DEN Denbury Inc

Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided its first quarter 2023 results. Supplemental materials for the quarter are also available at www.denbury.com. The Company will host a webcast to review its results tomorrow, May 4, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) on its website.

 

 

 

 

 

KEY 1Q HIGHLIGHTS

 

 

 

 

• First quarter 2023 net cash flows provided by operating activities totaled $89 million, and adjusted cash flows from operations(1) totaled $140 million.
• Net income for the quarter was $89 million, or $1.66 per diluted share, and adjusted net income(1)(2) was $73 million, or $1.36 per diluted share.
• Ended the first quarter with $68 million borrowed on the Company’s bank credit facility and $672 million of financial liquidity (including cash on hand and borrowing capacity under the credit facility).
• Commissioned the first CO2 recycle facility at the Cedar Creek Anticline (“CCA”) Enhanced Oil Recovery (“EOR”) project in March 2023; initial EOR production expected in 2Q23.
• Drilled first stratigraphic test well in the Orion CO2 sequestration site in Alabama. Subsequent to quarter-end, Denbury expanded its dedicated CO2 storage portfolio with the addition of a 30,000-acre site in Texas, southwest of Houston.

 

 

(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 53.8 million for the quarter ended March 31, 2023.

CEO Comment

Chris Kendall, the Company’s President and CEO, commented, “Denbury’s performance in the first quarter was strong, and we achieved significant milestones in both our EOR operations and CCUS businesses. At our anchor CCA EOR project, we have progressed the installation of our initial CO2 recycle facilities, and first tertiary production from this multi-decade asset is expected in the second quarter. Production from CCA will drive volume growth and margin expansion for our Company, while also significantly increasing the production of our carbon-negative “blue” oil, a unique commodity that we believe will be highly sought after for the production of low-carbon fuels. In our CCUS business, we expanded our dedicated CO2 sequestration portfolio with a new strategic site added in southeast Texas, and we drilled our first U.S. Gulf Coast stratigraphic test well. Negotiations with industrial customers for CO2 transportation and storage services continue to progress, and I look forward to announcing new agreements in the coming months. I remain convinced that Denbury is uniquely positioned to provide the most certain, most reliable, and most efficient CO2 transportation and storage system in the U.S.”

Oil & Gas Operations Highlights

 

1Q 2023

4Q 2022

1Q 2022

Sales volumes (BOE/d)

47,655

46,641

46,925

Avg. oil price, including hedges ($ per Bbl)

$75.36

$73.13

$70.43

Blue oil (% oil volumes using industrial CO2)

30%

29%

25%

Industrial CO2 injected (million metric tons)

1.14

1.15

0.94

Industrial CO2 injected (% total CO2 used in EOR operations)

40%

40%

36%

Oil & gas development capital ($ 000s)

$99,791

$120,971

$57,606

First quarter 2023 sales volumes were consistent with expectations, slightly above the midpoint of the Company’s annual guidance range. As compared to the fourth quarter of 2022, higher sales volumes were mostly related to the recovery of production lost due to late 2022 severe winter storms and an increase at Tinsley primarily due to the sale of inventory built in the fourth quarter. Approximately 56% of total volumes were from the Company’s Gulf Coast assets with the remaining 44% from the Rocky Mountain region. Gulf Coast production benefited from strong sales volumes at Oyster Bayou and Soso Rodessa Phase 1. Rocky Mountain region sales volumes included continued strong CO2 flood response at the Wind River Basin assets and recent horizontal development at CCA in the Mission Canyon reservoir. The Company’s average oil price differential in the first quarter of 2023 was $1.28 below the West Texas Intermediate average, in line with the Company’s guidance.

CO2 revenues for the quarter of nearly $11 million were slightly below expectation as a result of third-party purchaser downtime.

Lease operating expenses in first quarter 2023 totaled $129 million, or $30.12 per barrel of oil equivalent (“BOE”), and depletion, depreciation, and amortization (“DD&A”) was $42 million, or $9.80 per BOE for the quarter, both within the Company’s annual guidance range. General and administrative expenses totaled $23 million, slightly below expectation.

First quarter 2023 oil & gas development capital expenditures, excluding capitalized interest, totaled $100 million, consistent with expectation. Capital spend in the Gulf Coast region included the drilling and completion of horizontal wells in the Webster field and well conversion work for Soso Rodessa Phase 2 development. In the Rocky Mountain region, capital activities included a waterflood expansion project in the Charles formation within the Cabin Creek field of CCA, as well as the completion of two new wells in the Bell Creek field.

Cedar Creek Anticline EOR Development

Slightly more than 40% of Denbury’s first quarter 2023 oil & gas development capital was spent on the CCA EOR project, primarily focused on the construction of four CO2 recycle facilities planned for 2023, well conversions, and completion of the Pennel CO2 pilot well. Curtailed production averaged slightly more than 500 Bbl/d at CCA during the first quarter 2023, which is anticipated to return to production as the CO2 recycle facilities startup.

Commissioning of the first CO2 recycle facility was completed in March 2023, with the commissioning of a second CO2 recycle facility currently underway. Commissioning is planned for two additional CO2 recycle facilities in the latter part of the third quarter 2023. Associated with the startup of the first CO2 recycle facility, the Company is anticipating initial EOR production response in second quarter 2023. As CO2 recycle facilities are brought online and expanded, Denbury anticipates incremental EOR production from CCA to reach 2,000 Bbl/d by the end of this year and 7,500 to 12,500 Bbl/d by the end of 2024.

Carbon Capture, Utilization, and Storage (“CCUS”) Highlights

 

1Q 2023

4Q 2022

1Q 2022

Signed CO2 transport and/or storage offtake (cumulative million metric tons per year)

22

20

6

Secured CO2 sequestration capacity (cumulative million metric tons)

2,065

2,025

1,420

Class VI CO2 injection permit applications submitted - cumulative

3

3

-

Stratigraphic test wells drilled

1

-

-

CCUS capital expenditures ($ 000s)

$19,688

$32,505

$20,949

During first quarter 2023, the Company finalized a definitive agreement for the right to develop a dedicated CO2 sequestration site on nearly 15,000 acres in Campbell County, Wyoming, directly underneath the Company’s Greencore CO2 Pipeline. Denbury estimates potential CO2 sequestration capacity of the site (named Corvus) to be 40 million metric tons. In April 2023, the Company acquired exclusive development rights over a dedicated CO2 sequestration site southwest of Houston in Matagorda County, Texas. The approximately 30,000-acre site, known as project Dorado, is estimated to have a storage potential of more than 115 million metric tons. A 60-mile CO2 pipeline is required to connect the site to the Company’s existing CO2 pipeline network and would also provide access to additional markets and customers for CO2. Including the acquisition of the Dorado site, the Company’s dedicated CO2 sequestration portfolio now exceeds 2.1 billion metric tons of CO2.

During first quarter 2023, Denbury executed agreements with two eFuels companies, HIF Global and Monarch Energy Development LLC, to source and transport up to 2.4 million metric tons per year of CO2 to planned projects in southeast Texas. Also during the first quarter, the Company invested a combined $7 million into two emerging carbon capture technology companies, ION Clean Energy, an industry leader in liquid solvent technologies, and Aqualung Carbon Capture, a leader in membrane CO2 capture and separation technology.

First quarter 2023 capital expenditures for CCUS included the drilling of a stratigraphic test well in the Orion dedicated CO2 sequestration site in Alabama, as well as various costs for seismic licensing and acreage acquisition on both existing and new dedicated CO2 sequestration sites. The Orion stratigraphic test well was drilled to a total depth of 11,415 feet. Initial results from the well are consistent with expectations, and the Company is analyzing the core taken during drilling operations. In late April 2023, the Company submitted an additional application to the EPA for 6 Class VI well permits for the Company’s Leo CO2 sequestration site in Mississippi, which is directly underneath the Company’s NEJD CO2 Pipeline.

Updated Outlook

Second quarter 2023 sales volumes are anticipated to be similar to the first quarter based on increased production associated with the commencement of the CCA EOR flood, along with new production from the Charles development wells at CCA, primarily offset by a planned Delhi facility turnaround and the timing of inventory sales at Tinsley. Associated with the startup and ramp of EOR production at CCA, the Company anticipates DD&A and LOE per BOE to increase from first quarter levels, driven by the expected recording of initial tertiary reserves at CCA and the conversion of CO2 injection to LOE rather than capital.

Second quarter 2023 capital expenditures are anticipated to be modestly higher than the first quarter of the year, led by CCUS capital expenditures, which should increase based on CO2 storage site acquisition and pre-development spend. Oil & gas development capital is expected to be at similar levels as the first quarter of the year.

Additional guidance details are available in the Company’s supplemental earnings materials on its website.

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 act 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

Follow Denbury on Twitter and LinkedIn.

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. 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 comparative three-month periods ended March 31, 2023 and 2022, 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. Additional required disclosures will be included in the Company’s periodic reports:

 

 

 

Quarter Ended

In thousands, except per-share data

 

March 31, 2023

 

March 31, 2022

Revenues and other income

 

 

 

 

Oil sales

 

$

312,572

 

 

$

381,242

 

Natural gas sales

 

 

1,917

 

 

 

3,669

 

CO2 sales and transportation fees

 

 

10,686

 

 

 

13,422

 

Oil marketing revenues

 

 

14,548

 

 

 

13,276

 

Other income

 

 

1,295

 

 

 

250

 

Total revenues and other income

 

 

341,018

 

 

 

411,859

 

Expenses

 

 

 

 

Lease operating expenses

 

 

129,174

 

 

 

117,828

 

Transportation and marketing expenses

 

 

5,389

 

 

 

4,645

 

CO2 operating and discovery expenses

 

 

1,196

 

 

 

2,817

 

Taxes other than income

 

 

29,038

 

 

 

31,381

 

Oil marketing purchases

 

 

14,468

 

 

 

13,040

 

General and administrative expenses

 

 

22,977

 

 

 

18,692

 

Interest, net of amounts capitalized of $1,693 and $1,158, respectively

 

 

927

 

 

 

657

 

Depletion, depreciation, and amortization

 

 

42,032

 

 

 

35,345

 

Commodity derivatives expense (income)

 

 

(23,123

)

 

 

192,719

 

Other expenses

 

 

1,491

 

 

 

2,112

 

Total expenses

 

 

223,569

 

 

 

419,236

 

Income (loss) before income taxes

 

 

117,449

 

 

 

(7,377

)

Income tax provision (benefit)

 

 

 

 

Current income taxes

 

 

2,338

 

 

 

(561

)

Deferred income taxes

 

 

25,912

 

 

 

(5,944

)

Net income (loss)

 

$

89,199

 

 

$

(872

)

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

Basic

 

$

1.73

 

 

$

(0.02

)

Diluted

 

$

1.66

 

 

$

(0.02

)

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

Basic

 

 

51,503

 

 

 

51,602

 

Diluted

 

 

53,763

 

 

 

51,602

 

Denbury Inc. Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Quarter Ended

 

 

March 31,

In thousands

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

Net income (loss)

 

$

89,199

 

 

$

(872

)

Adjustments to reconcile net income (loss) to cash flows from operating activities

 

 

 

 

Depletion, depreciation, and amortization

 

 

42,032

 

 

 

35,345

 

Deferred income taxes

 

 

25,912

 

 

 

(5,944

)

Stock-based compensation

 

 

4,938

 

 

 

2,971

 

Commodity derivatives expense

 

 

(23,123

)

 

 

192,719

 

Receipt (payment) on settlements of commodity derivatives

 

 

2,065

 

 

 

(93,057

)

Debt issuance costs and discounts

 

 

531

 

 

 

685

 

Other, net

 

 

(1,958

)

 

 

(1,267

)

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

Accrued production receivable

 

 

793

 

 

 

(72,795

)

Trade and other receivables

 

 

(2,425

)

 

 

1,644

 

Other current and long-term assets

 

 

4,506

 

 

 

189

 

Accounts payable and accrued liabilities

 

 

(42,247

)

 

 

11,410

 

Oil and natural gas production payable

 

 

(2,861

)

 

 

23,348

 

Asset retirement obligations and other liabilities

 

 

(8,840

)

 

 

(4,233

)

Net cash provided by operating activities

 

 

88,522

 

 

 

90,143

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Oil and natural gas capital expenditures

 

 

(104,782

)

 

 

(58,707

)

CCUS storage sites and related capital expenditures

 

 

(14,645

)

 

 

(14,900

)

Acquisitions of oil and natural gas properties

 

 

(35

)

 

 

—

 

Pipelines and plants capital expenditures

 

 

(623

)

 

 

(15,204

)

Equity investments

 

 

(7,108

)

 

 

—

 

Other

 

 

(5,879

)

 

 

(1,396

)

Net cash used in investing activities

 

 

(133,072

)

 

 

(90,207

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Bank repayments

 

 

(319,000

)

 

 

(274,000

)

Bank borrowings

 

 

358,000

 

 

 

274,000

 

Other

 

 

5,619

 

 

 

(3,068

)

Net cash provided by (used in) financing activities

 

 

44,619

 

 

 

(3,068

)

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

 

 

69

 

 

 

(3,132

)

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

 

 

47,880

 

 

 

50,344

 

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

 

$

47,949

 

 

$

47,212

 

Denbury Inc. Consolidated Balance Sheets (Unaudited)

 

In thousands, except par value and share data

 

March 31, 2023

 

Dec. 31, 2022

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

525

 

 

$

521

 

Accrued production receivable

 

 

143,484

 

 

 

144,277

 

Trade and other receivables, net

 

 

29,770

 

 

 

27,343

 

Derivative assets

 

 

23,554

 

 

 

15,517

 

Prepaids

 

 

14,803

 

 

 

18,572

 

Total current assets

 

 

212,136

 

 

 

206,230

 

Property and equipment

 

 

 

 

Oil and natural gas properties (using full cost accounting)

 

 

 

 

Proved properties

 

 

1,474,721

 

 

 

1,414,779

 

Unevaluated properties

 

 

284,584

 

 

 

240,435

 

CO2 properties

 

 

192,107

 

 

 

190,985

 

Pipelines

 

 

218,822

 

 

 

220,125

 

CCUS storage sites and related assets

 

 

85,059

 

 

 

64,971

 

Other property and equipment

 

 

111,265

 

 

 

107,133

 

Less accumulated depletion, depreciation, amortization and impairment

 

 

(340,312

)

 

 

(306,743

)

Net property and equipment

 

 

2,026,246

 

 

 

1,931,685

 

Operating lease right-of-use assets

 

 

16,768

 

 

 

18,017

 

Derivative assets

 

 

1,617

 

 

 

—

 

Intangible assets, net

 

 

76,849

 

 

 

79,128

 

Restricted cash for future asset retirement obligations

 

 

47,424

 

 

 

47,359

 

Other assets

 

 

51,023

 

 

 

45,080

 

Total assets

 

$

2,432,063

 

 

$

2,327,499

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

$

215,291

 

 

$

248,800

 

Oil and gas production payable

 

 

77,507

 

 

 

80,368

 

Derivative liabilities

 

 

1,613

 

 

 

13,018

 

Current maturities of long-term debt

 

 

107

 

 

 

—

 

Operating lease liabilities

 

 

4,430

 

 

 

4,676

 

Total current liabilities

 

 

298,948

 

 

 

346,862

 

Long-term liabilities

 

 

 

 

Long-term debt, net of current portion

 

 

68,276

 

 

 

29,000

 

Asset retirement obligations

 

 

315,169

 

 

 

315,942

 

Deferred tax liabilities, net

 

 

97,031

 

 

 

71,120

 

Operating lease liabilities

 

 

14,407

 

 

 

15,431

 

Other liabilities

 

 

13,649

 

 

 

16,527

 

Total long-term liabilities

 

 

508,532

 

 

 

448,020

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity

 

 

 

 

Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding

 

 

—

 

 

 

—

 

Common stock, $0.001 par value, 250,000,000 shares authorized; 50,276,526 and 49,814,874 shares issued, respectively

 

 

50

 

 

 

50

 

Paid-in capital in excess of par

 

 

1,049,830

 

 

 

1,047,063

 

Retained earnings

 

 

574,703

 

 

 

485,504

 

Total stockholders’ equity

 

 

1,624,583

 

 

 

1,532,617

 

Total liabilities and stockholders’ equity

 

$

2,432,063

 

 

$

2,327,499

 

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

 

 

March 31,

 

 

2023

 

2022

Average daily sales (BOE/d)

 

 

 

 

Tertiary

 

 

 

 

Gulf Coast region

 

 

23,125

 

 

 

23,016

 

Rocky Mountain region

 

 

10,424

 

 

 

9,220

 

Total tertiary sales

 

 

33,549

 

 

 

32,236

 

 

 

 

 

 

Non-tertiary

 

 

 

 

Gulf Coast region

 

 

3,398

 

 

 

3,630

 

Rocky Mountain region

 

 

10,708

 

 

 

11,059

 

Total non-tertiary sales

 

 

14,106

 

 

 

14,689

 

 

 

 

 

 

Total Company

 

 

 

 

Oil (Bbls/d)

 

 

46,389

 

 

 

45,466

 

Natural gas (Mcf/d)

 

 

7,600

 

 

 

8,753

 

BOE/d (6:1)

 

 

47,655

 

 

 

46,925

 

 

 

 

 

 

Unit sales price (excluding derivative settlements)

 

 

 

 

Gulf Coast region

 

 

 

 

Oil (per Bbl)

 

$

74.86

 

 

$

93.17

 

Natural gas (per mcf)

 

 

2.74

 

 

 

4.71

 

 

 

 

 

 

Rocky Mountain region

 

 

 

 

Oil (per Bbl)

 

$

74.87

 

 

$

93.16

 

Natural gas (per mcf)

 

 

2.83

 

 

 

4.62

 

 

 

 

 

 

Total Company

 

 

 

 

Oil (per Bbl)(1)

 

$

74.87

 

 

$

93.17

 

Natural gas (per mcf)

 

 

2.80

 

 

 

4.66

 

BOE (6:1)

 

 

73.32

 

 

 

91.14

 

 

 

 

 

 

Average NYMEX differentials

 

 

 

 

Gulf Coast region

 

 

 

 

Oil (per Bbl)

 

$

(1.29

)

 

$

(1.37

)

Natural gas (per mcf)

 

 

(0.05

)

 

 

0.16

 

 

 

 

 

 

Rocky Mountain region

 

 

 

 

Oil (per Bbl)

 

$

(1.28

)

 

$

(1.38

)

Natural gas (per mcf)

 

 

0.04

 

 

 

0.08

 

 

 

 

 

 

Total Company

 

 

 

 

Oil (per Bbl)

 

$

(1.28

)

 

$

(1.37

)

Natural gas (per mcf)

 

 

0.01

 

 

 

0.11

 

(1)

Total Company realized oil prices including derivative settlements were $75.36 per Bbl and $70.43 per Bbl during the three months ended March 31, 2023 and 2022, 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 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

 

 

March 31, 2023

 

March 31, 2022

In thousands, except per-share data

 

Amount

 

Per Diluted Share(1)

 

Amount

 

Per Diluted Share(1)

Net income (loss) (GAAP measure)

 

$

89,199

 

 

$

1.66

 

 

$

(872

)

 

$

(0.02

)

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

 

 

 

 

 

 

 

 

Noncash fair value gains on commodity derivatives(2)

 

 

(21,058

)

 

 

(0.39

)

 

 

99,662

 

 

 

1.81

 

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

 

 

(999

)

 

 

(0.02

)

 

 

—

 

 

 

—

 

Accelerated depreciation

 

 

1,117

 

 

 

0.02

 

 

 

—

 

 

 

—

 

Noncash fair value adjustment - contingent consideration(4)

 

 

—

 

 

 

0.00

 

 

 

185

 

 

 

0.01

 

Estimated income taxes on above adjustments to net income (loss) and other discrete tax items(5)

 

 

5,047

 

 

 

0.09

 

 

 

(5,853

)

 

 

(0.11

)

Adjusted net income (non-GAAP measure)

 

$

73,306

 

 

$

1.36

 

 

$

93,122

 

 

$

1.69

 

(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 true-up to actual of 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)

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

(5)

Represents the estimated income tax impacts on pre-tax adjustments to net income which rate incorporates discrete tax adjustments. During the three months ended March 31, 2022, discrete tax adjustments primarily represented the release of the valuation allowance on certain of the Company’s federal and state deferred tax assets totaling $5.9 million.

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 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

 

March 31,

 

2023

 

2022

Net income (loss) (GAAP measure)

 

$

89,199

 

 

$

(872

)

Adjustments to reconcile to Adjusted EBITDAX

 

 

 

 

Interest expense

 

 

927

 

 

 

657

 

Income tax expense (benefit)

 

 

28,250

 

 

 

(6,505

)

Depletion, depreciation, and amortization

 

 

42,032

 

 

 

35,345

 

Noncash fair value losses (gains) on commodity derivatives

 

 

(21,058

)

 

 

99,662

 

Stock-based compensation

 

 

4,938

 

 

 

2,971

 

Noncash, non-recurring and other

 

 

(1,956

)

 

 

(411

)

Adjusted EBITDAX (non-GAAP measure)

 

$

142,332

 

 

$

130,847

 

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 oil and gas development expenditures, CCUS asset capital 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

 

March 31,

 

2023

 

2022

Cash flows from operations (GAAP measure)

 

$

88,522

 

 

$

90,143

 

Net change in assets and liabilities relating to operations

 

 

51,074

 

 

 

40,437

 

Adjusted cash flows from operations (non-GAAP measure)

 

 

139,596

 

 

 

130,580

 

Development capital expenditures

 

 

(99,791

)

 

 

(57,606

)

CCUS storage sites and related capital expenditures

 

 

(19,688

)

 

 

(20,949

)

Capitalized interest

 

 

(1,693

)

 

 

(1,158

)

Free cash flow (non-GAAP measure)

 

$

18,424

 

 

$

50,867

 

Denbury Inc. Capital Expenditure Summary (Unaudited)(1)

 

 

 

Quarter Ended

 

 

March 31,

In thousands

 

2023

 

2022

Capital expenditure summary(1)

 

 

 

 

CCA EOR field expenditures(2)

 

$

40,038

 

$

17,722

CCA CO2 pipelines

 

 

523

 

 

2,191

CCA tertiary development

 

 

40,561

 

 

19,913

Non-CCA tertiary and non-tertiary fields

 

 

49,093

 

 

29,363

CO2 sources and other CO2 pipelines

 

 

1,563

 

 

730

Capitalized internal costs(3)

 

 

8,574

 

 

7,600

Oil & gas development capital expenditures

 

 

99,791

 

 

57,606

CCUS storage sites and related capital expenditures

 

 

19,688

 

 

20,949

Oil and gas and CCUS development capital expenditures

 

 

119,479

 

 

78,555

Capitalized interest

 

 

1,693

 

 

1,158

Acquisitions of oil and natural gas properties

 

 

35

 

 

371

Equity investments(4)

 

 

7,108

 

 

—

Total capital expenditures

 

$

128,315

 

$

80,084

(1)

Capital expenditures in this summary are presented on an as-incurred basis (including accruals) and are $1 million and $10 million lower than the capital expenditures in the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and March 31, 2022, respectively, which are presented on a cash basis.

(2)

Includes pre-production CO2 costs associated with the CCA EOR development project totaling $5.2 million and $2.8 million during the three months ended March 31, 2023 and 2022, respectively.

(3)

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

(4)

Represents an investment made during the first quarter of 2023 of $2 million in a CO2 technology company (“Aqualung Carbon Capture AS”), as well as a $5 million investment in a carbon capture, utilization and storage technology company (“ION Clean Energy, Inc.”).

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230503005799/en/

Brad Whitmarsh, 972.673.2020, brad.whitmarsh@denbury.com Beth Palmer, 972.673.2554, beth.palmer@denbury.com