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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230223005308/en/
DENBURY IR CONTACTS Brad Whitmarsh, 972.673.2020,
brad.whitmarsh@denbury.com Beth Palmer, 972.673.2554,
beth.palmer@denbury.com
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