Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and welcome to Denbury's First Quarter 2023 Results Webcast. My name is Layla, and I will be your operator for today's call. [Operator Instructions]. I would now like to turn the conference call over to your host for today's call, Brad Whitmarsh, Head of Investor Relations. Please proceed, sir.

Brad Whitmarsh

thank joining and today. everyone, morning, you us for Good review a release were I had to issued the afternoon. that hope you've materials chance earnings supporting and yesterday the on at are our items available denbury.com. These website

that are discussed remind differ everyone materially results and call forward-looking our I want on that are information. could that on There to based reasonable to is today's factors will call. from today's include what statements numerous most actual best cause

and recent the full business release. our can and statements with accompanying on You yesterday's factors disclosures our risk forward-looking in today's read associated presentation, SEC news slides the our most filing,

Also, please today's as well. Reconciliation we measures. and event, note disclosure relative earnings today's release measures that, in the of to reference provided non-GAAP course may certain these during is

prepared Nick estimated Mark Carbon and SVP President to XX morning, at Kendall, from all Q&A. are COO; comments, CEO; Solutions; participate come Development Matt This SVP are in here Sheppard, approximately Wood, Chris the David which of will minutes, Business Dahan, and our Technology and of Allen, CFO; our

the over With turn call I'll to Chris. that,

Christian Kendall

Thanks, I'll a your opening Brad, you and all to call comments, the we'll make then open questions. few us joining and for good are morning today. of

Looking enhanced the credit was years Federal back, published Register. since now X XXQ it's in been the CCUS tax

strong our delivered Our vision Denbury We've strategy. CCUS had across [indiscernible] quarter expertise at the the a financial extensive year. results the time start our was COX that operating Denbury's and board. great to and deep first

line near cost of with continued annual and all guidance. our Our pricing were record production, levels, safety in and our items performance

capital development expenditures the working by before $XX totaled changes flow for our $XXX capital quarter, million. exceeding cash million Operating

in nearly asset fields ended carbon for million We the X $X most investments capture million $X retirement We mature program through ION technologies, Aqualung. our equity spent and to also annual million ad payments. in with bonus and invested for our from working $XX due and in million increase capital modest valorum liquidity debt debt, year-end with quarter a primarily outflows and $XXX tax first in in

in up more than outs averaged the earnings ins the and XX,XXX more in the track Sales day with BOE we various first on around and Bottom are volumes release. we quarter our production in line, X,XXX detail per with sequentially, described relatively our second BOE per see plan, quarter. in day, flat

spend. XXXX XXXX. our took primary in the including portfolio remains the midpoint and just the with anticipated we second as to for quarter be oil such In predevelopment year, we being expect the higher On half and out capital we strong front, early and advantage round $XXX in announced April, other hedges additional driver, layer hedge one of to of the storage acquisitions, capital the prices in modestly to our second million CCUS in site

Anticline. Cedar the to Turning Creek

game-changer asset. are pleased performance see We now first with Hills our so from recycle on production with facility and we've monitoring EOR this what first With this South, at quarter expect far production we very are seen project. facility EOR the to online this Cedar associated CCA

per more production XXXX. to of EOR to now and COX to year second scheduled of the online per XX,XXX still team peak X in quarter. this X,XXX be to is day barrels range barrels of Our facility, anticipate ramp commissioning in the and in around latter the to part day recycle incremental late end X,XXX brought by We third the are a

the our I'm CCA. is team extremely at proud of work doing

ramps, growth also margins. And largest ever drive EOR project it the with as cash company. for and improve million of will As we've CCA worked a barrels it on, XXXX XXX will potential production recovery. is reminder, It XXXX our our

our by of oil net new end the XXX% the X goal X so injecting the overall Scope we're significant volumes being our addition, industrial source, of scope will all be operations. of the blue COX are carbon-negative this to contributor of CCA a is In expanding decade.

fundamental million execution the near-term Denbury of upwards EOR. our the vision. industrial As our has the of CCA EOR take of highlights, project ability side tons per into to CCUS business of to the COX year is XX captured

flow and Our CCUS. as EOR business be the supports necessary investments, for pipeline as deployed of provides strong in well CCUS development cash can the that capabilities, it infrastructure the technical and operating

in The capabilities the of sets combination industry. unique competencies, assets and apart these Denbury

agreement are network storage Our continuing our on both dedicated COX COX of transportation focused to and our highly activities the and expanding diversity XXXX storage build portfolio. and CCUS scale

our quarter, the Alabama in Class at in VI of our support test first the well stratigraphic During we drilled first Orion site process.

our to We with the this EPA. expectations. with analysis subsurface progress further should characteristics We confirm later we understanding reservoir of site pleased core the detailed see which the consistent year, our very storage as will receive were

VI planned We wells additional expect at on support process to Class continue lease X to test drill this to least storage the stratigraphic our with sites wells year.

we Adding network site quarter-end, from metric our flexibility County, for XX,XXX-acre emissions in Since additional ton this in to area. agreement Texas. provides COX removing the high COX an Houston dedicated finalized redundancy site Matagorda XXX a million storage and

while Gulf In sources, stone to along plant further Coast. development opportunities to facilitates Texas emission serving the customer access as addition, a sites, it and additional e-fuels multiple opportunities EOR stepping

in our Leo XXX-mile Coast tremendous over Gulf infrastructure our the is permit our week, site, Leo for X the advantage by our great competitive COX from EPA Last our afforded applications example The of COX to leased underneath at an we footprint directly pipeline, VI network, and Class NEJD flexibility injection provides Weyerhaeuser, Mississippi. network. Mississippi. pipeline for advantages COX well in site submitted LEO leveraging

submit over Class of per cadence the X additional VI several for at a about to site permits quarter expect sites We quarters. next

multiple confidence end Greenfield in year reaching of negotiations provide with my million Nick per and and team both is ton Brownfield year high. target the by cumulative for XX in are his and customers the extensive and to CCUS projects, level services our discussions metric

storage, the complete even or As a capture transportation chain transportation reminder, through only, for of these combined agreements can storage. and be

located With the for COX believe market CCUS service by diverse only in ideally sites, the pipeline EOR Denbury's Coast. Gulf most dedicated a reliable network, multiple We the vast storage we dedicated positioned remain storage strategically with most the combined pipeline most the and solutions. industry's injection over efficient, growing COX network Coast, the COX provide the dozen to will COX Gulf sites, and reinforced in customers transportation service and that

here mentioned at at very it's exciting As I Denbury. outset, time the a

building while cash business transportation leading think storage expect rapid COX industry's making see can't Our generating to the same and EOR I is we our better this At the network. on a all production company future. in the quarter. we're from and need to flow, decarbonize of project incremental CCA time, EOR today deliver we the positioned strong progress energy

Thanks today, us for now again we'll open and the joining for call questions. your

Operator

[Operator Instructions].

first from from Citi. Our will Gruber Scott come question

Scott Gruber

on the its permitting. I'm VI to to that So regard has the news to to here start intent Class promising get recent EPA going well signaled Louisiana with

the a the processing timeframe for versus the steps I that have here. could level a EPA? here jump a to X-year look of start think execute processing officials any to what when Louisiana and comment including through, But could sense at a state sense state kind in permits, extra reasonable a there's couple permit for of of expectation like do you at

Matthew Dahan

Register, EPA to Louisiana's the they XX following of start with public Rouge. post And June, up Baton Louisiana rulemaking actually to see the a then is application XXth June this until the Federal happened comment Dahan. the and really XXth codification and comment, Matt pleased in the and we're Public which final the then Scott, public announcing hearing on of Yes, on stays subject open process. process

is expectation be Our is year-end or officially granted. towards may XXXX that we early primacy

time processing EPA as up Louisiana imagine will they running is that, will think, would what I initially speed those significantly. standpoint, But gets the processes to would. about goes on, the a think I up speed, I same timeframe be as from

Christian Kendall

And positive set to, add we're that broadly out step see thrilled this opens another Scott, the needs there. there, pathway view. as very thing, one in is see I'd mean yet Matt's more it CCUS step a just to to with our for we accelerate that like to the opportunity just comment I

Scott Gruber

on the a then with And question process permitting just EPA. the

from You're last from submissions that some any the it kind X-year of this so is out updated juncture? the whether months just could to the now great. feedback EPA And fall. initial timeframe What's would reasonable, thoughts be been at or still updated whether X color there [indiscernible], be as

Nikulas Wood

expected. in This they been verification the the the same the EPA processing at showed them are at we permits cadence speed timeframe the through see details the we through that they expected. that to. Yes, about same about the We go of They expected is we completion Nick. that going so has

a about at looking there. still timeframe we're So X-year

Christian Kendall

has Yes. from guess the And been solid. is bottom the Scott, EPA I just engagement there, line the

that's so with And about me, That's are where we for feel a better. to coming. good we much good like just And the it's looks start the Louisiana that with primacy EPA.

Operator

question Our from Stifel. next Nate Pendleton comes from

Nathaniel Pendleton

on Congrats new Class VI Permit and submissions. the site

how the can specifically, the for market? trending should about leasing port-based And And Gulf think availability in your level you for color some sequestration along space? we success, sites provide Regarding high-quality space the competition on pore core of of prices how the Coast? are

Nikulas Wood

Yes.

is Nick. So this take question. that Nate, I'll

can able brings pore for in space, high Denbury What of So of there volumes advantage we pore competition to for bring to about space. that being is the competition talk space. terms pore the is

negotiations, storage So looking can driver in pore the variables the space because would series the that owner. different owners for volume one site, amount economic space pore the that's a viability is are of for. we're take a their I to we big when there's actually of main of that say

Denbury brings so there. a advantage big And

so that our success. drives And

be to successful expect We to there. continue

add charges, to comes the storage been see You'll pore variance continue it's When portfolio it to of space us our of pretty to sites. steady.

Nathaniel Pendleton

deployed sites. you you often release, opportunity those current potentially methodology, conservative sites? estimates are your that knowing using you the being calculations learn do and about to storage to capital mentioned increase? is the in expect on expand a as And reservoir, to elaborate DOE expand you storage And injectivity the more that Can capacity

Nikulas Wood

a great again. Yes. point. is Nick Yes. That's This

are of to additional do acreage to offset sites. continuing through expand So we site. acquisitions our We that the

continuous we think the that the increase owner owner get total the and with a step is space base initial acreage there, is to that the large then add from identify you pore to the connected contract pore And them. if to to to amount. So about steps, continue first

second along I that's in with the initial the site, range the puts space conservative pore regards what call of nature upfront science around evaluation usually I'll of kind the question the accurate In injection. of available of of storage would you're the say to your availability the lower that

will on, and increase both see probably goes you time rates. an in space injection as So pore

Operator

comes question Next Tim Rezvan from KeyBanc. from

Timothy Rezvan

the state revenue. I contracts know in to the be you of the sort this just been all frustrated bit gotten I on of Brownfield lot people folks path first line. had discussions over with little have question have a past, there in a quicker would more A the my finish market. a been believe that of haven't

So what on and logjam, just of you're and we update there's line can could why year? think over an a finish contracts give seeing the how you getting kind this maybe about

Nikulas Wood

that the about Nick. We're Sure. would half through engaged, engaged, and many it's I have take of I'll say of This is portfolio going projects the right Tim, with have or been this pipeline Brownfield now. is projects. currently system we question.

the started go what building explained a takes exercises extra make time evaluate bit to Brownfield of the to house think and remodeling of of economics like versus sure a before, we've match process, it as lot initially. have developers a that rearrange expected it's to they their their scoping they up to project and which a the in as house, where I

right a now. would multiple I we've actually a for that, been progress Brownfield say great now, engaged lot projects of lot of seen with we've that with years

we've cases, engaged been years. some over for X in So

that we so the years chances line, to to projects coming finish partners be but see time. lot year, take And X get our happy maybe those to completion, that projects we're with and a of actually whole there's over hopefully some this to these of

Timothy Rezvan

develop, kind the connected to it we'll the tuned. CCA. comments be existing I ask take Obviously, talk would on were stay about you or So was question. first question, originally going to area? I That that time cost to the not my But of second to build I it's that potential wanted my or sort And site. sequestration pipeline. be guess appreciate then going to to about an the of extension that If can to

Nikulas Wood

reasons. add so for wanted Nick to great. it's Dorado It to Tim, big many that we of sites Yes, again. is the site's portfolio our one the

that that on The brings does that our One, It us. reason things it continuing is in markets, portfolio. for develop. great to the us path of we nearby. that few we capturing be closer sites a that might might not is the that positioning the some be new And acquired fields us as could to emissions, things also EOR additional it clear both adds quite storage also And to kind for can as brings into finally, site go Corpus. down extension on of

increase is storage the any total site, come our our at to lot that this does emissions of storage it allows the point bidirectionally opportunity capacity us that's With to have total coming adding a benefits in. particular the a a expected of to network. site case, In go with in position portfolio. allows high the that storage us the What has

reasoning so the site's behind Dorado kind of why So valuable. the position it's and that's

a with the for cost. we'll I on away, million $X it's this standpoint, range expectation so that's say site, of a from XX about stick to lower the mile I'll we're and side costs, would it's thinking. probably $X million cost miles and say the

Christian Kendall

And that. to add is Chris. I'll just then, Tim, this

we we when emissions sets think we strategically, but have, up love some the that footprint key look be, areas. extend want we are to to really we and into also backbone Just us at we where that that where

down moving and towards area Corpus is this there. us helps get Christi part of So that, the a

Timothy Rezvan

the like and just take And then to get timeline built just would theoretically, something big-picture, that permitted. that

Nikulas Wood

question? sorry. Tim, that this another is was I'm again. Nick So

Timothy Rezvan

trying just big-picture. to was [indiscernible] I No,

Nikulas Wood

the and that happen that is probably down the of will takes to emission thought the up need The pipeline couple of moving with a it, the what than, probably call from investment move we permitted We years for I'll get So would pipe. it installed. an because the reality us need is line standpoint. can emissions faster

line going be start a of finish actually coming quicker it So have and construction because kind pace, when we we be emissions on dependent to can when really it's to upon out. we

Operator

[Operator will Jefferies. from come Instructions]. And next our from question Burwell Sam

George Burwell

of and replacement curious green in apply XXXXs anything about would been the time you the sort in million line system pipeline. process, that you of Tim's scale $X a could know a asked line? And the scale per million on perspective it that larger of $X steal process larger from long-haul you you guys from value actually really, then mile questioning it But the Green? perhaps to built for undertook apply have would I'll a for but pipeline any permitting like commentary like, give if to rule the to late guys differ when how I about thumb plan, timing past. process that in

Nikulas Wood

Sam, this is again. Nick

think believe we very in the do that about line, replicating terms $X in that be So would of you line. the we through it a lot not that there light of I would bit in sense to through that would in that replicating we mile, you traversing our guess, across crossings are be potentially territories that a go extensions we to our were of able be to believe of When There in years a a general. that $X shorter will challenging to are in lot have little ago-plus, permits have able general. we're million XX to network, million accomplish get go tough the that replication when the to,

than expect million the a So $X a million to we would bit mile. $X it be higher to

of the pipeline. we're of play there's that larger we're timeframe you when you're permitting agencies down in time and longer upon with terms can When as either or come you're depending sites think going I'd there permit say dealing will a being connecting terms able you're a connection, accomplishing line when to in pipelines lot construct. that different a In in multistate the permitting, storage that being X-year emitters be about short where of at a lot into that.

Christian Kendall

even than That's in across when of of into right we regional But Nick us local as we today. we we it's how something Yes. good broader what that, about thing. that And feel so honestly, that the lines place what have along think see country part one Sam, I the I said, in the framework is that working here stay that's that, level, mean, just expand and makes now.

George Burwell

how really that's sort to would as similar That's comment differ then, Texas and and on available might you Mississippi helpful. can maybe Alabama? comment the What be there? in in bit, follow-up the space Louisiana of The zooming Is a you it GCNP? from out And Dorado. what's available on subsurface would little storage to

Nikulas Wood

again. Nick is this Yes,

acquired of our pore of so lot we the there big subsurface is evaluating And a been space on is It's through and because have a aquifer, like so attached saline space gas very for it. deal as area. to that It to there well of a a particular you're that which think what very we've pore necessarily reservoir. a development most oil The hasn't of is flat much the wasn't sites. penetrations, lot doesn't all a storage site other dip Dorado when

So there. very promising

the the owning the general, rules sandstones The the of between the storage Louisiana space pore intervals dealing in much space. Louisiana difference like we're Texas and around space the look with that actually in pore is pore the actual availability and very Just and Texas space.

around that yet. hasn't And so, the In Louisiana, necessarily there's firmness space. a surface the completed owners been pore bit more owning Texas,

fully And that yet. in whether which so, quite goes, way baked minerals it's surface, isn't and the

is we owners, and in and has those for acquire which the So look is space pore mineral that the we sites, Dorado. case way that surface we the accommodate issue the both

George Burwell

being that In rights general? aligned mineral like, to would lease more quick Does Super Okay. it easier Louisiana. and Louisiana? make follow-up that on in be, surface in

Nikulas Wood

that, areas a particular storage to looking to makes acquire say when necessarily owner you circumstance. it incentives I that the in to to group site. sites, large acquire storage win in have is owner we to that to surface because mineral out the Denbury target lease have would point have be that the easier doesn't it same be I general, want aligned. We those everyone want will still to

look generally, side we're group good are owner the surface places where can for same and so acquire mineral we where So about going. storage the and that feel the and we

Operator

next Charles Rice. from Meade Our Johnson from comes question

Charles Meade

VI helpful VI question about about people Can Class need to an Chris, a to I may think think VI Class of to you I Leo of probably hear I location. more what need? your Did me and us a for maybe this seem And support detail want be I a to ahead how you to back permit? many lot call. stratigraphic would little for Class going apologize whole your process, time the but in elementary the like this of and commits And VI then context Class listening said permit to drill bit comments, you permits other number that drives what you at wells order prepared correctly? X give

Christian Kendall

take Nick on to ask well. I'll that as

Nikulas Wood

Nick. the Charles, questions. it's for Thanks

well the submit And stratigraphic generally is absolutely so, What develop completion for you during permit, we storage will VI verified. your will they take aren't Class say to Class VI necessary that get the site process happens tests, you one. that it that each generally the comes when process. I likely most

regulatory has you're that with technical on point dealing evaluation. the EPA this whatever you You to have or with questions agency then back-and-forth go where a the

and will analysis, groups a take you Once in go point well, the the where You taking for most construct. well. and be VI the sending off X actually permit you At that which then the you usually then are it drilling to construct, rig then takes permit that drill get months. Class to it time, around a have point have core to

Denbury that of usually to kind what longer-term of to have that chart kind time additional, call of little analysis point puts that in the to an is of a a terms they so leads I'll full task relative process done bit timing in doing. And at have and in then it,

information some But would you from injection inject you do. From time, the in permit At as generally, the testing core, you that's everything expected, then as back to comes be point and the get then point, you taken. and get injection. have that have begin core as to the long where that you in

place piece there's analyzed well get the have are I'll we're Class well, after that to VI permit what stratigraphic that wells We we the case, to steps you and that to and our that a and in there to analyze speeding any potentially core And go send get permit those bypasses drill I doing stratigraphic taking early. your drilling the the Class permit VI have early to move we're can it up see by on to that gather permit that that is need parallel In EPA, it process core because can questions other to at if second construct. to question. pause before have

Charles Meade

explanation. continue. excellent No, that's an Please

Nikulas Wood

it evaluation So Chris to very Class storage a system. the you run space, pore review do the area study happens during then comes when watch that Leo what throughout will across is the geologic side pore VI of you that an to simulation how X have and site space reservoir of move the COX the mentioned, permits you and where the a detailed

Area space make want. the pressure and stays to you pore optimally wells the that that the pore doing space contained within COX the you're within sure place As that, through you traveling

course, so lot storage of you is And storage a of want of any lot of given a availability. and site out what rate potential

multiple storage us total we storage in given means rate put this the site have. increasing position in see at the wells can you accommodate in when that that time, a side, that we're point So that,

generate between per tons tons to year wells you rate. So million think per to are have somewhere XXX,XXX at X of year time, that in this injection point we X can here going

And position. so that's just for the current

to position, to injection continuing we're continue. availability add imagine, as which of can we add you the will that As to additional

Christian Kendall

well. a just guess I going And Charles, permit fundamentally, you're a have for to

And so have X talking we so permits. about X and Nick's wells,

Charles Meade

really helpful this you perhaps elaboration. was for all Matt. might for you be thank follow-up And that, a Nick. or That maybe Chris, And

be, quarterly perhaps, cited give day. XX,XXX going if you're up now what wondering I for would we're eventual spectrum? get on factors where that and I to you volumes between a actually you CCA wind that end seeing Does rate guess indication I'm one that said on be think some call the that that the that you You hearing X.X going barrels us And the are and you determine can of bias to And other? to talked early, given EOR spectrum last about early. that or COX you

Christian Kendall

You bet, Charles. line, over David more And a excited talk we bit a early about I'm But It's it about going to in in detail also hand that. to we're days. here to moment bottom see. what

with comes determined, as there's and to it in. much how you need to and some the of so And data works business really you know work floods, these be

that, over it And so with David. turn I'll to

David Sheppard

Charles. for Thanks that. Yes. Good asking question,

point is would So this some say about the this of facility. COX second that's And a facility. we're introduced that recycle the where that arrival. I within first excited some heart seen few we've early that commissioned, facility yes, get EOR we're declare into getting seeing indicators of really to wells response recycle help going that got particular online, have to that where facility going in that quarter to to some correspondingly, us in we're

same that's facility field, near a commissioning currently proximity, CHSU. second We're in recycle

assess those to we this of independent path, going later the end we is on We those in be track. towards more recycle it's our so see into year. system watch model, to to X assessment. back into that quarter, bring on will third wells wells expectation on, and our get CHSU that coming have the year facilities systems, we'll that bring the Once further and if into X and make bring get Continuing the those

so seen acquiring now, we've to solid far that confirms that. point us tilts right plan It's a is. every Everything data it and we're

So about that. real happy

throughout Those compression. We'll recycle time expanded. in bring be facilities will additional

some little goes as to will and XX,XXX our time. going flows moderates we faster our as capabilities COX move system, that There's in X,XXX window. day targeting that expand ultimately development production through time expands ebbs or barrel pace throughout Now, the throughout area, this be and more a that throughout a to

think particular a of long-term about that's this asset. going range trajectory produce to So the general to we're how

Christian Kendall

Charles, update tighten points, Yes. and every us you'll data wide And I is Well, than guys I data I'm as eager be more new for David you the forward, pointed what are there. we out a mentioned, with admittedly range, sure just think, see hopefully able am. as go quarter, you as fairly to

I'll So on hearing to look forward future that more of calls.

Christian Kendall

eager all That's data. the right. We're for

Operator

We from Capital a question from can take One. Brian Velie

Brian Velie

have All been my questions answered.

Operator

there no time. And further at the on line this are questions

Brad Whitmarsh

connecting you thank myself, today. Thanks This follow-up we to to Again, Brad. I look everyone don't want please to for just the to us reach is joining hesitate any out Should have or over you forward days, with coming and Beth all. again.

Denbury (DNRWW) 4 May 232023 Q1 Earnings call transcript