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Denbury Reports 2022 Fourth Quarter and Full-Year Results

Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided its fourth quarter and full-year 2022 results.

 

 

4Q 2022

 

 

FY 2022

(in thousands, except per-share and volume data)

 

Total

 

Per Diluted

Share

 

 

Total

 

Per Diluted

Share

Net Income

 

$75,115

 

$1.39

 

 

$480,160

 

$8.83

Adjusted net income(1)(2) (non-GAAP)

 

79,960

 

1.48

 

 

368,302

 

6.78

Adjusted EBITDAX(1) (non-GAAP)

 

140,042

 

 

 

 

586,429

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from operations

 

124,336

 

 

 

 

520,745

 

 

Adjusted cash flows from operations(1) (non-GAAP)

 

137,088

 

 

 

 

568,682

 

 

 

 

 

 

 

 

 

 

 

 

Oil & gas development capital expenditures

 

120,971

 

 

 

 

364,198

 

 

CCUS capital expenditures - storage sites and related

 

32,505

 

 

 

 

64,605

 

 

 

 

 

 

 

 

 

 

 

 

Average daily sales volumes (BOE/d)

 

46,641

 

 

 

 

46,809

 

 

Blue Oil (% oil volumes using industrial-sourced CO2)

 

29%

 

 

 

 

28%

 

 

Industrial-sourced CO2 injected (million metric tons)

 

1.15

 

 

 

 

4.35

 

 

Industrial-sourced CO2 injected (% of total CO2 used in EOR operations)

 

40%

 

 

 

 

40%

 

 

2022 FULL-YEAR HIGHLIGHTS

  • Generated $521 million in cash flow from operations and $136 million of free cash flow(1) (a non-GAAP measure).
  • Repurchased $100 million of the Company’s outstanding shares (1.6 million shares or 3.2% of shares outstanding) at an average price of $61.92 per share.
  • Exited 2022 with $29 million of debt and $711 million of financial liquidity (cash on hand and borrowing capacity under the Company’s existing credit facility).
  • Utilized 4.4 million metric tons of industrial-sourced carbon dioxide (“CO2”) in enhanced oil recovery (“EOR”) operations in 2022, an increase of more than 33% from 2021.
  • Commenced CO2 injection at the Cedar Creek Anticline (“CCA”) EOR project in early February 2022. The Company had 74 CO2 injection wells online at CCA at the end of 2022 and had injected a cumulative 1.4 million metric tons of CO2 in Phase 1 of the development.
  • Estimated proved reserves at the end of 2022 totaled 202 million barrels of oil equivalent, a 5% increase from 2021. The PV-10 value(1)(a non-GAAP measure) of those reserves at that date was nearly $4.5 billion, representing a value uplift of 67% from the end of 2021.

2022 CCUS HIGHLIGHTS

  • Executed multiple agreements with customers for future transportation and/or storage of industrial-sourced CO2 covering approximately 18 million metric tons of CO2 per year, including CO2 transport and storage associated with ammonia, biofuels, and hydrogen projects.
  • Invested $10 million into a greenfield blue ammonia project through an investment in Clean Hydrogen Works, the developer of the proposed project near Donaldsonville, Louisiana. Initial production from this world-scale development is anticipated in 2027.
  • Expanded Denbury’s dedicated CO2 storage portfolio to a total of 7 contracted sequestration sites along the U.S. Gulf Coast representing approximately 2 billion metric tons of potential CO2 storage capacity.
  • Submitted the Company’s initial Class VI permit applications (3 wells) for dedicated CO2 storage at the Orion site in Alabama to the Environmental Protection Agency for review and approval.

EXECUTIVE COMMENT

Chris Kendall, Denbury’s President and CEO, commented, “2022 was an incredibly successful year for our Company. Starting with safety, we delivered another strong year, a testament to our highly skilled and focused employees. In addition, we executed well on each of our capital allocation priorities in 2022: to maintain our strong balance sheet; to enhance our oil and gas production base; to advance our leadership position in CCUS; and to return capital to shareholders from our free cash flow.”

“Our teams did an excellent job of executing on all fronts in 2022 with strong momentum I believe will carry into 2023. We are excitedly looking forward to the first production from the CCA CO2 flood in the second half of 2023. CCA represents the Company’s largest potential EOR resource, which we expect will significantly strengthen our production and cash flow for decades into the future with 100% carbon-negative blue oil. We also will continue the aggressive pursuit of new CCUS business opportunities, supported by new transportation and storage agreements. To buttress those efforts, we will consider additional investments in new carbon related ventures while expanding our network of dedicated CO2 storage sites. With two decades of CO2 expertise and our extensive infrastructure, I believe Denbury is uniquely positioned to execute on our mission to deliver carbon solutions that provide resources to meet today’s energy needs while working toward a sustainable future. I am tremendously proud of what we have built at Denbury and more excited about the transformational growth journey that lays ahead.”

FOURTH QUARTER 2022 FINANCIAL AND OPERATING RESULTS

Denbury’s fourth quarter 2022 total revenues and other income totaled $381 million, down from third quarter 2022 levels primarily as a result of lower oil prices. The Company’s fourth quarter 2022 average pre-hedge realized oil price was $82.54 per barrel (“Bbl”), down 11% from the third quarter of 2022. Denbury’s average realized oil price differential was nearly identical to benchmark West Texas Intermediate prices in the fourth quarter of 2022, but less favorable than the $0.82 positive differential the Company realized in the third quarter of 2022.

The Company’s sales volumes averaged 46,641 barrels of oil equivalent per day (“BOE/d”) during the fourth quarter of 2022, down modestly from third quarter 2022 levels primarily due to severe winter storm impacts. Fourth quarter volumes were impacted on average approximately 1,150 BOE/d due to production downtime associated with late December 2022 winter storms and approximately 500 BOE/d related to the temporary curtailment of production in certain areas of the CCA EOR flood where CO2 arrival has occurred in advance of the completion of CO2 recycle facilities.

Rocky Mountain region sales volumes were up 2% from the third quarter of the year, largely driven by the Wind River Basin volumes which established a quarterly high in the fourth quarter following 2022 development activities. Sales volumes in the Gulf Coast were down 3%, primarily related to the winter storm impacts and an inventory build at Tinsley. Oil represented 97% of the Company’s fourth quarter 2022 volumes, with 29% of the Company’s oil produced through the injection of industrial-sourced CO2, resulting in carbon-negative blue oil.

CO2 sales and transportation fee revenue in the fourth quarter of 2022 was higher than historical periods; however, lower than the third quarter of the year, due primarily to a short-term agreement that expired during the fourth quarter 2022.

Lease operating expense in the fourth quarter of 2022 was $126 million, or $29.31 per BOE. The 6% decrease on a per BOE basis from the third quarter 2022 was primarily related to lower power and fuel costs, which were benefitted by lower natural gas prices, along with lower workover expenses.

General and administrative expenses were $23 million in the fourth quarter of 2022, slightly higher than in the third quarter of the year, driven primarily by personnel costs and a performance-based adjustment to the Company’s annual bonus program. Depletion, depreciation, and amortization expense was $43 million during the fourth quarter of 2022, or $10.02 per BOE.

Commodity derivatives expense totaled $38 million in the final quarter of 2022, comprised primarily of cash payments on hedges that settled in the quarter. Other expense of $5 million for the quarter included CCUS costs of approximately $3 million.

The Company’s fourth quarter 2022 effective income tax rate was approximately 17%, lower than the Company’s 25% statutory rate due to a $12 million valuation allowance released during the fourth quarter of 2022. Current taxes provided a benefit of $1 million in the period, primarily resulting from lower than projected income due to oil price changes versus forecast, reducing full year 2022 current taxes to 7% of total income tax expense.

CAPITAL EXPENDITURES

Fourth quarter 2022 capital expenditures, excluding capitalized interest, totaled $153 million, with 79% related to oil & gas development and 21% related to CCUS business activities. During the fourth quarter, the Company spent $51 million on the CCA EOR project, primarily focused on the construction of four planned CO2 recycle facilities, well conversions, and drilling the Interlake Pennel CO2 pilot. The CCA project remains on plan to commence EOR production in the second half of 2023. Non-CCA oil & gas development capital was deployed principally for horizontal drilling activity at Webster, drilling of Mission Canyon and Charles wells in the Cedar Creek Anticline, and the Oyster Bayou A2 phase 2 development.

CCUS capital expenditures for the fourth quarter of 2022 were $33 million and included, among other things, lease acquisitions of two planned CO2 sequestration sites (one in Louisiana and one in Mississippi), costs associated with the preparation for the Company’s initial stratigraphic test well, and acquiring 3-D seismic data over multiple potential CO2 sequestration sites. During the fourth quarter, the Company submitted its initial Class VI permit applications for 3 wells associated with its Orion site located in Alabama.

2022 PROVED RESERVES

The Company’s total estimated proved oil and natural gas reserves as of December 31, 2022, were 202 million barrels of oil equivalent (MMBOE), consisting of 197 million barrels of crude oil and 30 billion cubic feet of natural gas. Proved reserve revisions during 2022 were 28 MMBOE, primarily resulting from higher commodity prices utilized in determining economic reserves and, to a lesser degree, positive field performance revisions. As of the end of 2022, 98% of proved reserves were proved developed.

Year-end 2022 estimated proved reserves, the standardized measure of future net cash flows, and the pre-tax discounted net present value of Denbury’s proved reserves, using a 10% per annum discount rate (“PV-10 Value”)(1), were computed using first-day-of-the-month 12-month average prices of $93.67 per Bbl for oil (based on NYMEX prices) and $6.36 per million British thermal unit (“MMBtu”) for natural gas (based on Henry Hub cash prices), adjusted for prices received at the field. Comparative prices for 2021 were $66.56 per Bbl of oil and $3.60 per MMBtu for natural gas, adjusted for prices received at the field. The tax-effected standardized measure of discounted future net cash flows (a GAAP measure) at year-end 2022 was nearly $3.5 billion. The PV-10 Value(1) of Denbury’s proved reserves (a non-GAAP measure) was nearly $4.5 billion at December 31, 2022, compared to $2.7 billion at December 31, 2021. These values are reconciled in the last two tables at the end of this release.

Denbury’s estimated proved CO2 reserves at year-end 2022 were 4.8 trillion cubic feet (“Tcf”), including 3.8 Tcf at Jackson Dome in Mississippi (on a gross basis) and 1.0 Tcf at LaBarge Field in Wyoming (overriding royalty interest).

(1)

 

A non-GAAP measure.  See accompanying schedules that reconcile GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measures provide useful information for investors.

(2)

 

Calculated using weighted average diluted shares outstanding of 53.9 million and 54.4 million for the quarter and year ended December 31, 2022, respectively.

WEBCAST INFORMATION

Denbury management will host a webcast to review and discuss fourth quarter and full-year 2022 financial and operating results, as well as its outlook for 2023, today, Thursday, February 23, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time). Denbury will post additional supporting materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investors page of the Company’s website at www.denbury.com.

ABOUT DENBURY

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Utilization, and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO2 in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO2. The Company currently injects over four million tons of captured industrial-sourced CO2 annually, with an objective to fully offset its Scope 1, 2, and 3 CO2 emissions by 2030, primarily through increasing the amount of captured industrial-sourced CO2 used in its operations. For more information about Denbury, visit www.denbury.com.

# # #

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s 2022 Annual Report on Form 10-K to be filed with the SEC today. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on financial and market, engineering, geological 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 risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.

FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION SCHEDULES

The following tables include selected unaudited financial and operational information for the three month and annual periods ended December 31, 2022 and December 31, 2021, in order to assist investors in understanding the comparability of the Company’s financial and operational results for the applicable periods. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The following information is based on GAAP reported earnings. Additional required disclosures will be included in the Company’s Form 10-K:

 

 

Quarter Ended

In thousands, except per-share data

 

December 31, 2022

 

December 31, 2021

Revenues and other income

 

 

 

 

Oil sales

 

$

341,734

 

 

$

329,308

Natural gas sales

 

 

4,844

 

 

 

4,040

CO2 sales and transportation fees

 

 

15,952

 

 

 

12,576

Oil marketing revenues

 

 

17,368

 

 

 

12,204

Other income

 

 

1,259

 

 

 

3,770

Total revenues and other income

 

 

381,157

 

 

 

361,898

Expenses

 

 

 

 

Lease operating expenses

 

 

125,766

 

 

 

115,819

Transportation and marketing expenses

 

 

5,474

 

 

 

6,513

CO2 operating and discovery expenses

 

 

1,910

 

 

 

2,191

Taxes other than income

 

 

30,015

 

 

 

25,891

Oil marketing purchases

 

 

17,335

 

 

 

11,971

General and administrative expenses

 

 

23,182

 

 

 

16,437

Interest, net of amounts capitalized of $1,060 and $1,085, respectively

 

 

933

 

 

 

690

Depletion, depreciation, and amortization

 

 

43,003

 

 

 

37,118

Commodity derivatives expense

 

 

38,419

 

 

 

22,832

Other expenses

 

 

4,825

 

 

 

903

Total expenses

 

 

290,862

 

 

 

240,365

Income before income taxes

 

 

90,295

 

 

 

121,533

Income tax provision (benefit)

 

 

 

 

Current income taxes

 

 

(1,000

)

 

 

504

Deferred income taxes

 

 

16,180

 

 

 

398

Net income

 

$

75,115

 

 

$

120,631

 

 

 

 

 

Net income per common share

 

 

 

 

Basic

 

$

1.47

 

 

$

2.35

Diluted

 

$

1.39

 

 

$

2.19

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

Basic

 

 

51,173

 

 

 

51,247

Diluted

 

 

53,851

 

 

 

55,114

 

 

Year Ended

Dec. 31, 2022

 

Year Ended

Dec. 31, 2021

In thousands, except per-share data

 

 

Revenues and other income

 

 

 

 

Oil sales

 

$

1,559,111

 

$

1,148,022

Natural gas sales

 

 

19,571

 

 

11,933

CO2 sales and transportation fees

 

 

60,570

 

 

44,175

Oil marketing revenues

 

 

65,093

 

 

38,742

Other income

 

 

10,314

 

 

15,288

Total revenues and other income

 

 

1,714,659

 

 

1,258,160

Expenses

 

 

 

 

Lease operating expenses

 

 

502,409

 

 

424,550

Transportation and marketing expenses

 

 

20,112

 

 

28,817

CO2 operating and discovery expenses

 

 

8,474

 

 

6,678

Taxes other than income

 

 

131,502

 

 

91,390

Oil marketing purchases

 

 

64,497

 

 

37,734

General and administrative expenses

 

 

82,180

 

 

79,258

Interest, net of amounts capitalized of $4,237 and $4,585, respectively

 

 

4,025

 

 

4,147

Depletion, depreciation, and amortization

 

 

151,428

 

 

150,640

Commodity derivatives expense

 

 

178,744

 

 

352,984

Write-down of oil and natural gas properties

 

 

 

 

14,377

Other expenses

 

 

16,284

 

 

10,816

Total expenses

 

 

1,159,655

 

 

1,201,391

Income before income taxes

 

 

555,004

 

 

56,769

Income tax provision

 

 

 

 

Current income taxes

 

 

5,363

 

 

403

Deferred income taxes

 

 

69,481

 

 

364

Net income

 

$

480,160

 

$

56,002

 

 

 

 

 

Net income per common share

 

 

 

 

Basic

 

$

9.34

 

$

1.10

Diluted

 

$

8.83

 

$

1.04

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

Basic

 

 

51,427

 

 

50,918

Diluted

 

 

54,355

 

 

53,818

 

 

 

 

 

DENBURY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Quarter Ended

In thousands

 

December 31, 2022

 

December 31, 2021

Cash flows from operating activities

 

 

 

 

Net income

 

$

75,115

 

 

$

120,631

 

Adjustments to reconcile net income to cash flows from operating activities

 

 

 

 

Depletion, depreciation, and amortization

 

 

43,003

 

 

 

37,118

 

Deferred income taxes

 

 

16,180

 

 

 

398

 

Stock-based compensation

 

 

4,564

 

 

 

2,534

 

Commodity derivatives expense

 

 

38,419

 

 

 

22,832

 

Payment on settlements of commodity derivatives

 

 

(38,956

)

 

 

(97,774

)

Debt issuance costs and discounts

 

 

531

 

 

 

685

 

Gain from asset sales and other

 

 

(113

)

 

 

(3,583

)

Other, net

 

 

(1,655

)

 

 

(17

)

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

Accrued production receivable

 

 

31,973

 

 

 

1,004

 

Trade and other receivables

 

 

(8,307

)

 

 

1,525

 

Other current and long-term assets

 

 

12,070

 

 

 

3,053

 

Accounts payable and accrued liabilities

 

 

(27,395

)

 

 

(18,984

)

Oil and natural gas production payable

 

 

(8,943

)

 

 

6,183

 

Asset retirement obligation settlements

 

 

(12,106

)

 

 

(4,152

)

Other liabilities

 

 

(44

)

 

 

(1,852

)

Net cash provided by operating activities

 

 

124,336

 

 

 

69,601

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Oil and natural gas capital expenditures

 

 

(99,260

)

 

 

(37,870

)

CCUS storage sites and related capital expenditures

 

 

(32,362

)

 

 

 

Acquisitions of oil and natural gas properties

 

 

(102

)

 

 

(52

)

Pipeline capital expenditures

 

 

(1,219

)

 

 

(50,100

)

Net proceeds from sales of oil and natural gas properties and equipment

 

 

 

 

 

 

Equity investment

 

 

(218

)

 

 

 

Other

 

 

(6,775

)

 

 

3,331

 

Net cash used in investing activities

 

 

(139,936

)

 

 

(84,691

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Bank repayments

 

 

(207,000

)

 

 

(236,000

)

Bank borrowings

 

 

221,000

 

 

 

271,000

 

Pipeline financing repayments

 

 

 

 

 

(17,332

)

Other

 

 

1,328

 

 

 

(696

)

Net cash provided by financing activities

 

 

15,328

 

 

 

16,972

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

(272

)

 

 

1,882

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

48,152

 

 

 

48,462

 

Cash, cash equivalents, and restricted cash at end of period

$

47,880

$

50,344

 

In thousands

 

Year Ended

Dec. 31, 2022

 

Year Ended

Dec. 31, 2021

Cash flows from operating activities

 

 

 

 

Net income

 

$

480,160

 

 

$

56,002

 

Adjustments to reconcile net income to cash flows from operating activities

 

 

 

 

Noncash reorganization items, net

 

 

 

 

 

 

Depletion, depreciation, and amortization

 

 

151,428

 

 

 

150,640

 

Write-down of oil and natural gas properties

 

 

 

 

 

14,377

 

Deferred income taxes

 

 

69,481

 

 

 

364

 

Stock-based compensation

 

 

16,055

 

 

 

25,322

 

Commodity derivatives expense

 

 

178,744

 

 

 

352,984

 

Payment on settlements of commodity derivatives

 

 

(315,752

)

 

 

(277,240

)

Gain on debt extinguishment

 

 

 

 

 

 

Debt issuance costs and discounts

 

 

2,996

 

 

 

2,740

 

Gain from asset sales and other

 

 

(1,232

)

 

 

(10,609

)

Other, net

 

 

(13,198

)

 

 

(2,465

)

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

Accrued production receivable

 

 

(911

)

 

 

(51,944

)

Trade and other receivables

 

 

(8,241

)

 

 

(284

)

Other current and long-term assets

 

 

(9,659

)

 

 

10,390

 

Accounts payable and accrued liabilities

 

 

964

 

 

 

28,500

 

Oil and natural gas production payable

 

 

4,469

 

 

 

29,351

 

Asset retirement obligation settlements

 

 

(34,260

)

 

 

(10,185

)

Other liabilities

 

 

(299

)

 

 

(785

)

Net cash provided by operating activities

 

 

520,745

 

 

 

317,158

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Oil and natural gas capital expenditures

 

 

(317,094

)

 

 

(150,911

)

CCUS storage sites and related capital expenditures

 

 

(59,880

)

 

 

 

Acquisitions of oil and natural gas properties

 

 

(976

)

 

 

(10,979

)

Pipeline capital expenditures

 

 

(23,478

)

 

 

(69,223

)

Net proceeds from sales of oil and natural gas properties and equipment

 

 

237

 

 

 

19,053

 

Equity investment

 

 

(10,218

)

 

 

 

Other

 

 

(16,521

)

 

 

9,128

 

Net cash used in investing activities

 

 

(427,930

)

 

 

(202,932

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Bank repayments

 

 

(1,015,000

)

 

 

(933,000

)

Bank borrowings

 

 

1,009,000

 

 

 

898,000

 

Common stock repurchase program

 

 

(100,028

)

 

 

 

Pipeline financing repayments

 

 

 

 

 

(68,008

)

Other

 

 

10,749

 

 

 

(3,122

)

Net cash used in financing activities

 

 

(95,279

)

 

 

(106,130

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

(2,464

)

 

 

8,096

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

50,344

 

 

 

42,248

 

Cash, cash equivalents, and restricted cash at end of period

 

$

47,880

 

 

$

50,344

 

  

DENBURY INC.

CONSOLIDATED BALANCE SHEETS

 

In thousands, except par value and share data

 

December 31, 2022

 

December 31, 2021

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

521

 

 

$

3,671

 

Accrued production receivable

 

 

144,277

 

 

 

143,365

 

Trade and other receivables, net

 

 

27,343

 

 

 

19,270

 

Derivative assets

 

 

15,517

 

 

 

 

Prepaids

 

 

18,572

 

 

 

9,099

 

Total current assets

 

 

206,230

 

 

 

175,405

 

Property and equipment

 

 

 

 

Oil and natural gas properties (using full cost accounting)

 

 

 

 

Proved properties

 

 

1,414,779

 

 

 

1,109,011

 

Unevaluated properties

 

 

240,435

 

 

 

112,169

 

CO2 properties

 

 

190,985

 

 

 

183,369

 

Pipelines

 

 

220,125

 

 

 

224,394

 

CCUS storage sites and related assets

 

 

64,971

 

 

 

 

Other property and equipment

 

 

107,133

 

 

 

93,950

 

Less accumulated depletion, depreciation, amortization and impairment

 

 

(306,743

)

 

 

(181,393

)

Net property and equipment

 

 

1,931,685

 

 

 

1,541,500

 

Operating lease right-of-use assets

 

 

18,017

 

 

 

19,502

 

Intangible assets, net

 

 

79,128

 

 

 

88,248

 

Restricted cash for future asset retirement obligations

 

 

47,359

 

 

 

46,673

 

Other assets

 

 

45,080

 

 

 

31,625

 

Total assets

 

$

2,327,499

 

 

$

1,902,953

 

Liabilities and Stockholders’ Equity

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

$

248,800

 

 

$

191,598

 

Oil and gas production payable

 

 

80,368

 

 

 

75,899

 

Derivative liabilities

 

 

13,018

 

 

 

134,509

 

Operating lease liabilities

 

 

4,676

 

 

 

4,677

 

Total current liabilities

 

 

346,862

 

 

 

406,683

 

Long-term liabilities

 

 

 

 

Long-term debt, net of current portion

 

 

29,000

 

 

 

35,000

 

Asset retirement obligations

 

 

315,942

 

 

 

284,238

 

Deferred tax liabilities, net

 

 

71,120

 

 

 

1,638

 

Operating lease liabilities

 

 

15,431

 

 

 

17,094

 

Other liabilities

 

 

16,527

 

 

 

22,910

 

Total long-term liabilities

 

 

448,020

 

 

 

360,880

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity

 

 

 

 

Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

 

Common stock, $.001 par value, 250,000,000 shares authorized; 49,814,874 and 50,193,656 shares issued, respectively

 

 

50

 

 

 

50

 

Paid-in capital in excess of par

 

 

1,047,063

 

 

 

1,129,996

 

Retained earnings

 

 

485,504

 

 

 

5,344

 

Total stockholders’ equity

 

 

1,532,617

 

 

 

1,135,390

 

Total liabilities and stockholders’ equity

 

$

2,327,499

 

 

$

1,902,953

 

 

DENBURY INC.

OPERATING HIGHLIGHTS (UNAUDITED)

All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Average daily sales (BOE/d)

 

 

 

 

 

 

 

 

Tertiary

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

21,713

 

 

23,933

 

 

22,356

 

 

24,306

Rocky Mountain region

 

 

10,317

 

 

8,882

 

 

9,648

 

 

8,475

Total tertiary sales

 

 

32,030

 

 

32,815

 

 

32,004

 

 

32,781

 

 

 

 

 

 

 

 

 

Non-tertiary

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

3,666

 

 

3,929

 

 

3,647

 

 

3,683

Rocky Mountain region

 

 

10,945

 

 

12,138

 

 

11,158

 

 

12,306

Total non-tertiary sales

 

 

14,611

 

 

16,067

 

 

14,805

 

 

15,989

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

Oil (Bbls/d)

 

 

45,001

 

 

47,298

 

 

45,302

 

 

47,281

Natural gas (Mcf/d)

 

 

9,835

 

 

9,508

 

 

9,038

 

 

8,933

BOE/d (6:1)

 

 

46,641

 

 

48,882

 

 

46,809

 

 

48,770

 

 

 

 

 

 

 

 

 

Unit sales price (excluding derivative settlements)

 

 

 

 

 

 

 

 

Gulf Coast region

 

 

 

 

 

 

 

 

Oil (per Bbl)

 

$

82.11

 

$

75.48

 

$

94.20

 

$

66.48

Natural gas (per mcf)

 

 

5.53

 

 

5.01

 

 

6.44

 

 

3.97

 

 

 

 

 

 

 

 

 

Rocky Mountain region

 

 

 

 

 

 

 

 

Oil (per Bbl)

 

$

83.07

 

$

75.95

 

$

94.41

 

$

66.58

Natural gas (per mcf)

 

 

5.26

 

 

4.34

 

 

5.65

 

 

3.44

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

Oil (per Bbl)(1)

 

$

82.54

 

$

75.68

 

$

94.29

 

$

66.52

Natural gas (per mcf)

 

 

5.35

 

 

4.62

 

 

5.93

 

 

3.66

BOE (6:1)

 

 

80.77

 

 

74.12

 

 

92.40

 

 

65.16

(1)

Total Company realized oil prices including derivative settlements were $73.13 per Bbl and $53.21 per Bbl during the three months ended December 31, 2022 and 2021, respectively, and $75.19 per Bbl and $50.46 per Bbl during the year ended December 31, 2022 and 2021, respectively.

 

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net income (GAAP measure) to adjusted net income (non-GAAP measure)

Adjusted net income is a non-GAAP measure provided as a supplement to present an alternative net income measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations. Management believes that adjusted net income may be helpful to investors by eliminating the impact of noncash and/or special items not indicative of the Company’s performance from period to period, and is widely used by the investment community, while also being used by management, in evaluating the comparability of the Company’s ongoing operational results and trends. Adjusted net income should not be considered in isolation, as a substitute for, or more meaningful than, net income or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.

 

 

Quarter Ended

December 31, 2022

 

Quarter Ended

December 31, 2021

In thousands, except per-share data

 

Amount

 

Per Diluted

Share(1)

 

Amount

 

Per Diluted

Share(1)

Net income (GAAP measure)

 

$

75,115

 

 

$

1.39

 

 

$

120,631

 

 

$

2.19

 

Adjustments to reconcile to adjusted net income (non-GAAP measure)

 

 

 

 

 

 

 

 

Noncash fair value gains on commodity derivatives(2)

 

 

(537

)

 

 

(0.01

)

 

 

(74,942

)

 

 

(1.36

)

Litigation expense

 

 

572

 

 

 

0.01

 

 

 

 

 

 

 

Accelerated depreciation charge

 

 

3,391

 

 

 

0.06

 

 

 

 

 

 

 

Insurance reimbursements(7)

 

 

 

 

 

 

 

 

(2,399

)

 

 

(0.04

)

Noncash fair value adjustment - contingent consideration(8)

 

 

102

 

 

 

0.00

 

 

 

270

 

 

 

0.00

 

Other(9)

 

 

2,295

 

 

 

0.04

 

 

 

(1,890

)

 

 

(0.03

)

Estimated income taxes on above adjustments to net income and other discrete tax items(10)

 

 

(978

)

 

 

(0.01

)

 

 

 

 

 

 

Adjusted net income (non-GAAP measure)

 

$

79,960

 

 

$

1.48

 

 

$

41,670

 

 

$

0.76

 

 

 

 

Year Ended

Dec. 31, 2022

 

Year Ended

Dec. 31, 2021

In thousands, except per-share data

 

Amount

 

Per Diluted

Share (1)

 

Amount

 

Per Diluted

Share(1)

Net income (GAAP measure)

 

$

480,160

 

 

$

8.83

 

 

$

56,002

 

 

$

1.04

 

Adjustments to reconcile to adjusted net income (non-GAAP measure)

 

 

 

 

 

 

 

 

Noncash fair value losses (gains) on commodity derivatives(2)

 

 

(137,008

)

 

 

(2.52

)

 

 

75,744

 

 

 

1.41

 

Delta pipeline incident costs (included in other expenses)(3)

 

 

3,867

 

 

 

0.07

 

 

 

 

 

 

 

Contract contingency reversal(4)

 

 

(7,763

)

 

 

(0.14

)

 

 

 

 

 

 

Litigation expense(5)

 

 

2,016

 

 

 

0.04

 

 

 

 

 

 

 

Write-down of oil and natural gas properties(6)

 

 

 

 

 

 

 

 

14,377

 

 

 

0.27

 

Accelerated depreciation charge

 

 

3,391

 

 

 

0.06

 

 

 

 

 

 

 

Insurance reimbursements(7)

 

 

(6,692

)

 

 

(0.12

)

 

 

(2,399

)

 

 

(0.04

)

Noncash fair value adjustment - contingent consideration(8)

 

 

334

 

 

 

0.01

 

 

 

2,346

 

 

 

0.04

 

Other(9)

 

 

2,295

 

 

 

0.04

 

 

 

(8,424

)

 

 

(0.16

)

Estimated income taxes on above adjustments to net income and other discrete tax items(10)

 

 

27,702

 

 

 

0.51

 

 

 

 

 

 

 

Adjusted net income (non-GAAP measure)

 

$

368,302

 

 

$

6.78

 

 

$

137,646

 

 

$

2.56

 

(1)

Includes the impact of potentially dilutive securities including nonvested restricted stock, restricted stock units, performance stock units, shares to be issued under the employee stock purchase plan and warrants.

(2)

The net change between periods of the fair market values of open commodity derivative positions, excluding the impact of settlements on commodity derivatives during the period.

(3)

Represents an accrual for a preliminarily assessed civil penalty proposed in May 2022 by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration related to the Company’s February 2020 Delta-Tinsley pipeline incident.

(4)

Represents the reversal of a contract contingency primarily established in fresh start accounting which is no longer considered necessary.

(5)

Represents litigation expense, including $1 million recorded in other expenses and $1 million recorded in lease operating expenses during the 12 months ended December 31, 2022.

(6)

Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.

(7)

Insurance reimbursements during 2022 and 2021 associated with a 2013 insurance claim related to property damage at Delhi Field and the 2020 Delta-Tinsley pipeline repair, respectively.

(8)

Expense related to the change in fair value of the contingent consideration payments related to our March 2021 Wind River Basin CO2 EOR field acquisition.

(9)

Other adjustments during 2022 represent the write-off of costs associated with a potential CO2 storage site. Other adjustments during the three months ended December 31, 2021 include a $3.3 million gain on land sales, slightly offset by $1.4 million asset retirement obligation impairment, with the year ended December 31, 2021 further impacted by a $7.0 million gain on land sales, slightly offset by $0.3 million write-off of trade receivables.

(10)

Represents the estimated income tax impacts on pre-tax adjustments to net income which rate incorporates discrete tax adjustments primarily related to the release of the valuation allowance on certain of the Company’s federal and state deferred tax assets. The valuation allowance release was $12.3 million and $66.2 million during the three and twelve months ended December 31, 2022, respectively.

 

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net income (GAAP measure) to Adjusted EBITDAX (non-GAAP measure)

Adjusted EBITDAX is a non-GAAP financial measure which management uses and is calculated based upon (but not identical to) a financial covenant related to “Consolidated EBITDAX” in the Company’s senior secured bank credit facility, which excludes certain items that are included in net income (loss), the most directly comparable GAAP financial measure. Items excluded include interest, income taxes, depletion, depreciation, and amortization, and items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are non-recurring. Management believes Adjusted EBITDAX may be helpful to investors in order to assess the Company’s operating performance as compared to that of other companies in its industry, without regard to financing methods, capital structure or historical costs basis. It is also commonly used by third parties to assess leverage and the Company’s ability to incur and service debt and fund capital expenditures. Adjusted EBITDAX should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss), cash flows from operations, or any other measure reported in accordance with GAAP. The Company’s Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX, EBITDAX, or EBITDA in the same manner. The following table presents a reconciliation of net income (loss) to Adjusted EBITDA.

In thousands

 

Quarter Ended

Dec. 31, 2022

 

Quarter Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2022

 

Year Ended

Dec. 31, 2021

Net income (GAAP measure)

 

$

75,115

 

 

$

120,631

 

 

$

480,160

 

 

$

56,002

 

Adjustments to reconcile to Adjusted EBITDAX

 

 

 

 

 

 

 

 

Interest expense

 

 

933

 

 

 

690

 

 

 

4,025

 

 

 

4,147

 

Income tax expense (benefit)

 

 

15,180

 

 

 

902

 

 

 

74,844

 

 

 

767

 

Depletion, depreciation, and amortization

 

 

43,003

 

 

 

37,118

 

 

 

151,428

 

 

 

150,640

 

Noncash fair value losses (gains) on commodity derivatives

 

 

(537

)

 

 

(74,942

)

 

 

(137,008

)

 

 

75,744

 

Stock-based compensation

 

 

4,564

 

 

 

2,534

 

 

 

16,055

 

 

 

25,322

 

Write-down of oil and natural gas properties

 

 

 

 

 

 

 

 

 

 

 

14,377

 

Severance-related expense

 

 

 

 

 

 

 

 

 

 

 

476

 

Noncash, non-recurring and other

 

 

1,784

 

 

 

(5,467

)

 

 

(3,075

)

 

 

(11,053

)

Adjusted EBITDAX (non-GAAP measure)

 

$

140,042

 

 

$

81,466

 

 

$

586,429

 

 

$

316,422

 

 

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure) and free cash flow (non-GAAP measure)

Adjusted cash flows from operations is a non-GAAP measure that represents cash flows provided by operations before changes in assets and liabilities, as summarized from the Company’s Consolidated Statements of Cash Flows. Adjusted cash flows from operations measures the cash flows earned or incurred from operating activities without regard to the collection or payment of associated receivables or payables. Free cash flow is a non-GAAP measure that represents adjusted cash flows from operations less reorganization items settled in cash, interest treated as debt reduction, development capital expenditures and capitalized interest, but before acquisitions. Management believes that it is important to consider these additional measures, along with cash flows from operations, as it believes the non-GAAP measures can often be a better way to discuss changes in operating trends in its business caused by changes in sales volumes, prices, operating costs and related factors, without regard to whether the earned or incurred item was collected or paid during that period. Adjusted cash flows from operations and free cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to cash flows from operations, investing, or financing activities, nor as a liquidity measure or indicator of cash flows.

In thousands

 

Quarter Ended

Dec. 31, 2022

 

Quarter Ended

Dec. 31, 2021

 

Year Ended

Dec. 31, 2022

 

Year Ended

Dec. 31, 2021

Cash flows from operations (GAAP measure)

 

$

124,336

 

 

$

69,601

 

 

$

520,745

 

 

$

317,158

 

Net change in assets and liabilities relating to operations

 

 

12,752

 

 

 

13,223

 

 

 

47,937

 

 

 

(5,043

)

Adjusted cash flows from operations (non-GAAP measure)

 

 

137,088

 

 

 

82,824

 

 

 

568,682

 

 

 

312,115

 

Development capital expenditures

 

 

(120,971

)

 

 

(78,350

)

 

 

(364,198

)

 

 

(252,171

)

CCUS storage sites and related capital expenditures

 

 

(32,505

)

 

 

 

 

 

(64,605

)

 

 

 

Capitalized interest

 

 

(1,060

)

 

 

(1,085

)

 

 

(4,237

)

 

 

(4,585

)

Free cash flow (non-GAAP measure)

 

$

(17,448

)

 

$

3,389

 

 

$

135,642

 

 

$

55,359

 

 

DENBURY INC.

CAPITAL EXPENDITURE SUMMARY (UNAUDITED)

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

In thousands

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Capital expenditure summary (1)

 

 

 

 

 

 

 

 

CCA EOR field expenditures (2)

 

$

50,432

 

$

16,664

 

$

124,257

 

$

35,754

CCA CO2 pipelines

 

 

792

 

 

28,142

 

 

2,520

 

 

87,688

CCA tertiary development

 

 

51,224

 

 

44,806

 

 

126,777

 

 

123,442

Non-CCA tertiary and non-tertiary fields

 

 

57,991

 

 

25,578

 

 

196,901

 

 

97,085

CO2 sources and other CO2 pipelines

 

 

2,850

 

 

618

 

 

8,974

 

 

1,657

Capitalized internal costs(3)

 

 

8,906

 

 

7,348

 

 

31,546

 

 

29,987

Oil & gas development capital expenditures

 

 

120,971

 

 

78,350

 

 

364,198

 

 

252,171

CCUS storage sites and related capital expenditures

 

 

32,505

 

 

 

 

64,605

 

 

Oil and gas and CCUS development capital expenditures

 

 

153,476

 

 

78,350

 

 

428,803

 

 

252,171

Capitalized interest

 

 

1,060

 

 

1,085

 

 

4,237

 

 

4,585

Acquisitions of oil and natural gas properties(4)

 

 

102

 

 

52

 

 

976

 

 

10,979

Investment in Clean Hydrogen Works

 

 

218

 

 

 

 

10,218

 

 

Total capital expenditures

 

$

154,856

 

$

79,487

 

$

444,234

 

$

267,735

(1)

Capital expenditures in this summary are presented on an as-incurred basis (including accruals), and are $20.1 million higher and $27.3 million higher and than the capital expenditures in the Consolidated Statements of Cash Flows for the quarter and year ended December 31, 2022, respectively.

(2)

Includes pre-production CO2 costs associated with the CCA EOR development project totaling $5.2 million and $23.1 million during the three and twelve months ended December 31, 2022.

(3)

Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.

(4)

Primarily consists of working interest positions in the Wind River Basin enhanced oil recovery fields acquired on March 3, 2021.

 

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURE (UNAUDITED)

Reconciliation of the standardized measure of discounted estimated future net cash flows after income taxes (GAAP measure) to PV-10 Value (non-GAAP measure)

PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is an after-tax number. Denbury’s 2022 and 2021 year-end estimated proved oil and natural gas reserves and proved CO2 reserves quantities were prepared by the independent reservoir engineering firm of DeGolyer and MacNaughton. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC Topic 932. Management believes PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can be impacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property-by-property basis. Because of this, PV-10 Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated future net cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by management and others in the industry to evaluate properties that are bought and sold, to assess the potential return on investment in the Company’s oil and natural gas properties, and to perform impairment testing of oil and natural gas properties. PV-10 Value is not a measure of financial or operating performance under GAAP, nor should it be considered in isolation or as a substitute for the Standardized Measure. PV-10 Value and the Standardized Measure do not purport to represent the fair value of the Company’s oil and natural gas reserves.

In thousands

 

December 31, 2022

 

December 31, 2021

Standardized Measure (GAAP measure)

 

$

3,490,923

 

$

2,187,051

Discounted estimated future income tax

 

 

966,133

 

 

486,771

PV-10 Value (non-GAAP measure)

 

$

4,457,056

 

$

2,673,822

 

ESTIMATED QUANTITIES OF PROVED RESERVES ROLLFORWARD

 

 

Oil

(MBbl)

 

Gas

(MMcf)

 

Total

(MBOE)

Balance at December 31, 2021

 

188,938

 

 

16,506

 

 

191,689

 

Revisions of previous estimates(1)

 

24,863

 

 

16,378

 

 

27,593

 

Production

 

(16,535

)

 

(3,299

)

 

(17,085

)

Balance at December 31, 2022

 

197,266

 

 

29,585

 

 

202,197

 

 

 

 

 

 

 

 

Proved Developed Reserves – end of year

 

193,343

 

 

29,585

 

 

198,274

 

Proved Undeveloped Reserves – end of year

 

3,923

 

 

 

 

3,923

 

(1)

Reflects changes in commodity prices resulting in upward revisions of 23.1 MMBOE.

 

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