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, May 3, 2005 - Denbury Resources Inc. (NYSE symbol: DNR) ("Denbury"
or the "Company") today announced its first quarter 2005 financial and operating
results. The Company's production in the first quarter of 2005 increased 3% over
fourth quarter of 2004 production, averaging 29,724 barrels of oil equivalent
per day ("BOE/d"). The Company also posted near-record earnings for the quarter
of $30.1 million, or $0.54 per common share, as compared to earnings of $22.3
million or $0.41 per common share for the first quarter of 2004. Included in
first quarter 2005 net income are approximately $6.7 million of pre-tax non-cash
charges ($4.6 million after tax) related to the Company's decision to
discontinue hedge accounting as of January 1, 2005. These charges include the
resultant mark-to-market adjustments of its oil and natural gas derivative
contracts and amortization of deferred hedge mark-to-market value losses that
existed as of December 31, 2004 which are being amortized as the contracts
expire in 2005. Excluding these non-cash charges, net income for the first
quarter of 2005 would have been approximately $34.7 million, or $0.63 per share.
Adjusted cash flow from operations (cash flow from operations before
changes in assets and liabilities, a non-GAAP measure) for the first quarter of
2005 was $69.4 million, an 18% increase over first quarter 2004 adjusted cash
flow from operations of $58.9 million. Net cash flow provided by operations, the
GAAP measure, totaled $77.9 million during the first quarter of 2005, as
compared to $53.0 million during the first quarter of 2004. The difference
between the adjusted cash flow and cash flow from operations is due to the
changes in receivables, accounts payables and accrued liabilities during the
quarter. (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
from operations, which is the non-GAAP measure).
Production
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Production for the quarter was 29,724 BOE/d, a 3% increase over the fourth
quarter of 2004 average of 28,977 BOE/d and a 6% increase over the first quarter
of 2004 levels, after adjustment for the offshore properties sold in July 2004.
Oil production from the Company's tertiary operations increased 19% over prior
quarter levels, and 37% when compared to first quarter 2004 tertiary oil
production, averaging 8,644 Bbls/d in 2005's first quarter as a result of
production increases at Little Creek, Mallalieu and McComb Fields. Natural gas
production from the Barnett Shale increased to 1,313 BOE/d in the first quarter
of 2005, up from 229 BOE/d for the first quarter of 2004. Higher production from
tertiary operations and from the Barnett Shale were partially offset by declines
in production from the Company's onshore Louisiana properties which decreased
from 8,825 BOE/d in the first quarter of 2004 to 6,710 BOE/d in the first
quarter of 2005, with the majority of the decrease from Thornwell and Lirette
Fields.
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First Quarter 2005 Financial Results
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Oil and natural gas revenues, excluding hedges, were approximately the same
in the respective first quarters, as higher commodity prices more than offset
lower production levels resulting from the July 2004 sale of offshore
properties. Cash payments on hedges were $1.1 million in the first quarter of
2005, a significant decrease from the $14.3 million paid in the first quarter of
2004, as most of the Company's out-of-the-money hedges expired as of December
31, 2004. In addition to the cash payments, the Company expensed $6.7 million of
mark-to-market and other charges in the first quarter of 2005 relating to the
Company's decision to discontinue hedge accounting as of January 1, 2005. As a
result of this accounting change, all future changes in the fair values of the
Company's oil and natural gas derivative instruments will result in income or
expense in the Company's statement of operations.
Oil price differentials (Denbury's net oil price received as compared to
NYMEX prices) deteriorated during 2004, particularly in the last quarter, as the
price of heavy, sour crude produced primarily in the Company's East Mississippi
properties dropped significantly relative to NYMEX prices. These differentials
did not change significantly during the first quarter of 2005, although they
appear to be improving early in the second quarter. The Company's average NYMEX
differential increased from $4.24 per Bbl during the first quarter of 2004 to
$6.54 per Bbl during the first quarter of 2005, a $2.30 per Bbl decrease in the
price the Company received relative to NYMEX prices, and approximately the same
as the fourth quarter 2004 differential of $6.48 per Bbl.
While lease operating expenses were approximately the same in the
respective first quarters, on a per BOE basis operating expenses increased 27%,
from $6.76 per BOE in the first quarter of 2004 to $8.58 per BOE in the first
quarter of 2005. These per BOE expenses compare to an average of $7.60 per BOE
in the fourth quarter of 2004. The single biggest reason for the increase
relates to the increasing emphasis on tertiary operations, for which operating
expenses averaged $9.90 per BOE during 2004 and $10.07 per BOE during the first
quarter of 2005, higher than the operating costs for the Company's other
operations. The balance of the cost increases is generally attributable to
higher energy costs to operate Company properties and general cost inflation in
the industry.
Production taxes and marketing expenses generally change in proportion to
commodity prices and therefore were higher in the first quarter of 2005 than in
the comparable quarter of 2004. The July 2004 sale of the Company's offshore
properties also contributed to an increase in production taxes and marketing
expenses on a per BOE basis during 2005, as most of its offshore properties were
tax exempt.
General and administrative expenses increased 37% between the two first
quarter periods, averaging $2.43 per BOE in the first quarter of 2005, up from
$1.42 per BOE in the prior year's first quarter. Most of the increase is
attributable to approximately $950,000 of incremental consultant fees, primarily
related to compliance costs associated with, or audit work related to, the
Sarbanes-Oxley Act and approximately $1.0 million of non-cash compensation
resulting from the issuance of restricted stock during 2004.
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Interest expenses decreased on a gross and per BOE basis as a result of
lower overall debt levels following the sale of the Company's offshore
properties in July 2004, the proceeds of which were used to retire the Company's
bank debt, and as a result of approximately $262,000 of interest expense that
was capitalized during the first quarter of 2005 related to the CO2 pipeline
being constructed to East Mississippi.
Depreciation, depletion and amortization expense ("DD&A") increased only
slightly to $8.05 per BOE from the Company's fourth quarter DD&A rate of $7.98.
DD&A for the first quarter of 2004 was $8.19 per BOE.
The Company recognized current income tax expense of $5.3 million in the
first quarter of 2005 related to anticipated alternative minimum taxes due that
will not be offset by the Company's enhanced oil recovery credits.
2005 Outlook
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Denbury's 2005 development and exploration budget is currently set at $305
million, including estimated costs of the CO2 pipeline being constructed to East
Mississippi, as compared to $209.4 million spent during 2004 (excluding
acquisitions). Based on current commodity prices and project inventory, it is
likely that this capital budget will increase in the near future by as much as
$30 million to $50 million. Any acquisitions made by the Company will increase
these capital budget amounts. Denbury's total debt as of March 31, 2005 was
approximately $225 million, with $200 million undrawn on its recently reaffirmed
bank borrowing base.
The Company reaffirms its production guidance for 2005 of 31,000 BOE/d
which represents organic growth of over 10% from its average 2004 production
levels, after adjusting for the July 2004 offshore sale. The forecasted
production from the Company's core operations, its tertiary oil projects,
remains unchanged at 10,000 BOE/d for 2005.
Gareth Roberts, Chief Executive Officer, said: "We are pleased with our
operational results this quarter and our outlook for the future. Production from
our tertiary operations was right on forecast, averaging 8,644 Bbls/d, a 19%
increase over the fourth quarter tertiary production rates. Our tertiary
operations are responding as planned and we continue to expand our tertiary
recovery operations in Southwest Mississippi, having started injections at
Brookhaven Field and Smithdale Field in the first part of 2005. We have
completed one additional CO2 source well thus far this year, which should bring
our CO2 production capacity to around 400 MMcf/d, with two or three more CO2
source wells scheduled to be drilled later this year. Our CO2 pipeline to East
Mississippi is on track with its forecasted completion date in mid-2006, with a
possibility of completing it prior to that date.
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We recently acquired additional Barnett Shale acreage at a reasonable cost
of approximately $500 per acre, bringing our total net acreage in that area to
approximately 43,500 acres. We have shot seismic over our 18,000 net acres in
Parker County, Texas and based on a review of that seismic, it appears that only
a minimal amount of the area is affected by collapse structures in the
underlying Ellenburger formation (karsting). While we are suffering from cost
inflation in our industry, at current commodity prices, we expect to generate
record cash flow and earnings this year. Our future continues to look bright."
Conference Call
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The public is invited to listen to the Company's conference call set for
today, May 3, 2005 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, 2005 and 2004. 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 dollars except
share and unit data)
Three Months Ended
March 31,
----------------------------- Percentage
2005 2004 Change
------------- -------------- ----------------
Revenues:
Oil sales 79,182 54,525 + 45%
Gas sales 31,834 55,711 - 43%
CO2 sales and transportation fees 1,730 1,361 + 27%
Loss on effective hedge contracts - (14,268) N/A
Interest income and other 903 326 + >100%
------------- --------------
Total revenues 113,649 97,655 + 16%
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Expenses:
Lease operating expenses 22,962 22,528 + 2%
Production taxes and marketing expense 6,126 4,067 + 51%
CO2 operating expenses 346 144 + >100%
General and administrative 6,495 4,748 + 37%
Interest 4,476 5,081 - 12%
Depletion and depreciation 21,528 27,324 - 21%
Commodity derivative expense 7,821 818 + >100%
------------- --------------
Total expenses 69,754 64,710 + 8%
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Income before income taxes 43,895 32,945 + 33%
Income tax provision
Current income taxes 5,282 2,119 + >100%
Deferred income taxes 8,546 8,522 + -
------------- --------------
NET INCOME 30,067 22,304 + 35%
============= ==============
Net income per common share - basic 0.54 0.41 + 32%
Net income per common share - diluted 0.51 0.40 + 28%
Weighted average common shares:
Basic 55,459 54,388 + 2%
Diluted 58,604 56,313 + 4%
Production (daily - net of royalties)
Oil (barrels) 20,263 19,404 + 4%
Gas (mcf) 56,766 103,457 - 45%
BOE (6:1) 29,724 36,647 - 19%
Unit sales price (including hedges)
Oil (per barrel) 43.42 24.92 + 74%
Gas (per mcf) 6.02 5.52 + 9%
Unit sales price (excluding hedges)
Oil (per barrel) 43.42 30.88 + 41%
Gas (per mcf) 6.23 5.92 + 5%
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FIRST QUARTER FINANCIAL HIGHLIGHTS
(Amounts in thousands of dollars except
share and unit data)
Three Months Ended
March 31,
-------------------------------- Percentage
2005 2004 Change
--------------- --------------- ----------------
Non-GAAP Financial Measure (1)
Adjusted cash flow from
operations (non-GAAP measure) 69,411 58,920 + 18%
Net change in assets and liabilities relating to
operations 8,457 (5,925) + >100%
--------------- ---------------
Net cash flow from operations (GAAP measure) 77,868 52,995 + 47%
=============== ===============
Oil & gas capital investments 87,976 47,913 + 84%
CO2 capital investments 27,963 20,203 + 38%
Cash and cash equivalents 42,742 17,208 + >100%
Short-term investments 14,572 - N/A
Total assets 1,069,974 1,039,830 + 3%
Total debt (excluding discount) 225,000 305,000 - 26%
Total stockholders' equity 578,813 446,017 + 30%
BOE data (6:1)
Oil and natural gas revenues 41.50 33.06 + 26%
Loss on settlements of derivative contracts (0.41) (4.28) - 90%
Lease operating expenses (8.58) (6.76) + 27%
Production taxes and marketing expense (2.29) (1.22) + 88%
--------------- ---------------
Production netback 30.22 20.80 + 45%
CO2 operating margin 0.52 0.37 + 41%
General and administrative expenses (2.43) (1.42) + 71%
Net cash interest expense (1.37) (1.33) + 3%
Current income taxes and other (0.99) (0.75) + 32%
Changes in assets and liabilities 3.16 (1.78) + >100%
--------------- ---------------
Cash flow from operations 29.11 15.89 + 83%
=============== ===============
(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 the Company's 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. The Company believes that it is important to consider
this measure separately, as it believes it can often be a better way to discuss
changes in operating trends in its 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
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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, owns the largest reserves of CO2 used for tertiary oil recovery
east of the Mississippi River, and holds key operating acreage in the onshore
Louisiana and Texas Barnett Shale areas. The Company increases the value of
acquired properties in its core areas through a combination of exploitation
drilling and proven engineering extraction practices.
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 2005, pricing
assumptions based on current and projected oil and natural gas prices, 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.
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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