EXHIBIT 99.1
GENESIS ENERGY, INC.
BALANCE SHEET FOR THE YEAR ENDED DECEMBER 31, 2005
AND INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To Genesis Energy, Inc.:
Houston, Texas
We have audited the accompanying balance sheet of Genesis Energy, Inc. (the
"Company") as of December 31, 2005. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Company at December 31, 2005 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Houston, Texas
March 27, 2006
GENESIS ENERGY, INC.
BALANCE SHEET
December 31,
ASSETS 2005
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CURRENT ASSETS
Cash..................................................... $ 102,585
Accounts receivable - affiliate.......................... 1,061,459
Miscellaneous receivable................................. 881
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Total current assets................................ 1,164,925
INVESTMENTS IN UNCONSOLIDATED AFFILIATES................. 10,825,905
OTHER ASSETS............................................. 60,743
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TOTAL.................................................... $12,051,573
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LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.................... $ 1,214,637
Accounts payable - parent................................ 9,595
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Total current liabilities........................... 1,224,232
DEFERRED TAX LIABILITY................................... 119,856
STOCKHOLDER'S EQUITY
Common stock, 1,000 shares, $0.0001 par value............ 1
Additional paid-in capital............................... 11,453,415
Accumulated deficit...................................... (745,931)
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Total stockholder's equity.......................... 10,707,485
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............... $12,051,573
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The accompanying notes are an integral part of this
financial statement.
GENESIS ENERGY, INC.
NOTES TO BALANCE SHEET
AS OF DECEMBER 31, 2005
1. Organization and Summary of Significant Accounting Policies
Organization
Genesis Energy, Inc. (the "Company") is a Delaware corporation that is the
general partner of Genesis Energy, L.P. ("GELP") and Genesis Crude Oil, L.P.
("GCOLP"), and the subsidiary partnerships of Genesis Crude Oil, L.P. GELP is a
publicly traded Delaware limited partnership listed on the American Stock
Exchange under symbol GEL. GELP conducts substantially all of its business
through GCOLP, of which GELP owns a 99.99% limited partner interest. GCOLP is a
limited partnership that is engaged in gathering, marketing and transportation
of crude oil and wholesale marketing of carbon dioxide. Beginning in 2005, GCOLP
is also engaged in gathering, marketing and transportation of natural gas. In
April 2005, GCOLP also acquired a 50% interest in T&P Syngas Supply Company, a
general partnership that provides syngas processing services. The personnel who
manage and operate the assets of GELP and GCOLP are employed by the Company.
The Company is owned by Denbury Gathering and Marketing, Inc. a wholly-owned
subsidiary of Denbury Resources, Inc. ("Denbury").
Investments in Unconsolidated Affiliates
Investments in Unconsolidated Affiliates represents the Company's 2% general
partner interest and 7.25% limited partner interest in GELP and the Company's
0.01% general partner interest in GCOLP. The Company serves as the general
partner of Genesis Pipeline Texas, L.P., Genesis Pipeline USA, L.P., Genesis
CO2 Pipeline, L.P., Genesis Natural Gas Pipeline, L.P. and Genesis Syngas
Investments, Inc., but has no direct economic interest in these entities, all
of which are subsidiaries of GCOLP.
The equity method of accounting is used to account for the Company's
investments in GELP and GCOLP.
The Company's investment in GCOLP and GELP of $10.8 million exceeded its
percentage of net equity of those investments at the time of acquisition by $2.2
million, which represents goodwill and is not subject to amortization. The fair
value of the investment in those unconsolidated subsidiaries was $15.2 million
at December 31, 2005, based on quoted market value.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if any at the
date of the balance sheet. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of all demand deposits. The Company has no
requirement for compensating balances or restrictions on cash.
Other Assets
Other assets consist of amounts invested in mutual funds with an insurance
company to secure payment of amounts owed related to employee insurance
programs.
Federal Income Taxes
The Company is a wholly-owned subsidiary of Denbury, and, as such, is
included in the federal income tax return of Denbury. Income taxes are accounted
for using the liability method under which deferred income taxes are recognized
for the future tax effects of temporary differences between the financial
statement carrying amounts and the tax basis of existing assets and liabilities
using the enacted statutory tax rates in effect at year-end. The effect on
deferred taxes for a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance for deferred tax assets
is recorded when it is more likely than not that the benefit from the deferred
tax asset will not be realized.
The Company's deferred tax liability relates to temporary differences based
on tax laws and statutory rates in effect at the December 31, 2005 balance sheet
date. The primary source of these temporary differences relates to differences
in the income the Company recognizes for financial statements purposes and tax
purposes from its investments in GELP and GCOLP.
Cash Dividends
Cash dividends are typically paid to Denbury quarterly at the same time that
the Company receives cash distributions from GELP and GCOLP.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of amounts related to the
payroll and benefits of the personnel who manage and operate the assets of GCOLP
and GELP. The Company is reimbursed by GCOLP for all costs it incurs related to
those personnel.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable in the Balance Sheet approximated fair value due to the short
maturity of these instruments.
2. Investments in Unconsolidated Affiliates
At December 31, 2005, the Company's significant unconsolidated affiliates
accounted for by the equity method included its 9.25% economic interest in GELP
and its 0.01% economic interest in GCOLP. The Company has significant influence
over GELP and GCOLP; however, its control is limited under the limited
partnership agreement and therefore, GELP and GCOLP are not consolidated. Since
GELP owns substantially all of GCOLP's consolidated assets and conducts
substantially all of GCOLP's business and operations, the information set forth
herein constitutes combined information for GELP and GCOLP (in thousands).
December 31,
ASSETS 2005
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Current assets....................................... $ 90,449
Fixed assets, net.................................... 33,769
Other long-term assets, net.......................... 57,559
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TOTAL................................................ $ 181,777
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LIABILITIES AND PARTNERS' CAPITAL
Current liabilities.................................. $ 92,611
Long term debt and other long-term liabilities....... 955
Partners' equity..................................... 88,211
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TOTAL................................................ $ 181,777
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3. Transactions with Related Parties
At December 31, 2005, the Company had a net receivable from GCOLP for payment
of operating expenses. At December 31, 2005, the company had a net payable to
Denbury related to tax payments. Such amounts have been included in the
Company's balance sheet.
4. Commitments and Contingencies
The Company and GELP have guaranteed the credit facility of GCOLP, which
consisted of $10.1 million in letters of credit at December 31, 2005. There was
no debt outstanding under GCOLP's credit facility at December 31, 2005. There
are no guarantees by Denbury or any of its other subsidiaries of the debt the
Company, GELP or GCOLP.