Accelerating capital expenditures focused on executing CCUS
strategy
Denbury Inc. (NYSE: DEN) (“Denbury” or “the Company”) today
announced its 2023 capital budget range for oil and natural gas
development of $350 million to $370 million, and for carbon
capture, utilization, and storage (“CCUS”) capital expenditures of
$140 million to $160 million. At the combined midpoint of $510
million (excluding capitalized interest and equity investments),
planned capital expenditures are up 19% from 2022, with the
increase driven entirely by the CCUS business as the Company plans
to enhance its spending on the development of dedicated CO2 storage
sites and prepare for expansion of its CO2 pipeline
infrastructure.
Chris Kendall, Denbury’s President and Chief Executive Officer,
commented, “Our 2023 capital program furthers our strategy to build
a world-class CCUS network, unparalleled both in scale and
reliability, that delivers transformational growth for our
shareholders. In the oil & gas business, we are continuing to
invest in strong return projects, and we eagerly await expected
production from Phase 1 of the CCA CO2 flood in the second half of
the year. CCA is a very strategic project for Denbury as we expect
it to increase the scale of our carbon-negative oil operations,
deliver meaningful production growth next year, and provide the
foundation for sustainable production and cash flows for many years
to come. In addition, we are significantly ramping our CCUS
investments to expand our infrastructure network and our dedicated
CO2 storage portfolio as we target providing the industry’s most
efficient and reliable CO2 takeaway service.”
OIL AND GAS CAPITAL TARGETING FIRST CCA EOR RESPONSE IN 2H
2023
Oil and gas capital expenditures of $360 million at the midpoint
of the Company’s annual range for 2023 are comprised of $145
million for continuation of the Cedar Creek Anticline (“CCA”)
enhanced oil recovery (“EOR”) development (including $15 million
for capitalized pre-production CO2) and $215 million for other
tertiary and non-tertiary oil-focused development projects,
capitalized internal costs and CO2 sources.
2023 CCA capital activities include the construction of the
initial four CO2 recycle facilities, conversion of existing
production wells to handle CO2 arrival and associated oil response,
as well as continuing installation of the phase 1 infield flowline
network. In addition, to support Phase 2 CCA development, the
Company intends to commission a CO2 injection pilot in the Pennel
field targeting the Interlake formation, including the construction
of a CO2 recycle facility at Pennel.
Other oil and gas development projects include expansions of
existing EOR recovery projects in the Gulf Coast region, such as
targeting new horizons at Eucutta and Phase 2 of the Rodessa
development at Soso in Mississippi, as well as an infill drilling
program at Delhi in Louisiana and conventional horizontal drilling
programs at both Conroe and Webster in Texas. In the Rocky Mountain
region, Denbury intends to drill an additional Mission Canyon
horizontal in the Cabin Creek area of CCA, expand CO2 injection at
Grieve, develop a new EOR phase in the Salt Creek field, and
increase CO2 injection into the Beaver Creek E/F development.
Excluded from the Company’s planned development capital
expenditures, Denbury anticipates spending approximately $36
million on its proactive asset retirement program in 2023, which is
comparable to the amount spent in 2022.
Based on the Company’s projections as further detailed in its
2023 guidance, including estimated capital, costs and production,
Denbury anticipates its 2023 operating cash flows, excluding
working capital changes, will meet or exceed its combined capital
expenditures and planned asset retirement obligation activities
assuming average West Texas Intermediate (“WTI”) oil prices of
approximately $75 per barrel in 2023.
CCUS CAPITAL EXPENDITURES EXPANDING FIRST-MOVER
ADVANTAGE
Denbury’s 2023 CCUS development plan to spend $150 million at
the midpoint of the range is up $85 million from 2022. 2023 capital
expenditures will be focused on expanding the Company’s CO2
transportation and dedicated storage network by adding
strategically-located sequestration sites to its portfolio,
expanding existing sequestration sites with nearby leasing, and
drilling a number of stratigraphic test wells. In addition, Denbury
expects to acquire additional rights of way and long-lead items for
CO2 pipeline connections to sequestration sites and industrial
customers. Excluded from the capital budget amount are equity
investments that Denbury may make from time to time to increase the
scale of its CCUS operations.
2023 PRODUCTION VOLUMES UP FROM 2022
Oil and natural gas sales volumes for 2023 are anticipated to
average between 46,000 and 49,000 barrels of oil equivalent (“BOE”)
per day, with 97% of the volumes expected to be oil. The midpoint
of the 2023 production range is up approximately 1.5% from 2022,
primarily due to the anticipated commencement of production from
the CCA EOR development in the second half of 2023.
COST OUTLOOK
Lease operating expense (“LOE”) is estimated to range between
$29 and $31 per BOE during 2023, slightly higher than in 2022
primarily due to higher expected CO2 costs. LOE per BOE in 2023
will be impacted by a CO2 pricing change under a legacy purchase
agreement which increases due to the expiration of prior 45Q
incentives, as well as by CO2 costs at the CCA EOR flood, as CO2
costs beginning with first production response are treated as LOE
rather than capitalized pre-production.
G&A costs are expected to range between $90 and $105 million
for 2023, higher than 2022 due to increasing employee headcount,
primarily as the Company expands its CCUS business, and the
cumulative expense for long-term equity incentive awards, with 2023
being the third full year of expense following emergence.
Depletion, depreciation, and amortization (“DD&A”) is
expected to average between $9.75 and $10.25 per BOE in 2023, with
the largest driver of the increase from 2022 being the expected
impact from booking initial reserves at CCA EOR during 2023, which
is estimated to be at a higher cost per barrel than the Company’s
current DD&A rate.
Additional detailed guidance is included in the Company’s
supplemental materials for our 2023 Outlook which will be posted to
the Denbury website before market open today.
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, capital plan and production guidance for
2023, today, Thursday, February 23, at 11:00 a.m. Central Time
(12:00 p.m. Eastern Time). Additionally, Denbury will post
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, 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 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 contains forward-looking statements that
involve risks and uncertainties, including estimates of 2023
capital expenditures and production levels, along with estimates of
2023 levels of certain expenses. These estimates are based on
engineering, geological, financial and operating assumptions that
management believes are reasonable based on currently available
information; however, their achievement are subject to a wide range
of business 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 estimates
only as of today and should not be relied upon as representing its
estimates as of any future date. We assume no obligation to update
these forward-looking statements.
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version on businesswire.com: https://www.businesswire.com/news/home/20230223005310/en/
DENBURY IR CONTACTS: Brad Whitmarsh, 972.673.2020,
brad.whitmarsh@denbury.com Beth Palmer, 972.673.2554,
beth.palmer@denbury.com
Denbury (NYSE:DEN)
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