accounting principle 0.05 - N/A
---------------- ----------------
Net income per common share - diluted 1.02 0.86 + 19%
================ ================
Weighted average common shares:
Basic 53,881 53,243 + 1%
Diluted 55,464 54,365 + 2%
Production (daily - net of royalties)
Oil (barrels) 18,894 18,833 - 0%
Gas (mcf) 94,858 100,443 - 6%
BOE (6:1) 34,704 35,573 - 2%
Unit sales price (including hedges)
Oil (per barrel) 24.52 22.27 + 10%
Gas (per mcf) 4.45 3.35 + 33%
Unit sales price (excluding hedges)
Oil (per barrel) 27.47 22.36 + 23%
Gas (per mcf) 5.66 3.31 + 71%
Non-GAAP Financial Measure: (1)
Adjusted or discretionary cash flow from
operations (non-GAAP measure) 189,802 164,565 + 15%
Net change in assets and liabilities relating to
operations 7,813 (4,965) N/A
---------------- ----------------
Net cash flow from operations (GAAP measure) 197,615 159,600 + 24%
================ ================
Oil & gas capital investments 158,444 155,637 + 2%
CO2 capital investments 22,673 16,445 + 38%
Proceeds from sales of oil and gas properties 29,410 7,688 + >100%
Total assets 982,621 895,292 + 10%
Total long-term debt (excluding discount) 300,000 350,000 - 14%
Total stockholders' equity 421,202 366,797 + 15%
Year Ended
December 31,
----------------------------------- Percentage
2003 2002 Change
---------------- ---------------- ----------------
BOE data (6:1)
Revenue 30.43 21.17 + 44%
Gain (loss) on settlements of derivative contracts (4.91) 0.07 N/A
Lease operating costs (7.06) (5.48) + 29%
Production taxes and marketing expense (1.17) (0.92) + 27%
---------------- ----------------
Production netback 17.29 14.84 + 17%
CO2 operating cash flow 0.51 0.48 + 6%
General and administrative (1.20) (0.96) + 25%
Net cash interest expense (1.61) (1.73) - 7%
Current income taxes and other (0.01) 0.04 - >100%
Changes in assets and liabilities 0.62 (0.38) - >100%
---------------- ----------------
Net cash flow from operations 15.60 12.29 + 27%
================ ================
(1) See "Non-GAAP Measures" at the end of this report.
Non-GAAP Measures
- -----------------
Adjusted cash flow from operations is a non-GAAP measure that represents
cash flow provided by operations before changes in assets and liabilities, as
summarized from our Consolidated Statements of Cash Flows. Adjusted cash flow
from operations measures the cash flow earned or incurred from operating
activities without regard to the collection or payment of associated receivables
or payables. We believe that this is important to consider separately, as we
believe it can often be a better way to discuss changes in operating trends in
our business caused by changes in production, prices, operating costs, and so
forth, without regard to whether the earned or incurred item was collected or
paid during that period. For a further discussion, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Operating
Results" in our latest Form 10-Q or Form 10-K.
Denbury Resources Inc. (www.denbury.com) is a growing independent oil and
gas company. The Company is the largest oil and natural gas operator in
Mississippi and holds significant operating acreage in the onshore Louisiana and
offshore Gulf of Mexico areas. The Company increases the value of acquired
properties in its core areas through a combination of exploitation drilling and
proven engineering extraction practices, including secondary and tertiary
recovery operations.
This press release, other than historical financial information, contains
forward looking statements that involve risks and uncertainties including
expected reserve quantities and values relating to the Company's proved
reserves, the Company's potential reserves from its tertiary operations,
forecasted production levels relating to the Company's tertiary operations and
overall production levels, estimated capital expenditures for 2004, and other
risks and uncertainties detailed in the Company's filings with the Securities
and Exchange Commission, including Denbury's most recent reports on Form 10-K
and Form 10-Q. These risks and uncertainties are incorporated by this reference
as though fully set forth herein. These statements are based on engineering,
geological, financial and operating assumptions that management believes are
reasonable based on currently available information; however, management's
assumptions and the Company's future performance are both subject to a wide
range of business risks, and there is no assurance that these goals and
projections can or will be met. Actual results may vary materially.
Cautionary Note to U.S. Investors - The United States Securities and
Exchange Commission permits oil and gas companies, in their filings with the
SEC, to disclose only proved reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. The Company uses
certain terms in this press release, such as potential reserves, that the SEC's
guidelines strictly prohibit us from including in filings with the SEC, and
which are only intended as general long-term forward looking factors, not
precise economic or financial predictions.
For further information contact:
Gareth Roberts, President and CEO, 972-673-2000
Phil Rykhoek, Chief Financial Officer, 972-673-2000
www.denbury.com
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