EXHIBIT 99.1
DENBURY RESOURCES INC.
P R E S S R E L E A S E
Denbury Resources Announces First Quarter Results
News Release
Released at 7:30 AM CDT
DALLAS, April 28, 2004 - Denbury Resources Inc. (NYSE symbol: DNR)
("Denbury" or the "Company") today announced its first quarter 2004 financial
and operating results. The Company's production in the first quarter of 2004
increased 6% over the fourth quarter of 2003 production, averaging 36,647
barrels of oil equivalent per day ("BOE/d"), the Company's highest quarterly
average-to-date. The Company also posted near-record earnings for the quarter of
$22.3 million, or $0.41 per common share, as compared to earnings of $21.1
million or $0.39 per common share for the first quarter of 2003 ($18.5 million,
or $0.34 per common share excluding $2.6 million of income in the 2003 period
relating to the cumulative effect of a change in accounting principle).
Adjusted cash flow from operations for the first quarter of 2004 (before
changes in assets and liabilities) was also near-record highs, totaling $58.9
million, a 24% increase over the $47.4 million generated in the first quarter of
2003. Net cash flow provided by operations, the GAAP measure, totaled $53.0
million during the first quarter of 2004, as compared to $35.5 million during
the first quarter of 2003. (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 a GAAP measure, as opposed to
adjusted cash flow, which is the non-GAAP measure).
Production
- ----------
Production for the quarter was 36,647 BOE/d, just slightly higher than the
first quarter of 2003 average of 36,093 BOE/d, but a 6% increase over the fourth
quarter of 2003 levels. Oil production for the Company's tertiary operations
increased 13% over levels in the prior quarter, and 45% when compared to first
quarter of 2003 production, averaging 6,318 Bbls/d in 2004's first quarter,
primarily as a result of production increases at Mallalieu Field. The Company
also had an initial response, although minor, from McComb Field, where the
Company initiated CO2 injections late in 2003, although oil production from this
field is not expected to be significant until late 2004. Production from the
offshore Gulf of Mexico also increased 24% over levels in the prior quarter,
averaging 8,521 BOE/d, primarily as a result of several recent well completions.
Partially offsetting these increases were minor declines in other areas
resulting from property sales and general depletion.
First Quarter 2004 Financial Results
- ------------------------------------
In the first quarter of 2004, revenues increased $11.2 million primarily as
a result of lower hedge payments than in the first quarter of 2003. The $27.7
million paid during the first quarter of 2003 on hedges was primarily caused by
the unusually high natural gas prices during March 2003, when natural gas price
indexes were $9.28 per MMBtu. During the first quarter of 2004, the most
significant payments on hedges were oil related. Excluding the hedge payments,
the slightly higher production rates in 2004 were offset by slightly lower
commodity prices on a BOE basis. Oil prices were 4% higher in the first quarter
of 2004 than in the prior year first quarter, but natural gas prices were 11%
lower, resulting in an overall decline of 4% in commodity prices on a BOE basis.
Overall, operating cash expenses on a BOE basis were lower, although there
were both positive and negative changes. Operating expenses decreased to $6.76
per BOE in the first quarter of 2004, down from $6.90 in the first quarter of
2003, primarily because there were no significant unusual workover expenses in
the first part of 2004. Conversely, in the first quarter of 2003, the Company
expensed $850,000 on two workovers relating to the mechanical failures of two
onshore Louisiana wells. Higher production levels in 2004 also helped reduce
operating expenses on a per BOE basis.
General and administrative expenses increased, averaging $1.42 per BOE in
the first quarter of 2004, up from $1.17 per BOE in the prior year's first
quarter. The increase primarily relates to severance costs for a portion of the
Company's offshore professional and technical staff, plus expenses associated
with the recent sale of stock by the Texas Pacific Group.
Interest expenses decreased on a gross and per BOE basis as a result of
lower overall interest rates, primarily related to the subordinated debt
refinancing in 2003, and lower average debt levels, as a result of the $50
million reduction in debt during 2003.
Depreciation, depletion and amortization expense ("DD&A") increased in the
first quarter of 2004 to $8.19 per BOE, primarily as a result of the higher
percentage of expenditures on offshore properties during 2003 and early 2004,
which typically have a higher finding and development cost per BOE. The first
quarter 2004 rate is more comparable to the fourth quarter of 2003 DD&A rate of
$8.00 per BOE than to the first quarter of 2003 DD&A rate of $7.25 per BOE.
The Company recognized current income tax expense of $2.1 million in the
first quarter of 2004 related to alternative minimum taxes due that cannot be
offset by the Company's regular tax net loss carryforwards or enhanced oil
recovery credits.
On January 1, 2003, the Company implemented SFAS No.143, "Accounting for
Asset Retirement Obligations". The cumulative effect of this change in
accounting principle for the prior years, net of related income tax expense, was
$2.6 million, which was a credit to earnings in the first quarter of 2003.
2004 Outlook
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Denbury's 2004 development and exploration budget is currently set at $172
million. Any acquisitions made by the Company will increase these capital budget
amounts. Denbury's total debt as of April 27, 2004 is approximately $310
million, with $135 million undrawn on its recently reaffirmed bank borrowing
base of $220 million. The $10 million increase in bank debt since year-end was
primarily to fund the acquisition of the last remaining CO2 producing well in
Mississippi not previously owned by the Company.
The Company expects its production during the remaining three quarters of
2004 to be slightly lower than the first quarter rate of 36,647 BOE/d, with an
annual average of between 35,000 and 36,000 BOE/d. The Company will adjust its
guidance if, and when, the proposed sale of its offshore properties is
consummated, currently expected to occur mid-year. During the first quarter of
2004, production from these offshore properties averaged 8,521 BOE/d
(principally natural gas).
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Gareth Roberts, Chief Executive Officer, said: "We are pleased with the
operational results of this quarter. Production from our tertiary operations was
right on forecast, averaging 6,318 Bbls/d, a 13% increase over the fourth
quarter production rates. We are in the process of completing two additional CO2
source wells, which should bring our CO2 production capacity to around 300
MMcf/d, with two more CO2 source wells scheduled to be drilled this year. We
recognized the benefits of our 2003 offshore activity this quarter as offshore
production increased to its highest level in over a year, as a result of several
well completions in the fourth and first quarters. We hope to complete the
proposed sale of our offshore properties mid-year, assuming we obtain an
acceptable price. With the proceeds from our offshore sale, we plan to repay our
bank debt and invest the remaining cash balance over the next couple of years.
We have not yet finalized the use of proceeds pending the results of the sale,
but generally we plan to accelerate our development of CO2 reserves and
production at Jackson Dome, accelerate to the extent possible our second phase
of tertiary operations planned for East Mississippi, and increase our
expenditures in other areas such as the Barnett Shale. We are also continuing to
look for property acquisitions, particularly those that have future tertiary
potential."
Conference Call
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The public is invited to listen to the Company's conference call set for
today, April 28, 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 week by
dialing 888-203-1112 or 719-457-0820.
Financial and Statistical Data Tables
- -------------------------------------
Following are financial highlights for the comparative first quarters ended
March 31, 2004 and 2003. All production volumes and dollars are expressed on a
net revenue interest basis with gas volumes converted at 6:1.
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FIRST QUARTER FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars, except per
share and unit data)
Three Months Ended
March 31,
--------------------------- Percentage
2004 2003 Change
---------- --------- ----------
Revenues:
Oil sales 54,525 52,213 + 4%
Gas sales 55,711 59,511 - 6%
CO2 sales and transportation fees 1,361 2,189 - 38%
Loss on settlements of derivative contracts (14,268) (27,685) - 48%
Interest income and other 326 220 + 48%
---------- ---------
Total revenues 97,655 86,448 + 13%
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Expenses:
Lease operating expenses 22,528 22,402 + 1%
Production taxes and marketing expense 4,067 3,896 + 4%
CO2 operating expenses 144 317 - 55%
General and administrative 4,748 3,791 + 25%
Interest 5,081 6,461 - 21%
Depletion, depreciation and accretion 27,324 23,553 + 16%
Amortization of derivative contracts and
other non-cash hedging adjustments 818 (1,510) - 154%
---------- ---------
Total expenses 64,710 58,910 + 10%
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Income before income taxes 32,945 27,538 + 20%
Income tax provision
Current income taxes 2,119 2,730 - 22%
Deferred income taxes 8,522 6,355 + 34%
---------- ---------
Income before cumulative effect of a change in
accounting principle 22,304 18,453 + 21%
Cumulative effect of change in accounting
principle, net of income taxes of $1,600 - 2,612 N/A
---------- ---------
NET INCOME 22,304 21,065 + 6%
========== =========
Net income per common share - basic:
Income before cumulative effect of a change in
accounting principle 0.41 0.34 + 21%
Cumulative effect of change in accounting principle - 0.05 N/A
---------- ---------
Net income per common share - basic 0.41 0.39 + 5%
========== =========
Net income per common share - diluted:
Income before cumulative effect of a change in
accounting principle 0.40 0.33 + 21%
Cumulative effect of change in accounting principle - 0.05 N/A
---------- ---------
Net income per common share - diluted 0.40 0.38 + 5%
---------- ---------
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Three Months Ended
March 31,
--------------------------- Percentage
2004 2003 Change
---------- --------- ----------
Weighted average common shares:
Basic 54,388 53,639 + 1%
Diluted 56,313 55,049 + 2%
Production (daily - net of royalties)
Oil (barrels) 19,404 19,565 - 1%
Gas (mcf) 103,457 99,170 + 4%
BOE (6:1) 36,647 36,093 + 2%
Unit sales price (including hedges)
Oil (per barrel) 24.92 24.69 + 1%
Gas (per mcf) 5.52 4.54 + 22%
Unit sales price (excluding hedges)
Oil (per barrel) 30.88 29.65 + 4%
Gas (per mcf) 5.92 6.67 - 11%
Non-GAAP Financial Measure (1)
Adjusted cash flow from
operations (non-GAAP measure) 58,920 47,366 + 24%
Net change in assets and liabilities relating to
operations (5,925) (11,857) - 50%
---------- ---------
Net cash flow from operations (GAAP measure) 52,995 35,509 + 49%
========== =========
Oil & gas capital investments 47,913 36,361 + 32%
CO2 capital investments 20,203 6,904 + 193%
Proceeds from sales of oil and gas properties 512 26,366 - 98%
Cash and cash equivalents 17,208 161,170 - 89%
Total assets 1,039,830 1,082,077 - 4%
Total debt (excluding discount) 305,000 475,000 - 36%
Total stockholders' equity 446,017 379,844 + 17%
BOE data (6:1)
Revenue 33.06 34.40 - 4%
Gain (loss) on settlements of derivative contracts (4.28) (8.52) - 50%
Lease operating expenses (6.76) (6.90) - 2%
Production taxes and marketing expense (1.22) (1.20) + 2%
---------- ---------
Production netback 20.80 17.78 + 17%
CO2 operating margin 0.37 0.58 - 36%
General and administrative expenses (1.42) (1.17) + 21%
Net cash interest expense (1.33) (1.77) - 25%
Current income taxes and other (0.75) (0.83) - 10%
Changes in assets and liabilities (1.78) (3.66) - 51%
---------- ---------
Cash flow from operations 15.89 10.93 + 45%
========== =========
(1) See "Non-GAAP Measures" at the end of this report.
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Non-GAAP Measures
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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 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 such as those involved in drilling
activity and those due to price volatility, and uncertainties as to drilling
results, production levels, commodity prices, and financial results as detailed
in the Company's filings with the Securities and Exchange Commission, including
its reports on Form 10-K and 10-Q. These reports are incorporated by reference
as though fully set forth herein. These statements are based on assumptions
concerning commodity prices, existing market conditions, scheduling, drilling
and completion results and costs and engineering 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.
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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