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Denbury Announces Proved Reserves And Production

Increases Tertiary Proved Reserves by 36%

Increases Quarterly Tertiary Production by 8% Sequentially and 21% Year-over-Year

PLANO, Texas, Feb. 4, 2013 (GLOBE NEWSWIRE) -- Denbury Resources Inc. (NYSE:DNR) ("Denbury" or the "Company") today announced that its total estimated proved oil and natural gas reserves at December 31, 2012 were 409 million barrels of oil equivalent ("MMBOE"), consisting of 329 million barrels of crude oil, condensate and natural gas liquids, and 482 billion cubic feet (80 MMBOE) of natural gas. Reserves were 80% liquids and 60% proved developed, and 49% of such reserves were attributable to Denbury's carbon dioxide enhanced oil recovery ("CO 2 EOR" or "tertiary") operations. Nearly all of Denbury's reserves not attributable to CO 2 EOR operations at year-end 2012 relate to planned future CO 2 EOR operations. Also, year-end 2012 proved reserve estimates do not include the estimated 42 MMBOE of proved reserves associated with Denbury's pending acquisition of property interests in the Cedar Creek Anticline of Montana and North Dakota from ConocoPhillips in a transaction expected to close near the end of the first quarter of 2013 (the "CCA Acquisition").    

Denbury's aggregate proved reserve additions during 2012 were 114 MMBOE, primarily consisting of 57 MMBOE from CO 2 EOR operations at Hastings and Oyster Bayou fields, 26 MMBOE from the acquisition of interests in the Thompson, Webster, and Hartzog Draw fields that Denbury plans to flood with CO 2 in the future, and additions of 11 MMBOE in the Bakken area prior to its sale in the fourth quarter of 2012. These 2012 additions were offset by 26 MMBOE of production, the sale during the year of properties with combined proved reserves of 124 MMBOE, and minor revisions, including those related to lower natural gas prices. Total tertiary oil reserves at December 31, 2012 were 201 MMBOE, up 36% from the prior year-end level of 148 MMBOE, primarily as a result of initial bookings at Hastings and Oyster Bayou fields.      

The estimated discounted net present value of Denbury's proved reserves at December 31, 2012, before projected income taxes, using a 10% per annum discount rate ("PV-10 Value", a non-GAAP measure), was $9.9 billion, using first-day-of-the-month 12-month average 2012 prices of $94.71 per barrel ("Bbl") for oil and $2.85 per million British thermal unit ("MMBtu") for natural gas. This represents a $0.7 billion decline from the prior year level as the strategic sale of properties with a PV-10 Value of $1.9 billion at year-end 2011 (using first-day-of-the-month 12-month average 2011 prices of $96.19 per Bbl for oil and $4.16 per MMBtu for natural gas) and the impact of lower oil and natural gas prices more than offset increases from additional tertiary reserves and acquired properties. The year-end 2012 PV-10 Value of proved reserves attributable to Denbury's tertiary oil activities was $6.8 billion, a $1.1 billion, or 19%, increase from the prior year level.  Also, year-end 2012 PV-10 Values do not include any PV-10 Value of the pending CCA Acquisition, which is currently estimated at $1.1 billion using the same commodity price assumptions as those in Denbury's year-end 2012 report. On a pro forma basis, it is currently estimated that the CCA Acquisition would increase the Company's PV-10 Value to approximately $11 billion. Following is a preliminary reconciliation of the change in the Company's proved oil and natural gas reserve quantities between December 31, 2011 and December 31, 2012, along with the pro forma impact of the pending CCA Acquisition:

  MMBOE
Balance at December 31, 2011 462
Extensions & discoveries and improved recoveries 86
Acquisitions  28
Sales (124)
Estimated revisions due to price changes (7)
Other estimated revisions (10)
Estimated 2012 production (26)
Balance at December 31, 2012  409
Estimated reserves from pending CCA Acquisition  42
Estimated pro forma reserves 451

Denbury's estimated proved CO 2 reserves at year end 2012, increased 8% to 9.6 trillion cubic feet ("Tcf"). CO 2 reserves are presented on a gross working interest or 8/8 ths basis, except those reserves recently acquired from ExxonMobil which are reported net to Denbury's interest. Of these total CO 2 reserves, 6.1 Tcf were in the Gulf Coast region and 3.5 Tcf were in the Rocky Mountain region. Denbury's acquisition of approximately one-third of ExxonMobil's CO 2 reserves in LaBarge Field in Wyoming added approximately 1.3 Tcf to its Rocky Mountain region CO 2 reserves.

Preliminary 2012 and Fourth Quarter Production

Based on preliminary data, Denbury's average annual production rate for 2012 was 71,689 barrels of oil equivalent per day ("BOE/d") which included 35,206 barrels per day ("Bbls/d") from tertiary properties and 14,847 BOE/d from properties sold in 2012. Preliminary estimated total fourth quarter 2012 production was 70,116 BOE/d which included 37,550 Bbls/d from tertiary properties and 10,064 BOE/d from the Bakken area assets the Company sold during such quarter.  Quarterly total continuing production, which excludes production from the Bakken area assets sold during the fourth quarter of 2012, was 60,052 BOE/d, up 7% from the prior quarter continuing production levels, driven by an 8% sequential increase in tertiary production and a 6% sequential increase in non-tertiary production. Fourth quarter of 2012 tertiary production was 21% higher than the year ago quarter primarily due to strong contributions from the Company's newest CO 2 floods at Hastings and Oyster Bayou fields and the expansion of existing CO 2 floods at Delhi and Tinsley fields.  The sequential increase in non-tertiary production during the fourth quarter of 2012 was primarily the result of properties acquired from ExxonMobil during such quarter, which contributed approximately 1,200 BOE/d to quarterly production. Denbury estimates current average net production from the properties to be acquired in the pending CCA Acquisition at approximately 11,000 BOE/d, of which 99% is oil and natural gas liquids. Assuming the acquisition closes as currently scheduled near the end of the first quarter of 2013, Denbury estimates the properties would contribute approximately 7,700 BOE/d to its full-year 2013 average daily production.

Preliminary 2012 Capital Expenditures

Denbury estimates that 2012 capital expenditures, excluding expenditures on acquisitions, capitalized interest, and tertiary startup costs, were approximately $1.45 billion, which was in-line with the budgeted amount.  Of this amount, approximately $1.1 billion was spent on oil and natural gas development and exploration activities, with the remainder primarily spent on CO 2 sources and infrastructure. Capital expenditures on properties Denbury sold in 2012 were approximately $0.4 billion. 

Management Comment

Phil Rykhoek, Denbury's President and CEO, commented, "We finished a highly successful year for Denbury on a positive note with strong fourth quarter production. Annual production from our core business, CO 2 EOR, increased 14% year-over-year in 2012, and was in the upper half of our production estimates. Also, the stock repurchase program we commenced in the fourth quarter of 2011 effectively improves our per-share metrics by about 8.5% through reduction of our outstanding shares. Our strong fourth quarter tertiary production rate sets us up to continue to deliver on our production estimates in 2013. 

"Over the last year, we completed or entered into agreements on several strategic and tax efficient property transactions which not only add value, but more importantly, make us a nearly-pure CO 2 EOR company. These asset transactions (i) increased our un-booked EOR reserve potential by 208 MMBOE (using the mid-point of the estimated ranges), a slight increase over our estimated un-booked reserve potential of the assets sold and a significant increase in expected value, (ii) nearly replaced the production of sold assets with that from the acquired or to-be-acquired assets, (iii) exchanged proved reserves with a high proved undeveloped component for reserves that are nearly all proved developed, which significantly increases our current free cash flow, and (iv) increased our Rocky Mountain CO 2 reserves by 1.3 Tcf. We are now well positioned to execute on our long-term strategy, which we believe will continue to increase shareholder value for many years to come. 

"Also of note, we recently began accepting CO 2 from our first man-made ("anthropogenic") source, Air Products' Port Arthur hydrogen production facility in Texas for injection into our operated Hastings Field. This project illustrates our unique ability to use and store anthropogenic CO 2 that would otherwise be released into the atmosphere. 

 "At Denbury we have built a highly attractive asset base with excellent visibility on long-term oil production growth, a strong balance sheet that gives us tremendous financial flexibility and a workforce of highly technical, dedicated, and motivated employees focused on executing our plan. We look forward to more positive results in 2013 as we continue to build on our highly profitable, low-risk oil platform."

Stock quotes in this article: DNR 

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