Denbury Reports Third Quarter 2021 Results

Rhea-AI Summary

Denbury Inc. (NYSE: DEN) reported a net income of $82.7 million for Q3 2021, significantly improving from a loss of $64.6 million in the same quarter last year. Adjusted net income was $40.4 million, with revenues increasing 14% to $344 million due to higher oil prices. The company reduced its debt by $52 million and reported liquidity of $565 million. Denbury is advancing its carbon capture initiatives, securing agreements with Mitsubishi and Mitsui E&P for CO2 transport and storage. Additionally, the Greencore CO2 Pipeline extension is ahead of schedule.

Positive

• Net income rose to $82.7 million in Q3 2021, a turnaround from a loss in 2020.
• 14% increase in revenues to $344 million due to higher oil prices and production.
• Reduced total debt by $52 million, exiting Q3 with no long-term debt.
• Liquidity improved to $565 million.
• Secured a 20-year agreement with Mitsubishi for CO2 transport and storage.
• Greencore CO2 Pipeline extension completion expected ahead of schedule.

Negative

• Adjusted net income decreased compared to YTD 2020 (from $96 million to $40 million).
• Average realized oil price was $68.88, slightly below NYMEX WTI prices.
• Lease operating expenses increased by 3% from Q2 2021.

PLANO, Texas--(BUSINESS WIRE)-- Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided results for the third quarter of 2021.

FINANCIAL AND OPERATING HIGHLIGHTS

		3Q 2021					YTD 2021
(in thousands, except per-share and volume data)		Total		Per Diluted Share			Total		Per Diluted Share
Net Income (Loss)		$82,708		$1.51			$(64,629)		$(1.27)
Adjusted net income(1)(2) (non-GAAP)		40,360		0.74			95,976		1.80
Adjusted EBITDAX(1) (non-GAAP)		80,587					234,956
Cash flows from operations		104,019					247,557
Adjusted cash flows from operations(1) (non-GAAP)		77,550					229,291
Development capital expenditures		99,640					173,821
Average daily sales volumes (BOE/d)		49,682					48,732
Blue Oil (% oil volumes using industrial-sourced CO2)		25%					24%
Industrial-sourced CO2 injected (thousand metric tons)		862					2,430

• Progressed installation of the 105-mile extension of the Greencore CO₂ Pipeline to the Cedar Creek Anticline (“CCA”) EOR project ahead of plan, with completion expected before the end of November 2021.
• Completed the Oyster Bayou A1 CO₂ development expansion with initial production commencing late in the third quarter.
• Reduced total debt by $52 million during the third quarter, exiting the quarter with no outstanding long-term debt and liquidity of $565 million.
• Issued Denbury’s 2021 Corporate Responsibility Report, highlighting the Company’s net negative combined Scope 1 and 2 CO₂ emissions for 2019 and 2020 and its target to be fully negative through Scope 3 within this decade.

(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 54.7 million and 53.4 million for the three and nine months ended September 30, 2021, respectively.

RECENT CCUS HIGHLIGHTS

• Executed a term sheet with Mitsubishi Corporation for the transport and storage of CO₂ captured from Mitsubishi’s proposed ammonia project along the U.S. Gulf Coast. The agreement covers a 20-year period, and Mitsubishi’s project is targeted to produce associated CO₂ emissions of approximately 1.8 million metric tons per year (“MMTPA”), beginning in the latter half of the decade.
• Commenced a joint evaluation with Mitsui E&P USA LLC of potential opportunities across the U.S. Gulf Coast to develop carbon-negative oil assets utilizing anthropogenic CO₂. As part of the evaluation, the parties seek to jointly pursue CO₂ offtake opportunities from Mitsui’s potential projects along the U.S. Gulf Coast.
• Announced joint development of a Texas Gulf Coast sequestration site with Gulf Coast Midstream Partners. Located in close proximity to Denbury’s existing CO₂ Green Pipeline, the location has the potential to store up to 400 million metric tons of CO₂ at a rate of up to 9 MMTPA. The EPA Class VI permitting process has been initiated and sequestration is estimated to be available by early 2025.

EXECUTIVE COMMENT

Chris Kendall, the Company’s President and CEO, commented, “Denbury’s strong operational execution and continued safety focus, combined with support from higher oil prices, delivered exceptional results for the third quarter. We advanced both near and long-term resource development projects, and I am particularly proud that the CCA CO₂ development, the largest tertiary project in Denbury’s history, is ahead of schedule with zero recordable safety incidents incurred to date.”

“The third quarter was also a significant period for our CCUS business, as the initial term sheets we executed represent the first steps towards solidifying this substantial growth opportunity for our Company. We have advanced negotiations for additional CO₂ transport and storage arrangements, and I remain confident in further announcements by the end of 2021. Our successes in 2021 have set the stage for a very exciting future, as we execute on our strategy to grow the CCUS opportunity while maintaining a strong EOR-focused production business.”

FINANCIAL AND OPERATING RESULTS

Total revenues and other income in the third quarter of 2021 were $344 million, a 14% increase over second quarter 2021 levels, supported predominantly by higher oil price realizations and also slightly higher oil volumes. Denbury’s third quarter 2021 average pre-hedge realized oil price was $68.88 per barrel (“Bbl”), which was $1.75 per Bbl below NYMEX WTI oil prices, consistent with the Company’s guidance. As compared to the second quarter of 2021, the Company’s average oil differential widened from the $1.32 per Bbl below NYMEX WTI last quarter, primarily as a result of Gulf Coast crudes in comparison to WTI.

Denbury’s oil and natural gas sales volumes averaged 49,682 barrels of oil equivalent per day (“BOE/d”) during the third quarter of 2021. In comparison to the second quarter 2021, third quarter sales volumes were up 1% primarily attributable to the Wind River Basin properties, Oyster Bayou performance, and non-tertiary sales at Conroe Field. Oil represented 97% of the Company’s third quarter 2021 volumes, and approximately 25% of the Company’s oil was attributable to the injection of industrial-sourced CO₂ in its EOR operations, resulting in carbon-negative or blue oil.

Lease operating expenses (“LOE”) in the third quarter of 2021 totaled $117 million, or $25.50 per BOE, in line with expectations. On a per BOE basis, LOE expense increased approximately 3% from the second quarter of 2021 due in part to higher power and fuel, contract labor, and workover costs.

Transportation and marketing expenses for the quarter totaled $6 million, an improvement of $3 million from the second quarter of 2021, primarily as a result of a change in transportation and marketing arrangements for certain of the Company’s Rocky Mountain region oil volumes.

General and administrative expenses were $15 million in the third quarter of 2021, in line with expectations and consistent with the second quarter of 2021. Depletion, depreciation, and amortization (“DD&A”) was also in line with expectations at $38 million, or $8.25 per BOE for the quarter.

Commodity derivatives expense totaled $42 million in the third quarter of 2021. Cash payments on hedges that settled in the third quarter of 2021 totaled $78 million, offset by a $36 million noncash gain representing mark-to-market changes in the value of the Company’s hedging portfolio. No new hedges were added by the Company during the third quarter of 2021.

Other income for the third quarter of 2021 included a $7 million gain related to the sale of non-producing Houston-area surface acreage outside of the Company’s planned development area.

The Company’s effective tax rate for the third quarter of 2021 was negligible, as virtually all of the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Third quarter 2021 development capital expenditures totaled nearly $100 million, bringing year to-date capital expenditures to a total of $174 million. Approximately 60% of the third quarter total was dedicated to the CCA tertiary project, including the Greencore CO₂ Pipeline extension, the infield CCA distribution system installation, and field work to begin converting water injection wells to CO₂ injection. The Greencore CO₂ Pipeline extension project is running ahead of schedule, and completion is now anticipated before the end of November 2021. Initial CO₂ injection into CCA is expected in the first quarter of 2022, with production response estimated to commence in the second half of 2023.

Also during the quarter, the Company completed drilling and injection work at the Oyster Bayou A1 CO₂ development expansion in the Gulf Coast. In addition, the Company drilled a horizontal infield development well at Coral Creek in the Cedar Creek Anticline area of the Rocky Mountain region. Production response from these projects commenced late in the third quarter of 2021.

GUIDANCE

Development capital expenditures for the fourth quarter of the year are expected between $75 million and $95 million, with the full year unchanged at a range of $250 million to $270 million. Planned fourth quarter capital expenditures include the completion of the Greencore CO₂ Pipeline extension and CCA CO₂ infield distribution system, as well as additional field development activities. For the fourth quarter of 2021, LOE per BOE is anticipated to be consistent with the unit rate in the third quarter and sales volumes are anticipated to average nearly 50,000 BOE/d.

Additional fourth quarter guidance details are available in the Company’s supplemental third quarter 2021 earnings presentation, which is available in the Investor Relations section of the Company’s website, www.denbury.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury will host a conference call and webcast to review and discuss its results and outlook today, Thursday, November 4, at 11:00 a.m. Central Time. Additionally, Denbury will post presentation materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com. Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with conference number 13696090.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use 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 three million tons of captured industrial-sourced CO₂ annually, and its objective is to fully offset its Scope 1, 2, and 3 CO₂ emissions within this decade, 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 including estimated 2021 production, capital expenditures, and costs, the timing of completion of the Greencore pipeline extension to CCA, and results of ongoing negotiations of CCUS transport and storage arrangements, and other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent report on Form 10-K. 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

References below to “Successor” refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020, and references to “Predecessor” refer to the Denbury entity prior to emergence from bankruptcy. The following tables include selected unaudited financial and operational information for the Successor three and nine-month periods ended September 30, 2021, Successor period from September 19, 2020 through September 30, 2020, Predecessor periods from July 1, 2020 through September 18, 2020 and January 1, 2020 through September 18, 2020, and certain Combined information for the three and nine months ended September 30, 2020, 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 reporting earnings (along with additional required disclosures) included or to be included in the Company’s periodic reports:

		Quarter Ended Sept. 30, 2021			Quarter Ended Sept. 30, 2020				Period from Sept. 19, 2020 through Sept. 30, 2020				Period from July 1, 2020 through Sept. 18, 2020
In thousands, except per-share data		Successor			Combined (Non-GAAP)(1)				Successor				Predecessor
Revenues and other income
Oil sales		$	305,093		$	174,447			$	22,311			$	152,136
Natural gas sales		3,361			964				10				954
CO2 sales and transportation fees		12,237			7,484				967				6,517
Oil marketing revenues		12,593			3,483				151				3,332
Other income		10,451			7,191				94				7,097
Total revenues and other income		343,735			193,569				23,533				170,036
Expenses
Lease operating expenses		116,536			71,192				11,484				59,708
Transportation and marketing expenses		5,985			9,499				1,344				8,155
CO2 operating and discovery expenses		1,963			1,197				242				955
Taxes other than income		24,154			15,546				2,073				13,473
Oil marketing purchases		11,940			3,427				139				3,288
General and administrative expenses		15,388			16,748				1,735				15,013
Interest, net of amounts capitalized of $1,249, $4,887, $183 and $4,704, respectively		669			8,038				334				7,704
Depletion, depreciation, and amortization		37,691			41,600				5,283				36,317
Commodity derivatives expense (income)		41,745			574				(4,035		)		4,609
Write-down of oil and natural gas properties		—			261,677				—				261,677
Restructuring items, net		—			849,980				—				849,980
Other expenses		4,553			24,248				2,164				22,084
Total expenses		260,624			1,303,726				20,763				1,282,963
Income (loss) before income taxes		83,111			(1,110,157		)		2,770				(1,112,927		)
Income tax provision (benefit)
Current income taxes		350			(1,445		)		6				(1,451		)
Deferred income taxes		53			(302,350		)		6				(302,356		)
Net income (loss)		$	82,708		$	(806,362	)		$	2,758			$	(809,120	)
Net income (loss) per common share
Basic		$	1.62						$	0.06			$	(1.63	)
Diluted		$	1.51						$	0.06			$	(1.63	)
Weighted average common shares outstanding
Basic		51,094							50,000				497,398
Diluted		54,714							50,000				497,398

(1)

Combined results for the quarter ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the quarter reported in accordance with GAAP.

		Nine Months Ended Sept. 30, 2021				Nine Months Ended Sept. 30, 2020				Period from Sept. 19, 2020 through Sept. 30, 2020				Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands, except per-share data		Successor				Combined (Non-GAAP)(1)				Successor				Predecessor
Revenues and other income
Oil sales		$	818,714			$	511,562			$	22,311			$	489,251
Natural gas sales		7,893				2,860				10				2,850
CO2 sales and transportation fees		31,599				22,016				967				21,049
Oil marketing revenues		26,538				8,694				151				8,543
Other income		11,518				8,513				94				8,419
Total revenues and other income		896,262				553,645				23,533				530,112
Expenses
Lease operating expenses		308,731				261,755				11,484				250,271
Transportation and marketing expenses		22,304				28,508				1,344				27,164
CO2 operating and discovery expenses		4,487				2,834				242				2,592
Taxes other than income		65,499				45,604				2,073				43,531
Oil marketing purchases		25,763				8,538				139				8,399
General and administrative expenses		62,821				50,257				1,735				48,522
Interest, net of amounts capitalized of $3,500, $23,068, $183 and $22,885, respectively		3,457				48,601				334				48,267
Depletion, depreciation, and amortization		113,522				193,876				5,283				188,593
Commodity derivatives expense (income)		330,152				(106,067		)		(4,035		)		(102,032		)
Gain on debt extinguishment		—				(18,994		)		—				(18,994		)
Write-down of oil and natural gas properties		14,377				996,658				—				996,658
Restructuring items, net		—				849,980				—				849,980
Other expenses		9,913				38,032				2,164				35,868
Total expenses		961,026				2,399,582				20,763				2,378,819
Income (loss) before income taxes		(64,764		)		(1,845,937		)		2,770				(1,848,707		)
Income tax provision (benefit)
Current income taxes		(101		)		(7,254		)		6				(7,260		)
Deferred income taxes		(34		)		(408,863		)		6				(408,869		)
Net income (loss)		$	(64,629	)		$	(1,429,820	)		$	2,758			$	(1,432,578	)
Net income (loss) per common share
Basic		$	(1.27	)						$	0.06			$	(2.89	)
Diluted		$	(1.27	)						$	0.06			$	(2.89	)
Weighted average common shares outstanding
Basic		50,807								50,000				495,560
Diluted		50,807								50,000				495,560

(1)

Combined results for the nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the nine months ended September 30, 2020 reported in accordance with GAAP.

DENBURY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Quarter Ended Sept. 30, 2021				Quarter Ended Sept. 30, 2020				Period from Sept. 19, 2020 through Sept. 30, 2020				Period from July 1, 2020 through Sept. 18, 2020
In thousands		Successor				Combined (Non-GAAP)(1)				Successor				Predecessor
Cash flows from operating activities
Net income (loss)		$	82,708			$	(806,362	)		$	2,758			$	(809,120	)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Noncash reorganization items, net		—				810,909				—				810,909
Depletion, depreciation, and amortization		37,691				41,600				5,283				36,317
Write-down of oil and natural gas properties		—				261,677				—				261,677
Deferred income taxes		53				(302,350		)		6				(302,356		)
Stock-based compensation		2,556				571				—				571
Commodity derivatives expense (income)		41,745				574				(4,035		)		4,609
Receipt (payment) on settlements of commodity derivatives		(77,670		)		17,789				6,660				11,129
Debt issuance costs and discounts		685				1,764				114				1,650
Gain from asset sales and other		(7,055		)		(6,404		)		—				(6,404		)
Other, net		(3,163		)		9,074				589				8,485
Changes in assets and liabilities, net of effects from acquisitions
Accrued production receivable		(4,067		)		3,049				38,537				(35,488		)
Trade and other receivables		3,769				(4,815		)		1,366				(6,181		)
Other current and long-term assets		6,043				6,000				705				5,295
Accounts payable and accrued liabilities		20,192				36,213				(7,980		)		44,193
Oil and natural gas production payable		2,944				4,361				(11,064		)		15,425
Other liabilities		(2,412		)		(143		)		(29		)		(114		)
Net cash provided by operating activities		104,019				73,507				32,910				40,597
Cash flows from investing activities
Oil and natural gas capital expenditures		(59,630		)		(21,810		)		(2,125		)		(19,685		)
Acquisitions of oil and natural gas properties		(116		)		(1		)		(1		)		—
Pipelines and plants capital expenditures		(14,272		)		(645		)		(6		)		(639		)
Net proceeds from sales of oil and natural gas properties and equipment		597				1,231				880				351
Other		9,956				12,544				(308		)		12,852
Net cash used in investing activities		(63,465		)		(8,681		)		(1,560		)		(7,121		)
Cash flows from financing activities
Bank repayments		(212,000		)		(380,000		)		(55,000		)		(325,000		)
Bank borrowings		177,000				200,000				—				200,000
Interest payments treated as a reduction of debt		—				(3,911		)		—				(3,911		)
Cash paid in conjunction with debt repurchases		—				—				—				—
Costs of debt financing		—				(12,183		)		—				(12,183		)
Pipeline financing repayments		(17,166		)		(44,831		)		(54		)		(44,777		)
Other		309				(133		)		—				(133		)
Net cash provided by (used in) financing activities		(51,857		)		(241,058		)		(55,054		)		(186,004		)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(11,303		)		(176,232		)		(23,704		)		(152,528		)
Cash, cash equivalents, and restricted cash at beginning of period		59,765				247,642				95,114				247,642
Cash, cash equivalents, and restricted cash at end of period		$	48,462			$	71,410			$	71,410			$	95,114

(1)

Combined results for the quarter ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the quarter reported in accordance with GAAP.

		Nine Months Ended Sept. 30, 2021				Nine Months Ended Sept. 30, 2020				Period from Sept. 19, 2020 through Sept. 30, 2020				Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands		Successor				Combined (Non-GAAP)(1)				Successor				Predecessor
Cash flows from operating activities
Net income (loss)		$	(64,629	)		$	(1,429,820	)		$	2,758			$	(1,432,578	)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Noncash reorganization items, net		—				810,909				—				810,909
Depletion, depreciation, and amortization		113,522				193,876				5,283				188,593
Write-down of oil and natural gas properties		14,377				996,658				—				996,658
Deferred income taxes		(34		)		(408,863		)		6				(408,869		)
Stock-based compensation		22,788				4,111				—				4,111
Commodity derivatives expense (income)		330,152				(106,067		)		(4,035		)		(102,032		)
Receipt (payment) on settlements of commodity derivatives		(179,466		)		88,056				6,660				81,396
Gain on debt extinguishment		—				(18,994		)		—				(18,994		)
Debt issuance costs and discounts		2,055				11,685				114				11,571
Gain from asset sales and other		(7,026		)		(6,723		)		—				(6,723		)
Other, net		(2,448		)		7,751				589				7,162
Changes in assets and liabilities, net of effects from acquisitions
Accrued production receivable		(52,948		)		65,112				38,537				26,575
Trade and other receivables		(1,809		)		(20,977		)		1,366				(22,343		)
Other current and long-term assets		7,337				1,448				705				743
Accounts payable and accrued liabilities		47,484				(24,082		)		(7,980		)		(16,102		)
Oil and natural gas production payable		23,168				(17,856		)		(11,064		)		(6,792		)
Other liabilities		(4,966		)		94				(29		)		123
Net cash provided by operating activities		247,557				146,318				32,910				113,408
Cash flows from investing activities
Oil and natural gas capital expenditures		(113,041		)		(101,707		)		(2,125		)		(99,582		)
Acquisitions of oil and natural gas properties		(10,927		)		(1		)		(1		)		—
Pipelines and plants capital expenditures		(19,123		)		(11,607		)		(6		)		(11,601		)
Net proceeds from sales of oil and natural gas properties and equipment		19,053				42,202				880				41,322
Other		5,797				12,439				(308		)		12,747
Net cash used in investing activities		(118,241		)		(58,674		)		(1,560		)		(57,114		)
Cash flows from financing activities
Bank repayments		(697,000		)		(606,000		)		(55,000		)		(551,000		)
Bank borrowings		627,000				691,000				—				691,000
Interest payments treated as a reduction of debt		—				(46,417		)		—				(46,417		)
Cash paid in conjunction with debt repurchases		—				(14,171		)		—				(14,171		)
Costs of debt financing		—				(12,482		)		—				(12,482		)
Pipeline financing repayments		(50,676		)		(51,846		)		(54		)		(51,792		)
Other		(2,426		)		(9,363		)		—				(9,363		)
Net cash provided by (used in) financing activities		(123,102		)		(49,279		)		(55,054		)		5,775
Net increase (decrease) in cash, cash equivalents, and restricted cash		6,214				38,365				(23,704		)		62,069
Cash, cash equivalents, and restricted cash at beginning of period		42,248				33,045				95,114				33,045
Cash, cash equivalents, and restricted cash at end of period		$	48,462			$	71,410			$	71,410			$	95,114

(1)

Combined results for the nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should be not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the nine months ended September 30, 2020 reported in accordance with GAAP.

DENBURY INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In thousands, except par value and share data		Sept. 30, 2021				Dec. 31, 2020
Assets
Current assets
Cash and cash equivalents		$	1,783			$	518
Restricted cash		—				1,000
Accrued production receivable		144,370				91,421
Trade and other receivables, net		20,867				19,682
Derivative assets		—				187
Prepaids		10,872				14,038
Total current assets		177,892				126,846
Property and equipment
Oil and natural gas properties (using full cost accounting)
Proved properties		1,011,545				851,208
Unevaluated properties		108,258				85,304
CO2 properties		188,752				188,288
Pipelines		193,669				133,485
Other property and equipment		94,763				86,610
Less accumulated depletion, depreciation, amortization and impairment		(151,844		)		(41,095		)
Net property and equipment		1,445,143				1,303,800
Operating lease right-of-use assets		18,253				20,342
Intangible assets, net		90,533				97,362
Other assets		80,444				86,408
Total assets		$	1,812,265			$	1,634,758
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities		$	211,894			$	112,671
Oil and gas production payable		69,717				49,165
Derivative liabilities		193,015				53,865
Current maturities of long-term debt		17,332				68,008
Operating lease liabilities		3,338				1,350
Total current liabilities		495,296				285,059
Long-term liabilities
Long-term debt, net of current portion		—				70,000
Asset retirement obligations		243,184				179,338
Derivative liabilities		16,435				5,087
Deferred tax liabilities, net		1,241				1,274
Operating lease liabilities		17,362				19,460
Other liabilities		25,954				20,872
Total long-term liabilities		304,176				296,031
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; 50,120,895 and 49,999,999 shares issued, respectively		50				50
Paid-in capital in excess of par		1,128,030				1,104,276
Accumulated deficit		(115,287		)		(50,658		)
Total stockholders’ equity		1,012,793				1,053,668
Total liabilities and stockholders’ equity		$	1,812,265			$	1,634,758

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						Nine Months Ended
		September 30,						September 30,
		2021			2020			2021			2020
Average daily sales (BOE/d)
Tertiary
Gulf Coast region		24,336			25,776			24,432			26,971
Rocky Mountain region		9,033			7,718			8,337			7,586
Total tertiary sales		33,369			33,494			32,769			34,557
Non-tertiary
Gulf Coast region		3,763			3,728			3,600			4,161
Rocky Mountain region		12,550			12,464			12,363			13,221
Total non-tertiary sales		16,313			16,192			15,963			17,382
Total Company
Oil (Bbls/d)		48,145			48,334			47,276			50,619
Natural gas (Mcf/d)		9,222			8,110			8,739			7,916
BOE/d (6:1)		49,682			49,686			48,732			51,939
Unit sales price (excluding derivative settlements)
Gulf Coast region
Oil (per Bbl)		$	68.86		$	39.49		$	63.47		$	37.70
Natural gas (per mcf)		4.45			2.07			3.59			1.85
Rocky Mountain region
Oil (per Bbl)		$	68.91		$	38.85		$	63.39		$	35.66
Natural gas (per mcf)		3.64			0.38			3.11			0.67
Total Company
Oil (per Bbl)(1)		$	68.88		$	39.23		$	63.44		$	36.88
Natural gas (per mcf)		3.96			1.29			3.31			1.32
BOE (6:1)		67.48			38.37			62.13			36.15

(1)

Total company realized oil prices including derivative settlements were $51.35 per Bbl and $43.23 per Bbl during the three months ended September 30, 2021 and 2020, respectively, and $49.53 per Bbl and $43.23 per Bbl during the nine months ended September 30, 2021 and 2020, respectively.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net income (loss) (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 (loss) 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 or unusual 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 (loss) 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								Quarter Ended
		September 30, 2021								September 30, 2020
		Successor								Combined (Non-GAAP)(1)
In thousands, except per-share data		Amount				Per Diluted Share				Amount
Net income (loss) (GAAP measure)(2)		$	82,708			$	1.51			$	(806,362	)
Adjustments to reconcile to adjusted net income (non-GAAP measure)
Noncash fair value losses (gains) on commodity derivatives(3)		(35,925		)		(0.66		)		18,363
Reorganization items, net(4)		—				—				849,980
Write-down of oil and natural gas properties(5)		—				—				261,677
Accelerated depreciation charge(6)		—				—				1,791
Expense associated with restructuring(9)		—				—				16,232
Delhi Field insurance reimbursements(10)		—				—				(15,402		)
Noncash fair value adjustment - contingent consideration(11)		436				0.01				—
Other(12)		(6,859		)		(0.12		)		1,013
Estimated income taxes on above adjustments to net loss and other discrete tax items(14)		—				—				(307,344		)
Adjusted net income (non-GAAP measure)		$	40,360			$	0.74			$	19,948
		Nine Months Ended								Nine Months Ended
		September 30, 2021								September 30, 2020
		Successor								Combined (Non-GAAP)(1)
In thousands, except per-share data		Amount				Per Diluted Share				Amount
Net loss (GAAP measure)(2)		$	(64,629	)		$	(1.27	)		$	(1,429,820	)
Adjustments to reconcile to adjusted net income (non-GAAP measure)
Noncash fair value losses (gains) on commodity derivatives(3)		150,686				2.82				(18,011		)
Reorganization items, net(4)		—				—				849,980
Write-down of oil and natural gas properties(5)		14,377				0.27				996,658
Accelerated depreciation charge(6)		—				—				39,159
Gain on debt extinguishment(7)		—				—				(18,994		)
Severance-related expense included in general and administrative expenses(8)		—				—				2,361
Expense associated with restructuring(9)		—				—				24,107
Delhi Field insurance reimbursements(10)		—				—				(15,402		)
Noncash fair value adjustment - contingent consideration(11)		2,076				0.04				—
Other(12)		(6,534		)		(0.12		)		3,623
Adjustments to reconcile effect of dilutive securities(13)		—				0.06				—
Estimated income taxes on above adjustments to net loss and other discrete tax items(14)		—				—				(418,655		)
Adjusted net income (non-GAAP measure)		$	95,976			$	1.80			$	15,006

(1)		Combined results for the three and nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations of the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide more meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or meaningful than, independent results of the Predecessor and Successor periods for the quarter and nine months ended September 30, 2020 reported in accordance with GAAP.
(2)		Diluted net income (loss) per common share includes the impact of potentially dilutive securities including nonvested restricted stock units and warrants during the Successor period and includes nonvested restricted stock, nonvested performance-based equity awards, and shares into which the Predecessor’s previous convertible senior notes were convertible.
(3)		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.
(4)		Reorganization items, net represent (a) expenses incurred subsequent to the filing petition for Chapter 11 as a direct result of the prepackaged joint plan of reorganization, (b) gains or losses from liabilities settled, and (c) fresh start accounting adjustments.
(5)		Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.
(6)		Accelerated depreciation related to impaired unevaluated properties that were transferred to the full cost pool.
(7)		Gain on debt extinguishment related to the Company’s 2020 open market repurchases.
(8)		Severance-related expense associated with the Company’s May-2020 involuntary workforce reduction.
(9)		Expenses related to advisor and professional fees associated with review of strategic alternatives and comprehensive restructuring of the Company’s indebtedness.
(10)		Insurance reimbursements associated with a 2013 incident at Delhi Field.
(11)		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.
(12)		Other adjustments primarily include: (a) for the three months ended September 30, 2021, $7.0 million gain on land sales, (b) for the three months ended September 30, 2020, $5.9 million gain on land sales, $4.2 million write-off of trade receivables, $2.2 million of expense associated with the Delta-Tinsley CO2 pipeline incident and $0.5 million of expense associated with the helium supply contract ruling. The nine months ended September 30, 2021 were impacted by a $0.3 million write-off of trade receivables during the three months ended March 31, 2021, and the nine months ended September 30, 2020 were further impacted by $1.6 million of expense associated with the Delta-Tinsley CO2 pipeline incident and $1.0 million of expense associated with the helium supply contract ruling.
(13)		Represents the impact to the per-share calculation using weighted average dilutive shares of 53.4 million during the nine months ended September 30, 2021 as a result of the adjustments to the Company’s net loss (GAAP measure) to derive adjusted net income (non-GAAP measure).
(14)		The estimated income tax impacts on adjustments to net income for the nine months ended September 30, 2020 are computed based upon a rate of 25% applied to income before tax, which incorporates discrete tax adjustments primarily comprised of the tax effect of the ceiling test and accelerated depreciation, impacts of the CARES Act, valuation allowances, and the periodic tax impacts of a shortfall (benefit) on the stock-based compensation deduction.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

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

Adjusted EBITDAX is a non-GAAP 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 nonrecurring. 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 the 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 flow 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 the Company’s net income (loss) to Adjusted EBITDAX.

In thousands		Quarter Ended Sept. 30, 2021				Quarter Ended Sept. 30, 2020				Nine Months Ended Sept. 30, 2021				Nine Months Ended Sept. 30, 2020
		Successor				Combined (Non-GAAP)(1)				Successor				Combined (Non-GAAP)(1)
Net income (loss) (GAAP measure)		$	82,708			$	(806,362	)		$	(64,629	)		$	(1,429,820	)
Adjustments to reconcile to Adjusted EBITDAX
Interest expense		669				8,038				3,457				48,601
Income tax expense (benefit)		403				(303,795		)		(135		)		(416,117		)
Depletion, depreciation, and amortization		37,691				41,600				113,522				193,876
Noncash fair value losses (gains) on commodity derivatives		(35,925		)		18,363				150,686				(18,011		)
Stock-based compensation		2,556				571				22,788				4,111
Gain on debt extinguishment		—				—				—				(18,994		)
Write-down of oil and natural gas properties		—				261,677				14,377				996,658
Reorganization items, net		—				849,980				—				849,980
Severance-related expense		—				954				476				3,315
Noncash, non-recurring and other		(7,515		)		22,419				(5,586		)		35,014
Adjusted EBITDAX (non-GAAP measure)(2)		$	80,587			$	93,445			$	234,956			$	248,613

(1)		Combined results for the three and nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations of the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide more meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or meaningful than, independent results of the Predecessor and Successor periods for the quarter and nine months ended September 30, 2020 reported in accordance with GAAP.
(2)		Excludes pro forma adjustments related to qualified acquisitions or dispositions under the Company’s senior secured bank credit facility.

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 Unaudited Condensed 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 Sept. 30, 2021				Quarter Ended Sept. 30, 2020				Nine Months Ended Sept. 30, 2021				Nine Months Ended Sept. 30, 2020
		Successor				Combined (Non-GAAP)(1)				Successor				Combined (Non-GAAP)(1)
Cash flows from operations (GAAP measure)		$	104,019			$	73,507			$	247,557			$	146,318
Net change in assets and liabilities relating to operations		(26,469		)		(44,665		)		(18,266		)		(3,739		)
Adjusted cash flows from operations (non-GAAP measure)(2)		77,550				28,842				229,291				142,579
Reorganization items settled in cash		—				39,071				—				39,071
Interest on notes treated as debt reduction		—				(3,911		)		—				(46,417		)
Development capital expenditures		(99,640		)		(17,522		)		(173,821		)		(77,566		)
Capitalized interest		(1,249		)		(4,887		)		(3,500		)		(23,068		)
Free cash flow (deficit) (non-GAAP measure)		$	(23,339	)		$	41,593			$	51,970			$	34,599

(1)		Combined results for the three and nine months ended September 30, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations of the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide more meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or meaningful than, independent results of the Predecessor and Successor periods for the quarter and nine months ended September 30, 2020 reported in accordance with GAAP.
(2)		Adjusted cash flow from operations for the three and nine months ended September 30, 2021 includes $2.5 million of nonrecurring accrued litigation. If these amounts were removed, adjusted cash flow from operations would have been $80.1 million and $231.8 million for the three and nine months ended September 30, 2021, respectively.

DENBURY INC.
CAPITAL EXPENDITURE SUMMARY (UNAUDITED)(1)
		Quarter Ended						Nine Months Ended
		September 30,						September 30,
In thousands		2021			2020			2021			2020
Capital expenditure summary
Tertiary and non-tertiary fields		$	52,083		$	8,511		$	102,640		$	41,679
Capitalized internal costs(2)		7,854			8,351			22,639			26,695
Oil and natural gas capital expenditures		59,937			16,862			125,279			68,374
CCA CO2 pipeline		39,703			660			48,542			9,192
Development capital expenditures		99,640			17,522			173,821			77,566
Acquisitions of oil and natural gas properties(3)		116			15			10,927			95
Capital expenditures, before capitalized interest		99,756			17,537			184,748			77,661
Capitalized interest		1,249			4,887			3,500			23,068
Capital expenditures, total		$	101,005		$	22,424		$	188,248		$	100,729

(1)		Capital expenditure amounts include accrued capital.
(2)		Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.
(3)		Primarily consists of working interest positions in the Wind River Basin enhanced oil recovery fields acquired on March 3, 2021.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104005321/en/

Brad Whitmarsh, Executive Director, Investor Relations, 972.673.2020, brad.whitmarsh@denbury.com

Susan James, Manager, Investor Relations, 972.673.2593, susan.james@denbury.com

Source: Denbury Inc.

FAQ

What were Denbury's earnings for Q3 2021?

Denbury reported a net income of $82.7 million for Q3 2021.

How much did Denbury's revenues increase in Q3 2021?

Revenues increased by 14% to $344 million in Q3 2021.

What agreements did Denbury secure for CO2 transport?

Denbury secured a 20-year agreement with Mitsubishi for CO2 transport and storage.

What is Denbury's expected production response timeline for the CCA project?

Denbury expects initial CO2 injection in Q1 2022, with production response in the second half of 2023.

What is Denbury's debt status as of Q3 2021?

Denbury exited Q3 2021 with no outstanding long-term debt.